An affiliate marketing program can overlap with your existing SEM campaigns, leading to higher CPCs and unaffordable CPAs. Such an overlap in marketing spend can easily be avoided with some cross channel communication.
I witnessed this first hand while in an affiliate marketing meeting with the VP who oversaw all the spend across channels. Our internal SEM team was running Adwords on client brand terms + coupon keywords and at the same time, our affiliates were bidding on the identical keywords. This created a scenario where we were basically competing against ourselves on Adwords. The kicker was that our affiliate sites were much better suited for those coupon keywords because their whole sites were built around coupons. This gave their landing pages higher quality scores with Google, meaning much cheaper clicks. Our SEM team was paying an astronomically high CPC for the number one position, which drove the SEM CPA to a money losing $25.
I pointed out that since the CPA through our affiliate marketing program was only $7.50, it really did not make sense for the SEM team to keep bidding on the coupon keywords. Resources would be better spent on other keyword terms and to just let a select group of affiliates compete among themselves in that SEM space. The VP agreed and the next week, the SEM team stopped running ads on coupon keywords.
Competing with affiliates on SEM over brand terms is a lose lose situation because it drives up CPC for everybody bidding. Much money can be saved by handing over SEM keywords where internal performance is weak to affiliates who have high quality scores in the domain. Likewise, creating an overly competitive SEM environment with too many affiliates bidding on certain keywords is problematic as well. The best practice here is to have stringent policies that only allow three to five affiliates to run SEM campaigns on specified keywords. This pool of affiliates should be continuously reviewed for performance and an affiliate should be swapped out of the pool if their SEM campaigns under perform. Such a scenario creates the optimal amount of competition that will encourage affiliates to push your product.
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