In a world where marketing power has shifted from retailers to consumers, what role can Affiliate Marketing play?
There’s no denying Affiliate Marketing is the “old man” of marketing strategy. Ask any current marketing manager and they’ll tell you they can’t remember a time when it wasn’t at least a consideration in the marketing mix.
Affiliate Marketing is almost as old as the internet itself, with the first recorded commercial use dating back to 1989. A patent for the technology was filed in 1996 by William J Tobin, the same year that a young internet book retailer named Amazon also started their own affiliate scheme (called an Associates Program). By 1998 the first affiliate networks started to emerge providing out-of-the-box technology solutions for retailers, and the industry took off.
Affiliate Marketing is now worth over $12 billion globally and is estimated to account for over 15% of all digital media revenue. Hardly insignificant, so it should be an essential marketing activity for most ecommerce retailers. So why is it so often an afterthought for the majority of marketing teams who are content to setup the basics and let programs run without day-to-day management responsibility? This does both customers and affiliate partners - who could actively be driving both sales and brand engagement - an injustice.
What is Affiliate Marketing?
Affiliate Marketing is a type of performance-based marketing in which a publisher (usually a website) receives a commission for generating online actions (leads or sales) for an advertiser. This relationship can be direct or facilitated by an affiliate network who provide tracking technology to connect large numbers of publishers and advertisers together.
What are the benefits?
The main benefit of Affiliate Marketing is that you only pay commission on completed sales. This makes Affiliate Marketing a low risk, high reach marketing activity. In addition, it does a nice job of amplifying your brand presence by placing your name on high volume or key niche sites across the web to create wider awareness. Through strong affiliate management this reach and return on investment can be further amplified by creating specific partner strategies, placements and optimisation.
What about customers – how do they react?
This is where Affiliate Marketing comes into its own. Most consumers are now very digitally savvy and accustomed to ignoring adverts as well as employing technology such as adblockers to screen them out. So the old-school “Interruption marketing” - where marketing messages are force-fed to online shoppers via pop-ups and banners - is generating fewer sales and therefore lower ROI.
So as we move further into a consumer centric marketing world the power has shifted away from broadcast marketing messages and into the hands of consumers who do their own research and have their own sources of trusted information. Consumers are now much more likely to be swayed by some sort of social proof such as a review or recommendation from a trusted source.
As the number and reach of online influencers and consumer information related websites increases marketers need a better way to target consumers. So they should actively work with content partners to get their brand messages in front of customers who no longer respond to direct ads. Enter Affiliate Marketing.
Isn’t it all just discounts?
Not at all. As we have mentioned Affiliate Marketing is deep-rooted in the marketing mix and throughout its history has gone through numerous changes both in technology and approach. In many cases it followed the evolution of internet and its content providers.
In recent years there was a huge growth and subsequent consolidation of large voucher code and offers websites such as Groupon and Quidco. These still drive huge amounts of traffic but not necessarily only for retailers willing to constantly drop prices. Many have highly engaged followers who simply use them as their go to portals for shopping.
However with the growth of influencer marketing there is another shift towards social proof and customers being introduced to brands and products by online content creators they respect and trust. Understanding how to balance your affiliate portfolio and work with them to create both offers and content has never been more important.
Is it expensive?
If managed effectively Affiliate Marketing is one of the cheapest and strongest performing marketing channels especially when compared with paid media. High ROI is common in well maintained campaigns that engage with their affiliates as most overheads are low. Affiliate Marketing is one of the few completely performance-based marketing approaches, since commissions are generally only paid once a successful sale occurs. There are some initial set-up costs to be aware of which can fluctuate depending on your chosen network, but these are similar to most other channels.
Generally speaking, you need to consider these basic costs:
- Network Setup Fee: Usually per program and per region
- Affiliate Commission: A percentage of the sale price you pay to the affiliate partner
- Network Override (Commission): A percentage based on affiliate commissions you pay to the network
- Any staff costs or management fees
- Additionally you may want to spend marketing budget directly with certain affiliates for additional visibility
One thing you may want to get your head around is forecasting. For particularly successful campaigns you will need to try to forecast your affiliate fees. These are driven by how many sales you achieve and so will not be a fixed cost in the same way some other marketing activity might be managed.
Sounds too good to be true. What’s the catch?
Affiliate Marketing is cost effective and drives brand engagement, but it does require two very important things. A knowledge of the affiliate marketplace, and time.
Engaging with affiliates is a time-consuming activity but one that plays a huge role in separating the truly successful affiliate programs from the ones that simply tick along. Having direct relationships with your affiliates and influencers and not just your network, as well as employing the latest thinking, can make all the difference. In a crowded marketplace the affiliate relationships you foster will drive improved visibility, sales and competitive advantage.
To learn how CommerceCentric can help with your Affiliate Marketing ambitions, contact us for a free initial consultation.