In-House or Outsourced? This is the Question
Editor’s Note: We bring you more live coverage from the Affiliate Management Days conference. This series of articles is on topics of interest to businesses that offer affiliate programs.
This session was conducted by Michael Ni, CMO/SVP of Avangate.
Michael started out by providing some interesting stats about affiliate programs on the Avangate network:
- When programs are NOT managed on network they grow 15%
- 28% growth for in-house managed
- 79% growth for OPM managed
However, numbers only tell part of the story.
Many merchants are thinking this, but the million dollar questions is – when to outsource?
Michael placed the decision making process into 3 buckets and elaborated on the strengths and weaknesses of hiring and OPM vs. an in-house manager.
Bucket # 1 – Stage of the Program
Some questions to ask here include:
- How mature is the program?
- Is it just getting started?
- Is it 15%-20% of all online sales?
This will give you (the merchant) a better idea of to outsource or keep your program in house.
Launching a brand new affiliate program or re-launching an existing neglected affiliate program requires more time than most mature programs. So, entrusting in an OPM during these phases can be more beneficial than having an in-house manager for a variety of reasons and they include:
- OPM’s manage the platform well and are experts at program set-up and defining policies.
- OPM’s are good at recruiting affiliates. They have relationships built with top affiliates already and they can go to them and get them activated in a timely manner.
Michael provided case studies for each bucket. Please note that all merchants mentioned are on the Avangate affiliate network.
Case Studies #1
VSO Software saw a 32% increase in affiliate sales after adding a dedicated affiliate manager (in-house). The results came from an aggressive activation campaign. They asked affiliates for pieces of contact information in exchange for a bump in commission. This worked really well for them and their affiliates become motivated.
Case Study # 2
Abbyy USA saw a 197% sales growth after adding an Avangate OPM Partner Agency. They required top affiliates and affiliate sales increased from 6% to 11%.
Choosing an OPM or keeping a program in-house depends on the stage of the affiliate program and what the merchants ultimate goals are.
Bucket # 2 – What is the complexity of the market?
Questions to think about include:
- How competitive is the market?
- How specialized is the market?
An OPM gets more power when the market becomes saturated because they can cut through the “noise” and reach the affiliates on a personal level. Personal affiliate interaction is critical for long term success. As mentioned earlier OPM’s have already built relationships that they can leverage to increase the overall performance of an affiliate program. An in-house manager may not have the amount of affiliate connections and the growth may be smaller.
Case Study # 3
Telstream hired an OPM, then shifted to in-house manager. They used OPM to relaunch/grow affiliate program and affiliate sales increased 36% from previous quarter.
Hiring and educating an in-house affiliate manager to leverage specialized knowledge to deepen affiliate relationships was more beneficial than maintaining a relationship with an OPM.
Overall, they saw a 10% increase in affiliate revenue after in-house shift.
Case Study # 4
Kaspersky Turkey hired an OPM for geographic expansion. As a result, a 400% uplift in sales was seen by using an OPM to tap local affiliates.
OPM’s can dominate this phase. This is something that in-house managers can not do because (not all) of their limited relationships with affiliates and knowledge of the market.
OPM’s are strong in channel control. This matters with mature affiliate programs and their “local” knowledge.
Bucket # 3 – What are Objectives
What are the programs long term objectives?
Michael broke down the benefits of an OPM v. In-House manager into 4 categories:
- Cost structures
- Branding Control
- Time to Market
In-house managers have to think about salary and investing in tools and OPM’s cost varies. Their are 3 types of OPM payment terms:
- Retainer + %, Flat Fee and Rev Share
- Flat Fee – favor OPM
- Revenue Share (OPM puts skin in the game)
Case Study # 5
AVS4YOU had an established affiliate program + network help. They achieved 52% YoY affiliate revenues from starting program. In total they grew affiliate sales from 4% -11% of online sales and net ROI for 2014 is 34%
Case Study # 6
myFICO had an established affiliate program that was OPM driven. Ultimately, shifted from CPA to CPS model and as a result an +80% increase in QoQ affiliate orders and net ROI in 2014 was 166%.
Outsourcing your affiliate program management depends on a number of factors, but programs just starting up or relaunching reap the benefits of an OPM and a mature program may be in better hands if an in-house manager in control.