When budgets tighten and finance teams look at marketing spend, and invoicing is one of the first things they go to. Their goal is to hold onto money as long as possible, so net 30 and net 60 become an easy win including affiliate network invoices. While this works for some expenses, it gives competitors the advantage in affiliate marketing.
An easy way to explain this is to use a non-affiliate marketing example. If there are 2 companies that submit a job offer to a candidate and one has net 30 for paychecks while the other pays upon completion of the work, the candidate is going to select the one where they get paid faster if the jobs are similar.
If your competitors are doing net 30 or net 60, you can use this to recruit their affiliates.
Affiliates have a choice on who to work with as there could be five or ten similar affiliate programs. They’re going to go with the one that pays the fastest if most other things are equal. This becomes more important if the company offers a free trial (SaaS), allows customers to order a sample (home renovation, wedding cakes, etc…), or uses a subscription model (and there’s a cancellation period).
For a company with a 30 day free trial like a free 30 day supply, the time to get paid is not 30 days, it is a:
- 30 day trial
- 30 day locking period
- net 30 adds 30 more days for the network to get funds
- Network payout 15 to 30 days
The affiliate now has to wait between 3 and 1/2 to 4 months to get paid if the program pays the invoice net 30. The trial period could be a month so no commission is earned on a sale. The industry has an average 30 day window for a company to void commissions where customers cancel or when credit cards get chargebacks. Then most networks have set payment release dates occurring after the 30 day voiding window. If your competitors are doing net 30 or net 60, you can use this to recruit their affiliates.
Their partners are likely frustrated with the slow payments, so you can share your payment speed and try to get them to give you a test. This is something our affiliate marketing agency does regularly to take partners away from our client’s competitors. If your finance team is doing this to you, don’t stress, you can still be competitive.
What to do if Finance Requires Net 30 or Net 60 for Affiliate Programs
This situation happens, and while not ideal, it is not an end of the world. You can still compete.
- Offer lead commissions instead of sale based only.
- Provide media fees in addition to the commissions for non-review and top-funnel partners.
- Use LTV and get more competitive over initial commissions to bump up their earnings if you’re not on a recurring commission basis.
- Offer recurring commissions so they compound for at least one year.
Note: The following recommendations are for value adding affiliates meaning they control where their audience goes and you do not have access to that traffic without them. This means no review, comparison (best lists are the exception, brand vs. brand is not an exception), end-of-sale like a coupon site showing up for “brand + coupons” in Google, or browser extensions that activate on your own website.
The first thing to do is look for signals that the lead will convert like engaging with software, asking questions to customer support about the product after it arrives meaning they’re trying it out, or they start coming back and adding to cart, etc… from here you can prequalify which affiliates are driving engaged leads. As long as the affiliate is introducing the customers to you, give the partner a lead payout to keep the customers coming in.
Media fees work well here too. The partner gets an upfront fee for creating new content, and this covers the gap between the longer payout period. If you’re measuring the LTV of the customer, look to see what you can afford.
Older programs were set on a percentage of a sale. Modern affiliate programs use the touchpoint of the affiliate (introduced the customer vs. intercepted existing traffic) and how many purchases the customer makes over a life time to evaluate a fair commission. The commission could go from 10% to 100% because the affiliate has their own audience and that audience makes five or twenty purchases over their lifetime. They’re worth giving up the full first sale on for the long term gains.
Recurring commissions also work well here. While there is a long delay in the first payment, if customers stay for five or ten years, the affiliate makes more in the long run and your company benefits by getting their traffic. If they go to a competitor that pays out more quickly and/or offers recurring commissions, you did not save money. You lost customers and recurring revenue with current and future subscriptions, replacement products, and upgrades.
Net 30 and Net 60 work for some marketing channels like media buying or sponsorships, but not affiliate marketing. If your finance team is insisting on implementing a longer term payment schedule, get creative with how you commission. If your competitors are using Net 30 or longer, use that to recruit their top-funnel partners and take their business away from them.
