At the heart of digital marketing are the connections between brands and consumers. Affiliate marketing takes these connections to the next level and involves companies of all sizes, whether they are a start-up, SME or a big brand. It is cost-effective, highly targeted and data driven. Yet, the majority of tech-savvy-business-casual-nonchalant-scarf-wearing digital marketers are more or less unfamiliar with the concept and its benefits.
So, how can affiliate marketing help digital marketers reach their consumer base more efficiently? How can affiliate networks in turn do more in reaching out to those digital marketers of the future? Here are some points of wisdom for both marketers as well as affiliate networks to better connect to each other and in turn provide more value to the online ecosystem.
Affiliate marketing today while promising, is still in its infancy. The capacity to accurately target the right customers online merely scratches the surface of its potential. As yet, the concept is hardly utilised by many digital marketers or is simply unfamiliar.
Affiliate marketing, like the listening skills of men, is hardly used or the concept is simply unfamiliar.
Simplified, affiliate marketing is selling your products or services via publishers and in return, giving back a commission on a sale or when a certain target is met. The concept is built upon a win-win-win monetising model, where all parties (i.e. advertisers, publishers and consumers) get to be happy. Brands and agencies reach the right customer segment, publishers get their well-deserved commissions and customers get relevant ads.
Making this possible, are amongst others, affiliate networks. However, most of these data-savvy service providers are currently unsatisfied with the small marketing budgets big companies set aside for affiliate marketing. This is quite surprising considering it is currently one of the most cost-effective way to accurately target the right customer segment with the right content. Especially now, when the performance marketing industry is undergoing rapid changes, keeping up with the latest technological developments in affiliate marketing becomes more important. To make things even more pressing, other trends show that consumer purchase journeys become more fragmented, the online ecosystem more complex and user-attention spans shorter – not to mention the constant fluctuations in user behaviour.
User behaviour is changing more often than a schizophrenic on shrooms acting out a full episode of Game of Thrones
As new actors come into the digital ecosystem, social media, programmatic display and retargeting feature increasingly more in the user’s journey. Attribution models must both reflect and keep pace with these changes. This is exactly where affiliate marketing turns this potential threat into a huge opportunity in sustaining profitable growth. Affiliate marketing will eventually become an essential part of any company’s digital marketing practice, whether it’s a start-up, SME or a big brand.
As the ecosystem becomes more complex, content providers capture increasingly more niches, showing that the playing ground for affiliate marketing is growing and becoming increasingly more targeted. The concept already proves to be a more cost-effective alternative to traditional, less targeted, Display, CPM, PPC and Text ad-units methods provided by, for example, Google AdSense.
Moreover, the affiliate marketing business model does not only have to cater to big media publishers, price comparison sites, subject expert websites and loyalty websites, as seen today, but it can also cater for the niche blogger. Independent studies show that shoppers coming via affiliate sites are often more affluent, spend more on average, but also shop more frequently. It follows that the lifetime value of an affiliate channel customer is much higher.
Source: IAB / PwC Online Performance Marketing Study, 2014
Tracking the true influence of a website on the purchase decision (i.e. the customer journey experience) is immensely important for a marketer. Whether it is a multi-device multi-browser or device agnostic, social related tracking cookie, code/cash-back or just a regular coupon/discount, it is important for the affiliates to be credited and for marketers to find out exactly which channels perform and which do not – and why!
That way, brands and agencies (i.e. the advertisers) can add more value by applying this acquired knowledge in better-targeted content and select more relevant IABs to promote their products and services. In turn, customers get less annoyed with inappropriate ads and waste less time on irrelevant deals.
Digital advertising: the end of traditional marketing and your old marketing professor’s career
All of the above combined with more competitive technologies to track customer sales funnels will ensure a consistent use by brands and agencies of affiliate marketing for years to come.
Points of Wisdom for Affiliate Networks
In the future, affiliate marketing will have a bigger voice in the advertiser’s budget, but only if affiliate networks concentrate more on product development (i.e. existing markets, new products or services), concept promotion, market development (i.e. new markets, existing products or services) and better alignment between publisher and the account management teams.
Let’s start with product development and promotion of the affiliate marketing concept. It is crucial for affiliate networks to be technologically competitive and build upon the brand awareness of the affiliate concept.
Here are some tips to do exactly that:
- Education and account penetration: informing existing advertisers and publishers of the financial and technical benefits of affiliate marketing is key. There is still little known about affiliate marketing, even though it is built upon a strong win-win-win monetising model.
“Hands up if you really understand how affiliate marketing works. Now keep your hands up if you understand whether or not it’s right for your business. My guess is that there aren’t too many hands left up at this point.” – The Guardian
- Marketing communications: this ties in with the previous point. Affiliate networks need to create more brand awareness and promote concept recognition to a wider audience via social media, newsletter articles (PR) and at business conferences.
“It is no secret that in this day and age, online presence = brand awareness. In fact, most marketing experts agree that how you present your brand online is the 21st century equivalent of your first meeting with a potential customer.” – The Huffington Post
- Marketing tools: the affiliate channel is already well-known as being an expert at pushing sales, but less known for the role it plays in driving brand awareness and brand value. Introducing marketing tools for both publishers and advertisers that can measure the affect of different (experimental) campaigns on their brand awareness and brand value will create a whole new level of adding value to both advertisers and publishers alike.
“Companies are buying thousands of search terms across their lines of business, and new agencies keep popping up to serve marketers’ increasingly keen desire for innovative content, user tools, or social experimentation.” – McKinsey & Company
- Mobile: inform, train and reward publishers that want to create mobile-friendly websites or apps that support mobile advertising. As most of you know, online purchasing is dramatically shifting from desktop to mobile; both publishers and advertisers alike need to be ahead of the game.
“Millennials are changing the mobile landscape. The group is projected to have a purchasing power of $2.45 trillion by 2015 and prefers mobile as their number-one way to be reached and interact.” – Mashable
Besides nurturing existing advertiser markets, such as, FMCG, online retail and travel, affiliate networks will also have to play a role being the dominant digital marketing tool in new markets with existing products or services (i.e. market development). We suggested two, which ties in well with the previously mentioned points of wisdom.
- The start-up and young enterprise market: affiliate marketing makes perfect sense for start-ups and young enterprises as they are mostly on a strict budget, always want to see direct value for money, growth hack everything and are always looking to present valuable data to potential investors. Furthermore, consumer journey learning from insightful data can dictate lean strategy and budget allocation. It gives businesses the opportunity to be quick on their feet in decision-making and shifting priorities.
The nature of sharing best practices through WoM in incubations and shared workplaces, such as, Google Campus and IDEA Shoreditch, will organically increase the exposure of the affiliate marketing concept and its affiliate networks. Moreover, the ease of becoming a member of an affiliate network and partnering up with publishers fits in well with the fast-paced environment start-ups and young enterprises reside in.
Expected market value in 2017: $87.5 Billion
- The gaming market: the gaming industry is one of the fastest growing industries. Gaming companies, such as, Battle.net and Ubisoft, provide most of their games online, which aligns perfectly with the affiliate marketing concept. Also, gamers are a very unique customer segment. They have more tendencies to follow up on a sale after clicking a banner, than say, a customer looking to book a holiday to Istanbul.
The vast quantity of big and small competing gaming companies make it a very appealing market, especially since the click-acquisition ratio is much more favourable to both advertisers as well as publishers. Moreover, the huge customer base of gamers and the availability of a large amount of relating publishers make it even more appealing for an affiliate network to make this arena part if its company strategy.
Expected market value in 2017: $102.9 Billion
Finally, in order to compete with other affiliate networks, an affiliate network must build streamlined cross-departmental processes that encourage teamwork between the publisher and the account management teams. A continuous exchange of information is a big part of that in order to provide long-lasting value to advertisers.
The publisher team should first and foremost know its affiliates, segment them, make sure that it receives all the right data in terms of network intelligence, such as, traffic, user profiles, conversion data, suitability per product/category/industry and future development plans in terms of content. They should also keep a clear record of who was on board when and what results they generated for each client, industry and product category. This enables better decision making when recruiting new affiliates or assigning new campaigns to current ones.
The account management team, on the other hand, must be aware of the available data and the tracking capabilities of the publisher team, involve them in the client’s strategy formulation and assign the right marketing mix for each individual client, product or service group. It is also their responsibility to clearly understand the client’s KPIs and is ready to deliver on them. Lastly, in terms of adding value to top advertisers, the account management team must offer exclusive consultations to top advertisers by offering solutions complementary to affiliate marketing, such as, tracking data on customer behaviour and re-targeting via e-mail campaigns or social media.
There is significant room to grow in the digital marketing arena, and within that, affiliate marketing can play a significant role in providing the right marketing mix, as long as teams, processes and technologies integrate to create the most value for clients and their customers. Ultimately, the objective is to make money and in order to make money, you have to target the right product to the right customer segment with the right content. The days of the traditional outward-bound marketing model of casting the message wide and hoping to catch a few interested customers is over.