Affiliate Marketing, the Ultimate Direct Response Channel

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I have been working in the affiliate marketing industry since 1998. Back in the days when BeFree was Linkshare’s biggest competitor and Commission Junction was just getting started. Before Broadband, when dial-up connections (think AOL, Prodigy and Earthlink) were the norm and the top search engines were Lycos, Ask Jeeves, and Alta Vista! Back when only 3.6% of the world’s population had Internet access and most people didn’t have an email account.

I started my affiliate marketing career while working for one of the first e-tailers, Cyberian Outpost (AKA, Outpost.com, NASDAQ COOL). You may recall the infamous Outpost.com Gerbils being launched out of the cannon. I can personally confirm no actual Gerbils were harmed during the making of that commercial! Having worked closely with Steven & Heidi Messer, founders of LinkShare/Rakuten, I learned the ins and outs of affiliate marketing. Our team at Outpost.com developed a highly successful affiliate program that grew to represent 20% of the company’s overall business.

Now that I’ve sufficiently “aged” myself, I’m looking back and taking stock of how the affiliate marketing landscape has changed over the past couple of decades (and the ways it has remained the same). I thought I’d share some of my personal insights on the evolution of affiliate marketing, from the brands’ perspective.

What Makes Affiliate Marketing a Great Channel for Marketers to Invest In?

Pay for Performance

Affiliate programs are attractive because they use a “pay for performance” pricing model. This means brands do not incur an upfront marketing expense. They only pay for valid leads, applications, enrollments, or sales tied directly to an affiliate’s promotion of the advertiser’s offer.

Mass Distribution Reach

With affiliates promoting marketers’ offers to mass, general consumer audiences, this makes it possible for brands to cast a wider net. Thus, generate a significant volume of new customer acquisitions from large, unique sources of ad inventory that they may not reach ordinarily. This enables expansion beyond the hyper-targeting typically required when paying for ad inventory on a CPM, CPC, or flat fee basis.

It’s a Win-Win

Affiliate Marketing is beneficial to both the brand and the affiliate:

  • Affiliates earn commissions by successfully promoting marketers offers by leveraging either excess inventory or inventory that is not easily sellable on open exchanges
  • Marketers are able to reach and acquire new customers at a low cost per acquisition using the highly desirable click-based attribution measurement model

According to Web Market Support, 81% of brands and 84% of publishers leverage Affiliate Marketing making it one of the most popular and effective digital marketing tactics today.

Key Components to Managing a Successful Affiliate Program

Affiliate Procurement
1. Vetting and Screening
    • Brand safety is always a concern and with that comes the need for more extensive vetting and transparency of affiliates. Gone are the days of auto-accepting every affiliate into your program (and every conversion that gets recorded for that matter). Manual approvals are now the norm. Set yourself up for success by proactively taking a deeper look into an affiliate’s history, profile, and network earnings, conduct phone screenings, and verify that the affiliate applying to your program has no previous network violations. While this creates some extra work upfront, these initial steps will go a long way to weed out any potentially problematic partners from participating in your program.
2. Recruitment and Reactivation
    • Often times we focus our attention solely on the recruitment of new affiliate partners. We often forget the low hanging fruit of affiliates who have already joined your program, but for whatever reason are not yet setup or producing.  It’s important for affiliate managers to not only continually develop strategies to increase the recruitment of new affiliates, but also to devote equal time to Activation (and Reactivation) efforts for affiliates who have already made it past the initial screening and onboarding phases, and may just need a little push to start generating clicks and sales.
Diversify Your Media Mix
1. 90/10 Rule
    • One thing that has remained consistent in affiliate marketing over the years is the 90/10 rule. That is 10% of the total affiliates in your program will typically drive the majority of the volume. The other 90% will produce little sales or remain inactive. Therefore, a key objective of the affiliate manager’s strategy should not only identify and optimize these top-performing affiliates, but also to continually work to increase the ratio of active & productive affiliates.
2. Super Affiliates
    • This is the highest performing segment of affiliate partners. Typically, less than 1% of affiliates are “Super Affiliates”. Yet, that 1% typically will deliver more than 90% of your acquisitions. While it’s crucial to establish strong partnerships with top affiliates, it’s equally important to not put all your eggs (media partners) in one basket. We have all seen top-producing affiliates suddenly drop-off and stop promoting the offer. Or, perhaps their back-end performance suddenly declines and they need to be paused. If you rely heavily on only these handful of sources to meet your fiscal budget goals, you could quickly end up in a precarious position. My advice: Diversify. Diversify. Diversify.
3. Direct Relationships
    • While working with large Affiliate Network platforms can offer solid core benefits to your affiliate program, such as gaining access to their myriad of publishers and recruitment tools, it is still a good idea to maintain direct relationships with some small private affiliate networks. In my experience, these direct partnerships often yield greater results in terms of both volume and quality of new customer acquisitions. As long as you have a tracking solution in place and can provide these direct partners with conversion reporting, you can effectively remove the “middle man” and own these direct relationships.
4. Nurture Strategic Partnerships
    • Now that you have great affiliates in your program who are producing sales, it’s important to nurture these relationships continually. Work closely together to stimulate the volume of acquisitions generated by each active affiliate through hands-on publisher outreach. Develop proven, out-of-the-box solutions to work through any program challenges that may arise, and provide tactical and economical solutions to overcome them. Schedule weekly calls with your top partners, have in-person meetings whenever possible, and always strive to find new ways to maximize output.
Develop an Impressive Creative Library
    1. Affiliates want options and will often opt to more heavily promote the marketers that routinely provide partners with fresh content. Keep an updated selection of creative ads that come in a variety of different sizes, units, and themes.

2. In addition to standard creative ad sets with company logos and offer headlines, affiliates tend to favor creative that is geared towards holiday, seasonal, or special promotions. This can include discounts, dollars off, free shipping, gifts with purchase, as well as custom/exclusive creative for top affiliates.

3. Share marketing calendars with your creative department to continually develop new, engaging concepts throughout the year. Whether it’s banner ads, text links, rich media, or email creative, a large updated creative library will also allow the affiliate partner to conduct A/B and multi-variate testing to determine what consumer messaging and calls-to-action convert best. These learnings can then be applied to your other prospect acquisition channels.

Invest in Technology

1. Tracking and Reporting

    • Brands who set up their tracking and reporting platforms to be able to measure back-end performance and Lifetime Value at the Sub-Affiliate source level will ultimately have the most success in their affiliate programs.
      • Doing so enables your affiliate partners to dynamically optimize their traffic sources in real-time
      • In my experience, a marketer’s inability to support sub-id tracking & reporting can significantly hinder their program’s growth and scale potential

2. Implement Real-Time Fraud Controls

    • In today’s digital climate, it’s crucial for Brands to ensure that all layers of fraud controls are in place. This should be done prior to entering into the affiliate marketing arena. These fraud tools may include but are not limited to:
      • IP address screening (foreign, proxy, duplicate IP’s)
      • 3D device fingerprinting
      • Velocity checks
      • Real-time data validation: Address, Phone, and Email Verifications
      • Real-time Credit Card Authorizations

Analyze and Optimize

1. By continually monitoring and analyzing various KPI’s at the sub-affiliate source level and adjusting the media mix accordingly, marketers are able to quickly identify and scale any pockets of success and capitalize on immediate opportunities at hand.

2. Conversely, close monitoring of each sub-affiliate allows the marketer to quickly locate and shut down underperforming sources. Additionally, they can monitor abnormal spikes in volume that might indicate a source is engaging in some unauthorized promotional activity.

3. Creating a feedback loop to partners allows them to make the appropriate media optimizations as quickly and efficiently as possible.

State of Affiliate Today

Affiliate marketing has grown into a global industry worth well over $12 billion. In 2017, users clicked more than 5 billion times and the affiliate marketing networks carried out more than 170 million transactions worldwide, proving that Affiliate marketing is still a very effective and growing channel (source: IAB).

Technology has gotten better

Affiliate Marketing providers such as CJ and Impact are now able to offer deeper actionable insights of the customer journey. With newer product offerings like Path-to-Conversion reporting and Cross-Device Tracking, brands can see all clicks leading up to the conversion. They can ultimately use this data to change their commissioning strategy. As a result, they can give proper credit to the attributed source or even multiple sources using multi-tiered commission models.

Fraudsters have gotten smarter

Because the affiliate channel carries the potential risks of inconsistent levels of traffic quality as well as instances of both publisher and consumer fraud, violators are constantly developing new methods and technologies to find new ways to beat the system. Marketers must leverage a myriad of vetting, tracking, and real-time monitoring and screening tools. This will help mitigate the risks associated with the promotion of their offers in the affiliate channel.

GDPR / Privacy Concerns

The introduction of the General Data Protection Regulation (GDPR) is forcing some affiliates to obtain user data through opt-in consent, to receive direct permission from users before they can send targeted commercial messages. Consent requirements may bode well for marketers by improving the quality of the leads or sales generated by their affiliate sources. But, it may come at the tradeoff of decreased response rates.

Media Placements

While the traditional website placements: display ads, text links, SEM ads, coupon sites, and email marketing previously made up the majority of traffic opportunities within affiliate networks, we now see more emerging channels such as; social media, blogs, influencers, native, mobile, in-app, and push notification traffic being leveraged.

What does the future hold for Affiliate Marketing?

Affiliate programs today generate an average of 23% of all sales for advertisers. Source: Authority Hacker

Affiliate Marketing has stood the test of time. It remains a highly effective channel where marketers can generate new customer acquisition on a pay for performance pricing model.

Brands likely to remain successful in this channel will be those able to adapt. Including their business models, marketing budgets, and technologies to the ever-changing digital marketing landscape. At the end of the day, technology will continue to evolve. Fraudsters will continue to learn new ways to game the system. Privacy concerns will be an ongoing battle, and new regulations will always present challenges to marketers in the digital ecosystem.

As long as brands are able to evolve while adhering to the tried and true affiliate marketing strategies of old that still remain effective today, the future looks bright for this channel.

About the Author

Lori Swett is a Senior Director of Digital at Winterbridge Media and oversees the affiliate programs of a diverse array of marketers, ranging from start-ups to Fortune 500 brands. Interested in continuing the conversation?  Email us at [email protected]

 

 

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