Amazon will give higher commissions to affiliates that drive traffic in high-margin categories, and lower commissions in lower-margin categories. But there are risks in that approach.

Tony Zito, CEO, Rakuten Marketing

Tony Zito, CEO, Rakuten Marketing

Amazon has once again shaken up retail, albeit on the down low this time.  In an unpublicized March announcement, the online giant revamped the pricing structure for Amazon Associates ─ one of the first online affiliate marketing programs the company originally launched in 1996. Designed for website owners and bloggers, affiliate marketing rewards content creators with referral fees when online shoppers purchase products on through links from owner websites.  For years, and for many ‘Amazon Associates,’ this program has proven to be a money maker.  The new pricing structure changes all of this in ways that impact more than just content creators and is a move causing concern across the retail ecosystem.

Amazon Associates historically has been a program that scaled partner commissions—referral fees—based on product sales driven to Amazon.  It is now a performance-agnostic system that favors and rewards affiliate publishers from coupon and comparison shopping sites, mobile apps, etc. for sales in select product categories, and these sales are on products Amazon has selectively prioritized for itself.

For many publishers participating in Amazon Associates the change threatens past referral commissions and can mean substantial commission cuts.  Take this one step further and there is additional threat to certain retail brands. Why? With prioritization and control by Amazon, website owners and content providers are now in a place where in order to make money, they are guided to favor brands and products Amazon prioritizes.  For retailers not making that cut there is the loss of previously loyal publisher support and accompanying sales.

Dynamic affiliate pricing like Amazon’s new pricing structure is an increasingly popular commission model among retailers.   By increasing affiliate commissions on high-margin products and product categories, and lowering commissions on low-margin products, there can be significant competitive and revenue gains for savvy retail marketers. However, when referral program pricing changes are made in a vacuum retailers are at risk of being isolated by valuable and revenue-generating affiliate partners who play an instrumental role in a retailers’ sales success.

Retailers who want to implement dynamic affiliate pricing need to be careful they don’t lose sight of partners who are instrumental in driving upper-funnel, loyalty and sales success.

In a recent survey by Cision, 84 percent of marketers stated plans to launch influencer campaigns in the next 12 months—campaigns aimed at engaging bloggers, social personalities and other content publishers that recommend products, services or experiences to its followers. Influencer marketing is a key marketing strategy and an increasingly ubiquitous part of a retailer’s overall marketing toolbox, including their affiliate marketing relationships. Influencers are among the most negatively affected by Amazon’s pricing restructure, primarily because successful influencer marketing rests on reputation, authenticity and trust—all of which are directly challenged with the Amazon change. While Amazon may believe the impact of losing some publisher relationships as a result of its revamped pricing structure to be minimal, retailers and brands face the threat of a very real and significant revenue gap.

Case in point. Rakuten Marketing recently evaluated the role of varying affiliate publishers in impacting consumer journeys that end in a retail purchase and found that 84 percent of traffic driven by influencers are new site visitors.  Furthermore, the cost of acquiring a new visitor for retailers is 77 percent lower with influencers vs. other types of publishers. Our research also showed that influencers start more consumer journeys than any other publisher type and drive highly engaged shoppers that on average, view eight or more site pages per visit.

Influencers are certainly not the only publisher type impacted by affiliate pricing structures, but it’s clear that Amazon stands to lose money if it doesn’t find a way to maintain its popularity among this key audience. Retailers who want to implement dynamic affiliate pricing need to be careful they don’t lose sight of partners who are instrumental in driving upper-funnel, loyalty and sales success. It is easy to overlook when homing in too narrowly on factors that attribute to direct sales versus partners driving incremental revenue opportunities.  These are critical relationships lost if not nurtured.

For the industry, pricing structures need to be made in context of what is actually moving consumers through their complete purchase journeys so retailers know which publisher partnerships are critical and which they can’t afford to lose. Whether this leads to different decisions about dynamic pricing or opens opportunities to create custom rewards structures for key partnerships, it is critical to maximizing the revenue potential of affiliate marketing.