Affiliate marketing allows brands to launch full-on advertising campaigns and never pay a dime until a sale is made. So why aren’t more brands doing it?
Forrester and other sources estimate that merchant affiliate sales accounts for just six percent of sales. However, a well-managed affiliate program can up that percentage to about 20 percent. Why should you up your action in the affiliate channel?
If you think about it, affiliate marketing really delivers the best return on ad spend a brand can find as affiliates are only paid when a sale is made. They are not paid for returned sales, cancelled orders, or sales that are made by violating a merchants’ marketing policy and the commission that they are paid is the amount the merchant chose. Furthermore, they are paid after the sale (in many cases, 30 days after) and not before, unlike traditional relationships between brands and their agencies and/or media outlet.
This is a channel of unlimited possibility because costs can be tied to and dictated directly by sales. In essence, affiliate marketing is simply a super-efficient means through which to pay for marketing and advertising. A brand can launch a full-on advertising campaign and never pay a dime until a sale is made.
But the affiliate channel is vast. Vast as in really big. In search, there aren’t too many players. In e-commerce, a couple of handfuls more. The affiliate channel, though, has hundreds, if not thousands, of opportunities for a merchant to consider.
So why aren’t brands doing more affiliate marketing? Let’s take a look at the considerations brands face when allocation marketing dollar to the affiliate channel.
Bandwidth. Many brands, just like brands trying to do all their traditional marketing by themselves simply don’t have the bandwidth to capitalise on all the marketing opportunities presented through the affiliate channel If a brand is missing performance-based media buys, they are leaving sales opportunities on the table. If brands haven’t communicated their offers and best selling products to as many possible buyers as possible, then they aren’t working closely enough with affiliates to help them drive sales. But working with the hundreds, if not thousands, of affiliates that suit a brand takes time, energy, expertise, experience and clout.
Philosophy. Is your brand open to marketing on performance in all areas? Search, shopping cart abandonment, informational affiliates, emerging mobile apps are all opportunities to reach more consumers on a performance basis. If your brand is not open to marketing opportunities because of existing relationships, you should re-evaluate your ability to run on performance. If your brand is not open to marketing opportunities because you fear lack of control, then you should evaluate the partners you are working with.
Lack of knowledge. As a marketer, you’re probably familiar with all the usual forms of advertising both online and off such as TV, radio, print, billboard, banners, native advertising, SEO, etc. but you may not have had much exposure to performance marketing. It’s not your fault. It’s a growing segment of online marketing but it’s one with many advantages such as the ones mentioned above. To up your commitment and maximise your effort towards performance marketing, you need a partner who has a solid understanding of the space and get you up and running quickly.
Return on ad spend (ROAS). If the percentage of your affiliate channel activity is less than 10 percent of your overall e-commerce, you may want to compare how much that percentage of sales is costing you in other channels in comparison to the affiliate channel. It’s been found the affiliate channel has the highest ROAS of any other marketing channel. Knowing that, why wouldn’t you want to shift more of your marketing dollars to that channel? With affiliate marketing, you’re still doing familiar forms of online advertising, you’re just paying for it differently. But it’s that form of payment that so greatly increases ROAS.
As a brand manager, you understand the importance of working with an advertising agency. You understand that they can offer expertise and efficiency that simply isn’t possible within a brand-side marketing department. It’s no different with affiliate marketing. A brand needs a strategic partner with expertise to maintain affiliate program continuity, provide the necessary clout to manage thousands of affiliates with efficiency and do it in a way that is cost effective.
The views and opinions expressed here are those of this contributor, and do not reflect those of Power Retail or its staff.