It can happen to any major online advertiser with a mature affiliate marketing program. What once seemed to coast, climb and generate sales on autopilot eventually plateaus and even begins to stall. A common response from your affiliate network is to ‘raise commissions.’ However, smart marketers are now leveraging sophisticated technology to align their affiliate programs to their margins and optimize relationships with a much wider range of digital marketing partners.
Affiliate marketing is a large and growing segment with major online advertisers pouring billions into the channel. Forrester projected affiliate spend in the U.S. to reach $4.5 billion per annum last year, and the IAB regularly reports that performance-based models continue to dominate online ad spend. A lack of transparency into program performance, however, coupled with outdated affiliate strategies and models, can cause stagnation for even the most seasoned advertisers.
There are several areas of possible transformation in the affiliate space that can contribute to a brand’s affiliate program stalling. Fortunately, better access to data and smarter use of that data can enable brands to optimize and energize their programs and scale for the future, as traditional affiliate today is just one part of the larger partner marketing landscape.
Other channels have rapidly transformed to incorporate and leverage big data (think search and display exchanges) to drive the online advertising marketplace. Meanwhile, traditional affiliate marketing still relies primarily on static historical performance to determine commissions as the core program driver – and this can inhibit program growth. The good news is that technology is transforming the affiliate landscape. Advertisers that use data to optimize their affiliate spend need to migrate away from reactive data processed in spreadsheets, to proactive, real-time data that allows them to escape from crunching numbers and return their focus on advertising.
To date, the affiliate channel has been dominated by the network model, which focused on mining the long tail of publishers to drive incremental sales. In reality, however, the affiliate publisher base continues to consolidate. For many large advertisers, the attempt to “scale the tail” is contributing to the plateau of their affiliate programs, exacerbated by the proliferation of poor performers and bad practices. Advertisers need to focus on compliance, as well as move from flawed attribution models. Value attribution data can allow advertisers to identify publishers that drive the bulk of their highest value sales – and reward those publishers accordingly.
In the past, there has been an over-reliance on offers, promotions and exclusive placements, controlled and driven heavily by the publishers. This model is based on increasing sales through increased commissions but isn’t scalable for large advertisers once their affiliate program matures. Advertisers across different sectors from retail to travel to credit card companies each have their own target consumer, publisher base and compliance issues to consider. High-end retailers, for example, may place a higher priority on brand equity than blasting promos. Advertisers need to shift from the one-size-fits-all approach of increased commissions and refocus on their own internal marketing and product margin objectives as the determining factor for their mix of offers and promotions.
Technology and data will continue to transform the affiliate landscape. In fact, while performance-marketing used to be synonomous with affiliate, today we talk about digital partner marketing, which is a marketing channel that has origins in affiliate marketing, but extends beyond to include a much wider array of nontraditional partners. By examining their program management, publisher base and product/offer mix, enterprise-level advertisers will be in a position to more precisely market to consumers at the bottom of the sales funnel with their own priorities in play. Publishers, likewise, will also be positioned to leverage a deeper understanding of the tendencies and behaviors of their user base to maximize their own site performance and share of advertising budgets. Ultimately, the advertisers that understand how the affiliate channel and performance marketing in general has evolved will be able to take drive improved performance with their affiliates and larger range of digital marketing partners.
To learn more about how you can push your traditional affiliate marketing program forward, contact us for a conversation and demo.