Affiliate marketing has grown by an average of 15% every year over the past decade. The most recent Online Performance Marketing Study from the IAB and PwC estimated that advertisers spent £1.1 billion on affiliate and lead generation activity in 2014. With a reputation for continuous innovation and robust growth, it seems unlikely to suggest the channel’s days are numbered.
But with increasing spend, it is inevitable that the channel should be subject to ever greater degrees of scrutiny.
While volume was once enough to satisfy marketing managers, there has been a shift over the past few years to more qualitative measurements of success, meaning it is now an almost universally accepted truth that it is important to be able to demonstrate value alongside the volume.
As a channel that has relied heavily on last-click cost per acquisition (CPA), it is no surprise to see promotional types converging around the point of sale. Over the years we have seen incentivised traffic sources dominate while we have also witnessed the rapid emergence of re-targeting and basket abandonment affiliates.
While the last-click-wins model is not one that is fundamentally broken, it does ignore the additional, currently unpaid for benefits the channel can provide. In order for affiliate to remain a performance marketing stalwart, it is imperative for advertisers to continue to innovate and remunerate publishers for their influence over a sale as well as the conversion.
A need to evolve
What is always guaranteed to annoy an affiliate marketer is the frequently trotted out line that their channel often cannibalises early-funnel counterparts such as display and search, ignoring completely the ‘free’ clicks and impressions that receive no financial acknowledgement as a result of the last-click CPA model. For every sale Affiliate Window generated in 2014 this amounted to 21 clicks and 200 impressions.
Do we conclude that because we’re a channel commissionable on sales that these interactions are worthless? Obviously not. What’s more, advertisers have always been keen to engage with relevant editorial content and blogger sites, yet the last-click CPA model ignores the more complex paths to conversion that they may be involved in.
These sites typically influence purchasing decisions, playing a key role in the customer journey, yet they are not necessarily converting their traffic so missing out on commission. It stresses the value of a ‘payment on assist’ model to help reward these affiliates for their early-funnel influence, whilst ensuring the advertiser benefits from additional coverage across the most relevant sites. Challenging the traditional concepts and payment models is just one of the many ways affiliate can ensure it holds a place in the performance marketing economy.
Why? Because as consumer behaviour has evolved, the role of influence is becoming ever more important.
Customer journeys are not only spanning multiple channels, they are also taking place across a number of devices. Research from Statista indicates that the average person in the UK had access to 3.1 connected devices in 2014. To truly understand customer journeys, cross-device tracking is vital for driving the channel forward.
The route to conclusion
As a channel based on paying for transactions, it is even more important that this data is accurate; going down a ‘deterministic’ rather than ‘probabilistic’ route. It is not sufficient to say that a sale that was completed on a particular device was ‘probably’ made by the same person who had interacted on another.
Cross-device tracking isn’t merely about rightfully rewarding affiliates for the sales they have driven, though. There is also the dual benefit of additional insights. For example, we know that smartphones convert at a lower rate than desktop and tablet devices, but what is their role as an influencer in cross device customer journeys? Additionally, can we see patterns in the devices used throughout the day and use this data to be smarter at targeting consumers?
The answers to these questions can only be of benefit to the channel as it looks to progress within a mobile-first environment.
Data and insight already plays a fundamental role in shaping decisions, but more advanced data points will play a key role in the channel developing further. There is a wealth of information available to advertisers, agencies, publishers and networks, and greater collaboration and sharing of this data will continue to challenge conventions.
We have seen a number of advertisers rolling out bespoke commission models based on the value of the customers being referred by each affiliate. This is based on their key performance metrics having analysed a significant volume of post-conversion data. This takes into account metrics such as the new vs. existing customer split, lifetime value and customer churn rates.
This data will also facilitate more sophisticated ways of working with affiliates in order to drive the most valuable customers through the channel. Telecoms brands have always been very effective at doing this, and it’s a trend that’s being passed onto a number of other sectors.
In fact, when this data is scrutinised the results often show that affiliate marketing delivers some of the highest quality customers. Within this, there is a stronger argument for increased investment in the channel.
Brands, certainly within the fashion sector, are increasingly recognising the positive connotations of working with affiliates. They are starting to view bloggers as an extension of their marketing teams and working more collaboratively with product teams to showcase their clothing ranges.
As the boundaries around performance become blurred, the industry is challenged to enable this to fit with its historic business model – but it’s a challenge that businesses are happy to face.
Let’s never forget that the affiliate channel has always been a melting pot for innovation from all quarters. For a new tech company looking to quickly scale through partnerships with advertisers, an affiliate network remains a fantastic place to gain access to hundreds of brands who know they can trial the activity with minimal risk.
Last but not least, the variety and innovation of the channel remain two of the most compelling reasons why affiliate marketing has been able to flourish. It’s precisely because of the ever-changing digital landscape that the industry will allow itself to survive long into the future.