The very idea of only paying on performance is one of the main reasons why the affiliate channel has become so endearing to the advertisers it serves. In times where gaining ROI sits atop of the brand marketer’s agenda, it’s hard to beat the level of security that payment models such as cost per acquisition can offer.
But in marvelling over the spontaneous nature of the channel there is a separate argument – an ever-present flipside – that an air of accountability goes amiss.
Being able to accurately forecast affiliate sales can sometimes prove tricky. Advertisers that don’t have their programme running in-house are heavily reliant on third parties to drive the campaigns within. Network and agency feedback is vital to the success of any affiliate activity running through this model; their guidance helping advertisers understand what makes their campaign tick and in calling on industry experience, the likely reward in doing so.
However, it would take more than expert advice to pinpoint the amount that publishers are likely to reel in at any given quarter, a year in advance. In theory, a brand may not lose money, but it cannot account on gaining it either. The situation begs an obvious question: where is that crystal ball when you need it?
Outlining expectations
Forecasting issues have a habit of falling at the feet of new affiliate investors or brands with very niche offerings, who lack the level of foresight granted to travel operators, automotive firms, fashion retailers and the like. Investors with existing programmes and advertisers looking to promote generic, everyday products tend to have things a little easier.
“We have experienced affiliate planners and understand what a mid-size retailer should expect, from working with other mid-size retailers,” says James Briscoe, who helps run affiliate campaigns for Avis Budget Group and a number of international travel brands as CEO at London media agency Unique Digital.
“The affiliate networks will also have been working with competitors and they’ll give guidance of what to expect. But also they understand that the product the advertiser is selling needs to be compelling in order to attract eyeballs, so it does require a very integrated planning session between the affiliates, the agency and the client.”
Briscoe claims that affiliate’s reputation as a sales channel has done little to vouch for its inclusion in general marketing strategy discussions, and that separate forecasting is commonplace. Still, there are plenty of considerations to work off.
“You can learn a lot from indicators such as brand searches, because affiliates rely on search to drive their traffic. Also, a mature affiliate programme with any client should account for 30-35% of their sales, so that’s what you might be aiming for.
“You’ll then often find those 5, 10, 20 affiliates that are going to drive a large amount of your volume. You’ll have conversations with them, and they’re likely to be experts in the particular industry so they’ll be able to give you a good idea of how much volume they can get. If you [the agency] talk to them and match that with the client in mind, then you can get a good picture.”
Done and dusted?
As for the networks, they too agree that an accurate set of predictions is never far away. Anthony Clements, UK country manager at Affiliate Window, believes forecasting is a problem of the past and a challenge the industry has already met.
“Budgeting and forecasting affiliate activity is a fundamental part of any major brand’s success in the affiliate channel. Almost all the clients that we work with will produce forecasts for their affiliate activity, normally reassessing these on a month-by-month basis,” says Anthony, whose experience in forecasting comes via hosting affiliate programmes for likes of BT Broadband, O2 Mobiles and John Lewis.
“This would be a fairly standard part of any brand’s approach to online marketing, and the affiliate channel is no different. The reach and sophistication of the UK’s major affiliates, combined with learnings and data insight that can be provided by networks, means that forecasts should be straightforward to produce, and be reliable for budgeting.”
Outlining monthly expectations and other short-term methods of forecasting could be as cut and dry as they seem.
Brands can use a base point from the previous month while factoring in the occasional lift or dip yielded by a known event. Advertisers may be content with month-by-month forecasting to outline expectations for the weeks ahead, and Clements informed PerformanceIN that yearly forecasts were also obtainable. Still, the question of whether a decent level of accuracy comes with a longer forecast is up for debate.
A richer view
Beyond affiliates dropping out of the frame altogether, brands must consider how events such as a Google search algorithm update can pummel their best affiliates down to the bottom of a list of contributors. Suddenly, the place where a brand once earned thousands of pounds a month is contributing only a fraction of that amount due to a lack of visibility on search.
Added to the mix is the poaching of publisher loyalty by competitors. If a rival brand decided to change their commission structure in an effort to gain better support from a top contributor, perhaps creating a bespoke offer for their consideration, their newfound tie could have a detrimental impact on the performance of their competitors.
Those with experience of managing affiliate campaigns for big investors in the channel will know this situation all too well.
“There are too many unknowns in planning months in advance,” says Gill Makepeace, the former Debenhams affiliate marketing manager, now at Incentive Networks.
“If I looked back to when I worked at Debenhams, the publishers that performed top one year versus the next year can change significantly and therefore if you forecast using run rates it will be inaccurate.”
Things have barely improved for Gill since her move across to a different side of the channel. Taking the reins as advertiser and network manager at loyalty marketing platform Incentive Networks, essentially, her view of the trials and tribulations of being an affiliate has been magnified; providing a counter argument to the third parties who feel that annual forecasting is a task under control.
“Being on the publisher side at Incentive Networks, it clearly is still an issue. I’ve experienced advertisers dropping their commission rates or pulling out of campaigns due to budget issues, so it clearly is still an issue for some companies.”
The biggest question is whether a lack of accurate forecasting has hindered growth in the channel, to which many – fortunately – disagree.
“I’m not sure of the extent it has harmed the industry, but from my experience – from both the publisher and merchant side – it does sometimes seem difficult to get increased budget for the affiliate channel versus other digital channels,” comments Makepeace.
“The KPIs will change from brand to brand and while some may be driven by sales and look at ROI, others may focus more on their visitor numbers and brand awareness. This obviously will impact how they distribute their budgets.
“Personally I believe the affiliate channel can deliver against all these KPIs but it is how the brand measures it and making sure that the teams internally look at the full picture and work together.”
Issues with forecasting remain, but there is certainly an argument of this being an internal problem – left only to those with investments in affiliate. There is also a charming aspect about the channel’s unpredictable nature. It can build you up; it can also knock you down, but those unexpected peaks in sales could make everything worth the while. In theory, as long as advertisers are happy with their current accuracy of reporting, that crystal ball is best left alone.