By adaptive - November 28th, 2012

As corporations develop multiple marketing channels to reach new customer segments, affiliate marketing is moving through somewhat of a renaissance. Using members of your supply chain, or cultiv...

As corporations develop multiple marketing channels to reach new customer segments, affiliate marketing is moving through somewhat of a renaissance. Using members of your supply chain, or cultivating new commercial relationships within your business' market sector is proving to be a lucrative way to reach new consumers. With the UK's affiliate industry estimated to be worth £47m in just the first half of 2012 alone, no business can afford to ignore this marketing channel.

Dave Tinneny, Affiliates Manager, Tug.

Dave Tinneny, Affiliates Manager, TugWith the affiliate market now quite mature, is this form of marketing as lucrative as it seems?

A recent Forrester research paper, commissioned by Linkshare, predicts a compound annual growth rate of 17% between 2011 and 2016 for the affiliate industry. A number of other findings also highlighted the value of having an affiliate programme. Affiliates produce new customers and generate incremental customer acquisition. These customers are also profitable, spending more than the average online shopper and affiliates have a positive impact on brand reputation. Large publishers are becoming recognisable brands in their own right, often valued higher than a lot of the brands they promote.

Can you outline the main affiliate marketing systems that are available to small businesses at the moment?

The traditional idea of affiliate marketing involves a lot of SEO optimised content sites promoting banners and text links. While this is certainly a major aspect to any programme, affiliate marketing is essentially about the payment model. There has even been a shift recently towards the term ‘performance marketing’ to reflect this.

Almost any aspect of your marketing mix can be outsourced to affiliates working to a CPA/CPL. Remarketing, retargeting, display, email, social gaming, lead generation, monitising video content and paid search are just some of the areas where an affiliate programme can fill in the gaps. It is also incredibly cost effective, as they only pay for each sale or lead generated. This allows real freedom to experiment with any number of channels without the typical budget constraints.

The commissions paid to affiliates can be very different from a few pounds to high levels of commission. How important is it to get the level of affiliate commission right?

Nothing is more important to the success of a programme. Affiliates are sometimes referred to as a ‘virtual sales force’ and I think this is a great analogy when discussing commissions. On a CPA/CPL payment model, the affiliate is assuming the risk. They are investing the time, resources and budget to promote your brand.

It’s a very competitive space, so you need to offer value for the affiliate if you want to stand out. What you can actually offer will depend entirely on your margins. You will need to account for affiliate commission, network override, network service fees and the offers or discounts (including exclusives) that affiliates will expect in order to add value to the sales journey or in exchange for additional promotion. Getting the balance correct is paramount.

What would be your key advice to business owner that wanted to set-up an affiliate marketing scheme for the first time?

It’s important to understand the goals of the programme. Affiliate marketing isn’t a silver bullet solution that will suddenly transform your business into the next Amazon. Programmes need time and attention to succeed. They require constant testing and optimisation to achieve the best results possible.

It is also a relationship based business and contacts can be invaluable when launching a new programme or negotiating additional promotion opportunities. Choosing the correct network for your needs, setting the correct commission levels, devising strategy for growth and expansion, programme terms, designing creative collateral, setting budgets, targets, KPI’s – all of these are serious considerations which will impact performance (and that’s before you’ve even launched).

Who is going to manage the programme on a day-to-day basis? Is there someone in your organisation with the relevant skills set and experience, or should you outsource? There are huge benefits to joining the performance marketing space, but it’s not something that you switch on or off as required.

Is it always advisable to use an affiliate network?

The majority of publishers prefer to use a network, rather than go directly to the advertiser. There are a number of important advantages to using a network: They provide tracking technology, analytics and act as a neutral, independent third party. Choosing the correct network can also be important, as most tend to have more experience in certain verticals.

Networks charge a percentage of the commission earned by affiliates along with a monthly service fee. The service fee is to ensure that the network can cover its costs if the programme isn’t generating large sales volumes. Networks will offer guidance, platform training, assist with communication to publishers and are generally on hand for advice or promotion suggestions. Going it alone would be a very steep learning curve and would certainly delay the programme significantly from reaching its full potential.

What are the key pitfalls to watch out for when a business is entering affiliate marketing for the first time?

Unfortunately fraud is still prevalent in the affiliate industry. Most reputable networks are taking every possible step to reduce this threat by implementing controls and technology that helps to identify fraudulent affiliates. However, it still happens to all programmes at some point.

CPL is most at risk and the quality of leads from each publisher need to be assessed regularly, as there are bots and automated software that can register fake accounts. Brand bidding is another common issue, especially outside of office hours. Sites based on URL misspellings or subtle brand variations can appear, copying the style of your own branding and linking back to it using affiliate links. PPV, direct linking, misleading landing pages, good old-fashioned spam and a host of other dubious promotion methods can cause a lot of headaches for a programme manager. Your branding can be subverted in any number of ways. However, once you successfully identify this behaviour, commissions can be withheld or the affiliate even removed from the programme.

The B2B market as continued to struggle with the affiliate method of marketing their goods or services. Why is this? Do you think this will change in the future, or is affiliate marketing really aimed at the B2C market only?

Traditionally, it has always been easier to build content sites around consumer facing products. The large voucher and cash back sites are consumer focused and these tend to be the first sites approached when launching a new programme.

The infrastructure is well established for B2C products and it’s a much easier sell for affiliates. Using the CPA/CPL payment model however, allows for a huge amount of flexibility with a B2B programme. Lead generation is the main concern for most B2B brands and there are a number of innovative solutions in the affiliate space that excel at this. Affiliates are realising that there is huge earning potential from generating quality B2B leads, which I think will only improve the opportunities for B2B brands in the future. If the competition has an affiliate programme, they have it for good reason.

What does the future of affiliate marketing look like?

The affiliate landscape is continuously changing with new technologies and business models emerging all the time. TradeDoubler’s Zoo Project is a great example of this, with the network offering an incubator scheme for affiliate start-ups.

More and more brands are entering the market and competing for attention. The cost effectiveness of the channel makes it very appealing, especially considering the global economic downturn when every penny in the budget needs to be accounted for.

There are a few challenges ahead for the industry: The implementation of tracking on mobile sites is still a long way behind where it needs to be. The debate over attribution seems to be never ending and with every Google update, more publishers are affected which in turn affects advertisers.

The continuing prevalence of voucher sites will impact the future direction of the industry and there are still some doubts surrounding the EU Privacy Directive. Perhaps the main challenge is to finally overcome the dubious reputation affiliate marketing earned for itself over a decade ago, proving itself as an essential component of every online campaign.

The industry is in a very healthy position, with growth predicted over the next few years. I would strongly urge every business to re-evaluate the affiliate channel and its potential in relation to their business.

European Affiliate Marketing Landscape Report 2012

Affiliate4U LogoThe survey this year was filled out by over 900 affiliates in 40 countries. Questions from the first part of the survey were aimed at discovering the key characteristics of active affiliates (gender, age, company size, earnings etc).

Who exactly are these people at the heart of our industry? The survey also examines how international our European affiliates really are; and how much cross-border promotion takes place.

Understanding how affiliates choose to promote our merchants is an essential part of the puzzle, and the survey examines in depth the tools, techniques and promotional biases employed. The differences (and similarities) between countries paint a fascinating picture.

Of particular value are the views expressed by the affiliates on how our industry is evolving and how they see the future unfolding. Do affiliates see earnings rising or falling? Where are the threats to earnings? Which countries are optimistic and which are less so?

The main findings of the latest survey include:

  • As much as 55% of European Affiliates really heavily on Search Engine Optimisation to generate traffic to their website. Still a high amount but the figure is down from 65% in 2011 as affiliates explore new avenues to generate traffic. Social Media (13%) and Paid Search (12.7%) have increased in popularity compared to 2011 figures of 8% and 10% respectively.
  • Content-driven Affiliates are on the decrease across Europe, when compared to 2011’s figures, which was down 5% year-on-year.
  • Affiliate companies are expanding throughout Europe. Results show a decrease in affiliate businesses with 1-4 employees and an increase in businesses with 10-19 and 20-29 employees respectively.
  • The biggest threat to Affiliate Earnings is still ‘Google Updates / Slaps’, however this figure is down 5% on last years’ results.
  • Of Affiliate Window’s 15% share of votes as preferred network, 25% of votes came from affiliates based in European countries outside of the UK, despite not having a European operation in place.
  • The voucher affiliate model continues to grow despite an increasing saturation across the market, up 4% year-on-year.
  • 43% of European affiliates are planning to expand internationally over the course of 2012, with the United States, United Kingdom, Spain, Germany and France being the most popular countries for planned expansion.
  • The tightening of consumers’ purse strings can be seen in the big-earning respondents with all monthly commission-earning brackets over €500 dipping slightly.
  • The proliferation of the voucher model continues with a rise in its usage by respondents. These figures will doubtless fuel debate that how this model is developed will likely shape the future of the industry over the next few years.
  • Social media’s standing in the spectrum of digital marketing is climbing, a fact that’s probably in line with the heightening piles of investment cash being shovelled into services such as Facebook and Pinterest.
  • Bizarrely - even after months and months of headlines - nearly half of all respondents have yet to take steps towards conforming to the E-Privacy Directive.

Making Money with Affiliate Marketing: Infographic

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