The fact that affiliate marketing is not popular with everyone is partly due to the fact that it is a difficult channel that has many limitations and little innovation has taken place in recent years. Yet that now seems to be changing. In this blog, we take a closer look at the channel, discuss our vision on affiliate marketing and make a prediction for the future.
The complexity of the affiliate channel
The affiliate channel has a number of rules that many marketers may have difficulty with. The first point is the high degree of closeness of the affiliate networks. Where with channels such as SEA and e-mail you mainly have control yourself, with an affiliate you are largely dependent on the possibilities within the networks. For example, with some networks you need the account managers to be able to acquire publishers and you are not allowed to adjust commissions without communicating this to the network itself. A rather outdated way of working. In addition, the fact remains that you can actually only communicate indirectly with the consumer and thus partly relinquish control.
Second, there are very limited targeting options within affiliate marketing. Depending on the publisher, every visitor gets to see the same message. This means that you cannot communicate in a personalized way with the potential customer or respond to a specific need. You can only vary in communication in terms of the content of your message. For example, it can be placed very differently with content publishers than with e-mail publishers. What you can also do is take a critical look at the publisher’s target audience and determine whether it could be relevant.
Although an affiliate is basically a performance-based channel, a reduction in effort and / or costs, on the other hand, is almost guaranteed to mean a reduction in revenue.
In addition, if you want to improve the efficiency of your webshop, affiliate will probably be the last channel that will help you with this. Within search of shopping you can reduce your costs relatively easily, for example by scaling back campaigns that focus on orienting consumers. Such an adjustment does not have to have a direct impact on your turnover. In fact, by making smart choices or targeting more specifically with SEA campaigns, you can often even improve your return. Although an affiliate is basically a performance-based channel, a reduction in effort and / or costs, on the other hand, is almost guaranteed to mean a reduction in revenue.
Finally, the fact that the channel is a separate silo. By this we mean that the channel generates its own data and you cannot use these insights to optimize within the marketing mix. An important challenge in collecting data will be the disappearance of third party cookies. Within Google Analytics it is possible to gain insight into the performance of the channel, but due to the measurement system that the affiliate networks use themselves, the turnover always deviates from what you see within the networks. Where is the truth and to what extent is the channel of added value?
Why it is worth it anyway
If you read the paragraphs above you would almost ban the channel from your marketing mix and make the arc around it a bit bigger. Despite the channel’s manual, however, we see that affiliate offers an excellent opportunity for almost every retailer to set up performance-based partnerships with many different segments of publishers. When used correctly, this could even take up 5-10% of the marketing mix of each webshop in terms of turnover share. In addition, it remains a channel with which you can easily generate volume at relatively low costs and is perfect for the deployment of action-driven promotions.
The right bet
As mentioned, there are many different publisher segments that actively target consumers in the exploratory, comparative and decisive phase of the purchasing funnel. This allows the channel to make a good contribution to the entire funnel. Although the target options are limited, this does not have to be in the way. When you enter into a good collaboration with a publisher who is an authority within a certain product category, you reach a target group that is almost impossible to target via other channels.
The ease with which you can acquire new consumers and the great supporting value are important reasons for advertisers to use affiliate marketing.
The ease with which you can acquire new consumers and the great supporting value are important reasons for advertisers to use affiliate marketing. The latter is often mentioned as a major advantage, despite the fact that no remuneration model is used that takes into account the actual added value of the publisher. Both the allocation of a commission regardless of the share within the customer journey and the payment based on the last cookie count (as is done in Google Analytics) are both not exactly fair. So the truth is somewhere in the middle. To better understand this, let’s dive deeper into the associated cost / compensation model of the channel.
The current compensation model
The way you incur costs within affiliate is completely different from any other marketing channel. In contrast to search, shopping or display campaigns, you usually only pay within an affiliate when a conversion takes place. The “problem” is that to some extent you pay the same commission to the publisher of the last touchpoint, regardless of how many clicks and which channels contributed to this conversion. You can assign higher or different compensation to certain publisher segments, but this is largely based on assumptions. The actual added value of the publisher is not taken into account. This rigid compensation model is exactly what makes the channel somewhat outdated and that many marketers may struggle with. Can this not be otherwise?
To resolve the discrepancy between activity, value and reward, TradeTracker introduced real attribution in 2017. They want to give advertisers more control and insight over their campaigns and try to make the way publishers receive commission fairer. In addition to the traditional last click model, TradeTracker developed five new models and the option to create your own custom model. This allows the advertiser to decide for himself which value is assigned to which touchpoint. More and more self-managed affiliate platforms are being added to this, such as Partnerize and Impact. Where you were also allowed to partly enjoy account management with the traditional affiliate networks, these parties position themselves more as a SaaS platform where you are the network yourself. Because a lot of time can be invested in the development of the tool, they are able to claim the attribution piece more and more, albeit within their own platforms. These are great developments within the canal, but for the time being this is not the holy grail. This is because only the touchpoints within the channel are taken into account and not the contribution of the other marketing channels.
The future of affiliate marketing
So where does the solution lie? Ideally, you would want to reward publishers based on a multi-touch attribution model that fits your specific business model. What would also be a nice step is if this is not channel-specific, but cross-channel and also takes into account what happens during the entire customer journey. When you can award commissions at publisher level based on these factors, you can make much more informed choices. At the same time, this guarantees transparency between the advertiser and the publisher – which is so extremely demanded. This innovation was recently started from Odyssey Attribution. This is a multi-touch attribution tool that can be integrated with Google Analytics and provides insight into the actual performance of the marketing channels. By linking the costs per channel, the platform enables you to make budget decisions based on this. Not just at channel level, but even on a campaign and publisher level. As Yellowgrape, we see this as a good basis for exposing the actual added value of a publisher. We therefore also look with interest at developments such as Odyssey Partnerships. This is an affiliate platform that focuses on rewarding the incremental value of a publisher. By combining the insights of both platforms, this platform enables you to apply a multi touch attribution model. In the coming period, we will also investigate whether the existing networks can embrace this vision and make this renewed “ecosystem” their own. The aim is to no longer make the channel a separate silo, but a fully-fledged part of the entire marketing mix. This finally gives the affiliate channel the fresh wind of innovation it so desperately needed.
The evolution to partner marketing
These innovations can ensure that affiliate marketing is seen in a broader perspective and that the market will be increasingly broken open. This will result in various disciplines being covered in the future, such as influencers, larger comparators and marketplaces. In this way it can be seen more as a channel where various collaborations are centered with your “partners” and the term affiliate marketing no longer covers the meaning.