Discussions around market expansion are becoming a lot more common, and surprisingly easier than expected to realise. Yet there is still great ambiguity about the considerations required to expand an affiliate program from the UK into mainland Europe and beyond.
The affiliate channel simply allows merchants to reach out economically, with little overheads and without actually requiring a ‘native’ website, as long as you can ship your goods and services abroad.
The idea around ‘risk’, something to lose from such a move, especially if your brand is not in the desired market and by opening an affiliate channel will somehow be making an aggressive statement of expansion.
Affiliate marketing in the UK is at a more advanced stage than most of our neighbors. Surely we should be capitalising on the experience already gained to grow profitably and quickly.
In this article I will share ways in which affiliate programs in the UK can tap into new markets on our doorstep and for the more adventurous, markets far beyond.
A comparison of UK & European markets
Total ad spend remains ahead in the UK with expectations reaching 37% to be spent online compared to 27.1% for the whole of Europe by the end of the year. A larger portion of the UK economy is driven by online sales, 12.4% of GDP to be exact.
The European Union; our closest and the world’s largest collection of economies is expected to have a GDP of 5.7% driven by online sales, out of a total GDP of $15.7 tn. It is also worthwhile remembering that the EU has over 400 million people online, compared to 50 million in the UK. It also seems that the average spend is not far behind; UK residents spent an average of 1,240 EUR a year compared to 871 EUR in the EU.
The UK affiliate landscape is one of the world’s most diverse, complicated and established and has a multitude of different segment types to rely on. Cashback, loyalty and voucher are well established, trusted, and more importantly, understood by the consumer in the UK. The EU is a big place and CPA is not considered the norm in all regions.
The important thing is to take time to survey your landscape and listen to the affiliates. It is very difficult to apply a companywide policy on say CPA if the market will respond to some form of impression sales, there is always a middle ground and budgets can always be capped and arbitraged back into a competitive CPA against whatever ROI metric your business requires to consider it a success.
Why bother and is there real opportunity?
8.8% of EU consumers currently purchase cross border, and the EU currently imports more than it exports, -$34bn. The EC wants at least 20% of the population to buy cross border by 2015, that’s over 80 million people. The UK in comparison is set to export more than import; by 2016 this will look to be about 18bn worth of goods exported in total.
Europe's current population of 426 million spent $1.1tn online in 2011 and is set to grow 11% annually over the next five years. The trend over the past three / four years has seen UK affiliates expand into Europe and develop their models further. EU affiliates have also shown interest in UK models, adapting them for their market. An example has been rise of the voucher, location based services, loyalty and Cashback sites and a move away from keyword and email services.
Embed your brand early; this approach will be an effective part of your growth strategy when establishing your brand in a new territory.
Exporting from the UK
Exporting from UK literally means establishing all your international functions from your current location.
- Lower initial cost: No office space, simple pages added to existing site, and existing staff will allow for significant savings.
- UK-based operations: Existing staff are familiar with the products and the UK is well placed to launch your business into Europe.
- Quick set up: Once the site is set up you are ready to start trading in the European Union.
- Shipping costs: UK-based and your prospective consumer is not, costs are therefore higher.
- Payment: Depending on which market, it can be slightly trickier to set up payment. Of course, using the Euro is fairly straight-forward, but in markets such as Brazil it can be slightly more complicated. Consumers will not want to pay in Sterling.
- Consumer reluctance to purchase cross-border: It is early days, target the markets that have higher cross-border purchase rates
- It's essential that the site is set up in the local consumer language. An English site marketing your products in France will not go down well!
- Be aware of multiple languages or dominant second languages such as in Belgium.
- Payment in local currency is very important; In Europe it is common to pay using Euros in multiple markets. However there are other currencies. Exchange rates, bank charges and mistrust will all put the consumer off.
- In markets outside the UK it is best to pay in local currency. However the exception here is when working with international publishers, it is best to pay in their base currency which would usually be Euro or US Dollar.
- The exception to the rule on local currency is for slightly weaker economies which are not considered as strong as a regional / secondary currency. For example, in the Middle East it is very common for transactions and publisher commissions to be paid in US Dollar.
Clear shipping costs
- Transparency on the consumer shipping cost is key; be upfront and clear about what options are available.How long will goods take to be delivered and is the package insured?
- The other consideration is logistics. In the UK we take the postal service for granted, but not all markets have such a robust national delivery service. Are you completely certain your goods will reach the consumer? If the answer is not a resounding YES, then you may need to think about establishing a logistics center or if that is too expensive, hiring a private delivery firm.
Cross border publishers
- Understandably you will not have knowledge of all the local partners, dominant segments, metrics etc. While you are building this local knowledge, working with cross border partners can provide a great foundation to any international program. They benefit from local knowledge, dedicated cross border campaigns coordinated across multiple markets and one point of contact.
Different competitor landscape
- Research in detail local and international competitors.
Different effective channels
- If you are entering multiple markets, make sure you look into how consumers are researching, comparing and buying products.
- Local payment methods: Establishing within the EU will immediately mean that you have a base to launch into markets that share the currency.
- Lower delivery times & shipping costs: Delivering from within the EU or new market will mean that you have access to local logistics and of course delivery times.
- Local expertise: Nothing beats having local knowledge and understanding of the market. It is easier to identify shifts in consumer trends; people on the ground, paying in local currency, talking to local consumers and gaining feedback in the local language, understanding who and what your competitors are doing locally and of course talking locally with your affiliates!
- Significant initial costs: Commitment to native merchant site, dedicated local language team, and local or at least regional shipping.
- Brand awareness: Both options face challenges with brand awareness, however there is greater pressure to drive sales as the costs are higher. It is therefore important to have a clear understanding of who is likely to purchase your product in a new market.
- Risk factor: The initial outlay is significant. Investing in CPA and cashback within Eastern Europe rather than hybrid models could be the difference between success and failure.
- Different competitor landscape: Each market is different in Europe, emerging markets and even within the domestic regions per market. Do not assume your UK position will immediately give you leverage in every market you enter. We see huge disparity between powerful UK brands that command little attention in very close EU markets
There are four key stages when considering geographically expanding. Below I have elaborated beyond the obvious points.
- Consider not just local language, but the differences between say EU Portuguese and Brazilian, and actually beyond how you market within the local regions of Brazil.
- Local currency is key; however international partners will prefer to be paid in base/regional currency.
- EU tax is fairly simply, it is effectively governed in the same way as UK [VAT]. Outside of the Union it is much more complex.
- Logistics and delivery; consider how your goods will get to the consumer, is the postal service robust or will you need to invest in private delivery firms/logistic centres.
- Understand what your dominant affiliate models are. Do you require a feed, voucher code availability, cashback, or openness to brand bidding because those affiliates are how consumers are driven to purchase?
- It is equally important to understand how affiliates prefer to be rewarded. In the UK the market suits CPA and is considered the norm. Not understanding that hybrid models, iSales and CPC are required for initial success can be the difference between success and failure.
- Plan from the top down. International publishers should be aligned and approached first with marketing activity so you can align multiple market activities.
- This should be filtered through to local teams to align the local partners.
- Effective and consistent planning requires a strong central presence and coordination so make sure that everyone internally knows what should be happening and when.
Stage four: Final stage
- Clear, personal communication to top partners internationally and locally. Make sure that they are fully briefed and understand the objectives and exposure requirements.
- Clear communication to the rest of your affiliates; clear, transparent and in stages: CPA / remuneration, bonus structures available and how they can be achieved, your marketing objectives, and what creative and tools are available
Ready to go live
A few final thoughts to take away when considering extending UK operations or geographically expanding:
- Different markets require local expertise
- Consider utilising international publishers when launching a new market. It's an effective method to drive traffic while you build your local publisher base and in the future will have headroom to effectively launch multi-market campaigns centrally.
- Be the first and the best! It is inevitable; more consumers are coming online every day. More of these are purchasing cross border. Embed your brand in partner sites while the markets are establishing themselves, it is a cost-effective growth strategy.