What to Consider When It Comes to PI-Only Models
Picture this scenario: You’re reviewing your current marketing strategy and want to see if your brand will experience significant growth and ROI by utilizing the affiliate channel. Perhaps you already know a little bit about how the industry works or maybe you’re starting from zero.
What do you do next?
We understand that when it comes to paying for a service, you want to make sure you are getting the best advice. At PartnerCentric, we are completely transparent about budget and costs for our clients because happy clients = tenured clients. We want to be in this for the long haul with you.
How Performance Marketing Agencies Get Paid
There are a few ways that performance marketing agencies set parameters around how they get paid.
- Retainer Arrangements: A retainer is meant to cover their operational costs as well as performance. This is often seen as a higher flat monthly fee.
- Retainer + Performance Incentive: Some agencies will charge a smaller retainer and add a performance incentive, which can take the form of a percent of sale, commission, or other share of the performance being driven.
- PI-Only: Other agencies work on a strictly PI-only basis, which often holds the greatest appeal to those attracted to affiliate marketing as a pay-per-performance driven channel. However, while it might sound like the most cost effective option, the PI-only structure isn’t always in the best interest of the client or program.
Here are some reasons why investing in a retainer arrangement may be in your best interest:
A retainer ensures your program is being proactively managed, not just maintained
Affiliate Marketing is NOT a set it and forget it solution. An agency’s retainer ensures that their operational costs are covered, so they are positioned to proactively manage and grow your program at all times; not just when they are making a return on peak seasons or promotional periods.
When an agency gets paid on a PI-only basis, growth may be achieved using strategies that are not in the best interest of your brand. Rather, the focus can become one of quick, not smart, growth as increased program revenue results in increased agency revenue under this model. Typically, growth incentivized this way comes from high-volume discount partners, which may look like rapid success, but actually eats into margin if not properly managed.
And, a PI-only relationship with your management team could prevent steady growth and optimization while potentially increasing fraud. In the short-term, it feels like you’re paying less because you’re not committed to a retainer but you may lose money along the way due to mismanagement, overpaid partners, and loss of margin.
A PI-only agency tends to put all the eggs in just a few baskets
There is a huge margin and concentration risk with hiring a PI-only agency. Often, they go for high-volume “plug and play” affiliates, resulting in only two or three partners driving 75% or more of the revenue. If one of those partners leaves, the program is immediately in trouble and loses significant revenue. Because the goal is to grow as quickly as possible with limited regard to stability and maintenance, there isn’t an emphasis on choosing strategic partners, diversifying your partner portfolio, or preventing this very top-heavy mix. At PartnerCentric, we make sure our clients are set up for measurable and continuing success with the right partners, instead of being at the mercy of their top few partners.
A retainer agency is always looking for ways to save you money
A PI-only agency has little incentive to ruffle feathers with partners so they are less likely to negotiate and reduce commissions. They want to keep everything as smooth and easy as possible with those top two to three partners who are driving 75% or more of your revenue. We have seen cases where partners were grossly overpaid and under-performing when we took over management of a program.
Our team has cultivated countless partnerships over the years and we aim to save our customers money wherever we can. Because our base costs are covered, we will negotiate commission rates and paid placements with affiliates to get you the best possible ROI. We genuinely care about the success of your program, and success is not always seen as simple growth – reducing cost, incrementality, increasing Return On Ad Spend, and diversification are just some of the additional KPIs we care about.
A retainer agency is incentivized in their best interest, not yours
When you hire a PI-only agency, they have one “true north” in the engagement, which is to grow sales. That puts them at odds with making your program experience the healthiest, lowest cost acquisition channel we know affiliate to be. They will push to recruit all of the lowest value deal and coupon sites they can jam into your publisher universe – ones who will have no concern for trademark bidding, cookie stuffing, or other non-incremental actions. Don’t give someone the opportunity to build an affiliate base of bad actors.
The safer bet
At PartnerCentric, you get a full team of experts to manage your program and they each bring a unique set of skills to ensure that your program is seeing ROI quickly and strategically. We make sure the agency and client are aligned on goals and expectations and focus on data-driven management that is constantly being optimized. You will see the results of our work every step of the way. We’re primarily focused on growing relationships with a thoughtful approach, and always consider the integrity of the brand in our recommendations.
Unlike PI-only management teams, we have a healthy mix of diverse partners across the landscape that we utilize to grow your program. Depending on the goals and needs of your brand, we can use a combination of:
- Coupon publishers
- Non-traditional partnerships
This ensures that we aren’t relying too heavily on just one partner and can be nimble when it comes to recruiting the right partners. By understanding your unique goals, we choose partners that align with your brand, not just ones that can churn quick volume but not value.
If you are someone who cares about your brand’s value and wants a robust program that is driven by strategy (and not gimmicks), you’ll appreciate a premium agency that is always looking out for your best interest, not our own. We’d love to hear from you.