As we all face the current situation, many companies are making decisions about the allocation of marketing resources. One issue that partner marketers face is that some senior leaders in their companies may not understand the partnership and affiliate channels – how they work, the compensation model, and the ROI that is regularly driven from the space.
About a year ago, we published a piece that ran on Forbes that provided a summary of the strengths of this marketing channel. If you find yourself needing to educate internal teams on the value of partnership, we hope these points can be helpful.
WHY PARTNERSHIP WORKS SO WELL
Partnerships operate on a performance-based revenue model, meaning that the brand or influencer is paid only when a sales gets made. That provides an outstanding incentive for performance. Further, partners often have well-established equities and reputations that engender consumer trust. A recommendation from a trustworthy ‘someone’ or ‘something’ often goes down very well with prospects.
WHAT TYPES OF PARTNERS ARE THERE?
There are many different kinds of companies you can work with as partners. Affiliate publishers are perhaps the most common, and many can deliver strong volume and revenue. Influencers are becoming increasingly popular as a marketing and publicity channel. While brands often think of uber celebs like Kim Kardashian as influencers, there are also thousands of “micro-influencers” – experts on topics like tech or fashion – who can drive strong sales in many categories. Loyalty communities make up a third category, and channel partners or resellers are increasingly common as well. Finally, a growing number of brands are working with other brands to co-promote products and services.
WHERE PARTNER SALES COME FROM
In 2018, our company commissioned a global survey of 1,200 marketers to ask them about the importance of partner sales, and which types of partners delivered the strongest results. The results showed that partnership is now driving a strong percentage of total brand sales. In fact, 55% of respondents said that partnerships drove more than 20% of their sales. In terms of which types of partners were most important to revenue, the results showed:
- 46% of partner sales come from affiliate marketing publishers
- 19% come from influencers and niche content bloggers
- 26% come from “pay for performance deals” with traditional media companies
- 9% come from brand-to-brand partnerships
Thus, while affiliate remains the largest segment, multiple partner classes are now driving strong revenue for leading brands.
ARE PARTNER SALES INCREMENTAL?
The $64,000 question. Some marketing leaders question whether partner sales are incremental, particularly for some sectors of the affiliate channel. In fact, they often are at least as incremental as other channels. While data vary by brand, our research across many advertisers shows that some of the most questioned sectors – like cashback sites – actually drive a much higher percentage of new customers than traditional channels.
But don’t take our word for it. We strongly believe in independent measurement of incrementality, and urge clients to measure it using tools from independent sources. The best way to assess this (or any other) channel is to integrate your partner marketing data into your customer analytics database, and put the channel through the same scrutiny as search or video or display advertising. APIs are making it easier to incorporate partner data into multi-channel analytics and BI.
WHAT PARTNERSHIP COSTS
Partners are typically compensated based on a percentage basis or a flat rate per sale. But recently, many large brands have started setting compensation programs that align to more precise or specific brand KPIs. For example, a number of companies are now compensating their partners over time based on the lifetime value of the users that they attract. Others are defining multiple commission rates based on the gross margin of the basket of items sold. Still others offer different rates for sales made to new versus returning customers. These strategies, to name just two, ensure that partnerships are well aligned to the overall goals of the company.
HOW PARTNERSHIPS ARE MEASURED
Brands work with service providers or software companies for measurement. The measurement often uses either first-party cookies or API-based server-to-server integrations to measure clicks and purchases and then connects them so that the referring partner can be identified and compensated for their efforts. In the past, third-party cookies were commonly used, but that has changed as browser cookie policies have changed. With some measurement solutions brands have the option to reward the final referring partner or to reward every partner on the customer journey.
HOW TO LEARN MORE
Most companies already employ people with deep knowledge of the partnership space. Look to your affiliate marketing or business development teams for additional thoughts on how to proceed. These teams generally have great growth ideas but don’t always have a seat at the budget allocation table. Give them one and you may unlock an outstanding growth channel for your business.