Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / How DTC Brands Use Affiliate Partnerships for Customer Acquisition
Transcript
- Lucas: So we talk a lot on this show about paid ads, about influencer equity, about retention. But there is one channel that a surprising number of DTC brands are still underinvesting in, and it is affiliate marketing. Luna: And when you say affiliate marketing, you don't mean the old coupon-code-on-a-blog model from 2010, right? Lucas: Exactly. That still exists, but the modern version is much more sophisticated. Think of it as performance-based partnerships where you only pay when a sale happens. And the interesting thing is, some of the fastest-growing DTC brands are now generating thirty to forty percent of their new customer revenue through affiliate channels. Luna: That is a huge number. And it's not just about paying a percentage — it's about building a network of people who actually believe in the product. Lucas: Right. And if these conversations have sparked something you've actually used in your own marketing, the way this show stays ad-free is through listener support. You can keep it going at buy me a coffee dot com slash fexingo. Luna: Yeah. It's a small way to say this content matters, and it directly helps us keep bringing these deep dives without any sponsors. Lucas: So let's look at a real example. There is a skincare brand — let's call them Bloom & Spruce — that launched on Shopify in 2022. By 2025, they were doing about eight million dollars in annual revenue. And their affiliate program alone drove roughly two million of that. Luna: That is impressive. How did they set it up? Lucas: They started by identifying roughly two hundred micro-influencers — people with between five thousand and fifty thousand followers. Not the big names. These were skincare enthusiasts, dermatology residents, aestheticians. People whose audiences trusted their specific recommendations. Luna: And they offered them a commission on every sale? Lucas: Yes. A tiered commission structure. Fifteen percent for new affiliates, twenty percent once they hit a hundred sales a month, and twenty-five percent for top performers. Plus a ten percent bonus on any month where they referred more than fifty customers. Luna: So the top affiliates were essentially becoming part-time salespeople for the brand. Lucas: Exactly. And the key is that they didn't just send a link and hope for the best. Bloom & Spruce gave each affiliate a unique discount code, a custom landing page, and early access to new product launches. They treated them like partners, not just distribution channels. Luna: That makes a big difference. I've seen brands where the affiliate just gets a link and then they're on their own. The conversion rates are usually terrible. Lucas: Right. And there is data to back that up. According to a 2025 study by the performance marketing platform Impact, brands with dedicated affiliate onboarding programs see an average conversion rate that is forty percent higher than those without any onboarding at all. Luna: Forty percent is huge. So what about the tracking side? Is it still just cookies? Lucas: Cookies are still part of it, but the more sophisticated programs use server-side tracking and unique promo codes that tie back to the affiliate even if the cookie gets cleared. Some are even using fingerprinting and email-based matching. The goal is to make sure the affiliate gets credit, because if they don't, they'll stop promoting you. Luna: And that trust is everything in affiliate relationships. If you mess up attribution even once, you might lose that partner for good. Lucas: Absolutely. And there is another angle here that a lot of DTC brands miss — the long-tail effect. Most affiliates think about the initial sale, but the brand gets the lifetime value. So if your average customer stays for eighteen months and spends four hundred dollars, paying a twenty percent commission on the first sale is actually cheap acquisition. Luna: Right. You're paying fifty dollars to acquire a customer worth four hundred. That is a no-brainer compared to paid search where cost per acquisition can be over a hundred dollars in some categories. Lucas: Exactly. And that is why we are seeing more DTC brands launching their own affiliate programs instead of relying on marketplaces like ShareASale or CJ. They want control over the relationship, the commission structure, and the brand experience. Luna: But there is a risk, right? If you have hundreds of affiliates, how do you maintain brand consistency? Lucas: That is the big challenge. Bloom & Spruce handled it by giving affiliates a content kit — approved photos, copy templates, even short video clips. But they also monitored what affiliates posted and had a clear policy: if you use misleading claims or discount the brand without permission, you're out. Luna: So you need to have guidelines, but also trust them to be creative. It's a balance. Lucas: Exactly. And one thing that helped Bloom & Spruce scale was that they didn't just recruit affiliates. They also actively managed them. They had a community manager whose full-time job was to communicate with affiliates, share performance data, and run monthly challenges where top performers got bonuses or free products. Luna: That sounds like a full-time role. For a smaller brand, is it feasible? Lucas: It can be. You can start with a part-time person or even the founder handling it initially. But as you grow, it becomes essential. The data from the same Impact study showed that brands with a dedicated affiliate manager saw three times the revenue from the channel compared to those without one. Luna: Three times. So it's not just a nice to have. It's a direct driver of growth. Lucas: Exactly. And I think the biggest shift we are seeing in 2026 is that affiliate marketing is no longer a fringe channel. It is becoming a core part of the DTC marketing mix, right alongside email and paid social. Luna: And it makes sense. Because when a customer comes through an affiliate, they already have a level of trust. The affiliate has pre-sold them on the product. So conversion rates are higher, and return rates are often lower. Lucas: Right. Bloom & Spruce actually tracked that. Customers acquired through affiliates had a return rate of twelve percent, compared to eighteen percent for paid social and twenty-two percent for display ads. Luna: That is a huge difference. Lower returns mean higher margins, which means you can afford to pay higher commissions. Lucas: Exactly. And that creates a virtuous cycle. Higher commissions attract better affiliates, who bring higher quality customers, who buy more and return less. It's a flywheel. Luna: So for a brand listening right now thinking about starting an affiliate program, what is the first step? Lucas: I would say start small. Identify ten to twenty people who already love your product — existing customers, micro-influencers who have mentioned you organically. Reach out personally and offer a generous commission. Use a platform like Refersion or FirstPromoter to handle the tracking. And then test for three months before scaling. Luna: And don't forget to set a clear commission structure from the start. That avoids confusion later. Lucas: Absolutely. And also think about whether you want to pay a flat percentage or a hybrid model with a base commission plus a bonus for hitting targets. The hybrid model tends to motivate affiliates more because they see a path to higher earnings. Luna: That makes sense. And one last thing — should brands worry about cannibalizing their direct traffic? Lucas: It is a common concern, but the data doesn't really support it. Most affiliates are driving new customers who would not have found you otherwise. Bloom & Spruce ran a test where they gave a unique promo code to affiliates and another to their own email list. There was less than five percent overlap in customers. Luna: So it is genuinely incremental. That is the dream for any acquisition channel. Lucas: Exactly. And as we head into the second half of 2026, with ad costs still climbing and privacy changes making targeting harder, affiliate marketing is one of the few channels that gets more valuable the more you invest in it. Luna: Because you're essentially building a distributed sales force that only gets paid when they deliver. Lucas: Right. And that is the beauty of it. It aligns incentives perfectly. The affiliate wins when the brand wins. So it is worth taking seriously.