This is the second in a series of posts aimed at helping brands find ways to develop a more direct relationship with their online customers. If you missed it, there’s still time to read our Why Brands Should Go Direct post.
Today we turn our attention to affiliate marketing, which can be a great way for brands to connect with customers across the sites they like to visit online. As a branded manufacturer, affiliate marketing can help you align your products with consumers at different points in the purchase cycle, giving your brand fast visibility to segments and markets. Affiliate schemes range widely from voucher codes to social networking sites, as well as comparison sites and loyalty sites.
Seizing The Opportunity
Amazon and Walmart reportedly derive 40% of their $100 billion annual sales through their 2 million affiliates. In the UK it’s a lucrative market, with the industry estimated to be worth over £1 billion a year. Some claim affiliate marketing is responsible for as many as one in 10 sales. Given this, it’s surprising that some branded manufacturers are overlooking the potential value affiliate marketing could offer.
How Could Affiliate Marketing Help Your Brand?
There are two ways that a branded manufacturer can leverage affiliate marketing programs, and this will depend on whether you sell online exclusively through retailers, or whether you also sell direct to consumers through your own e-commerce site.
As some background, participants in the affiliate marketing ecosystem are typically known as publishers or advertisers.
Advertisers: Advertisers create programs within an affiliate network in an effort to increase traffic to their website, and ultimately convert this traffic into sales (selling products/services). These are the businesses that sell their products and services to the end consumer. For example, a retailer like Walmart would be classified as an advertiser within an affiliate network. However, a brand who sells direct to the consumer would also be considered as an advertiser if they are looking to drive more traffic to their website. An example of a brand who sells direct, as well as via online retailers, would be GoPro.
Publishers: Publishers sign up to an advertiser’s affiliate program and are rewarded for the traffic they refer. For example, an advertiser (such as a retailer like Walmart) will pay a publisher (via the affiliate program) for the traffic that the publisher delivers. There are various reward models, such as cost-per-click (CPC) or cost-per-acquisition (CPA). CPA is popular for e-commerce sites because they will only pay a commission if the lead results in a sale.
Traditionally, a brand would therefore only use an affiliate program if they sell direct to the consumer, acting as an advertiser. However, if a brand doesn’t sell direct, they could utilize affiliate programs as part of their efforts to link consumers to retailers stocking their products. This essentially means the brand will act as a ‘publisher’ in the affiliate world.
Given the complexity of finding and overseeing individual affiliates, many larger brands opt to partner with affiliate networks. These networks have access to large numbers of affiliate schemes and can identify the most appropriate for a brand and its goals. They oversee the flow of information between the brand and affiliate.
Affiliate Marketing Offers an Attractive Revenue Proposition
Affiliate marketing is an attractive option revenue-wise since it tends to operate under a cost-per-acquisition (CPA) pricing system. Advertisers generally pay a commission to participating publishers and the affiliate network only after a sale or lead is generated.
Brands Can Access Valuable Customer Data via Affiliate Marketing
As well as identifying the right publishers, the affiliate program also acts as a platform for collecting product information, distributing that information to publishers and tracking the results of the publishers’ efforts to deliver paying customers.
That means an affiliate program can give you valuable data and additional insight into the how, where and why a transaction took place. Being able to better understand how your customers behave can help you make informed decisions regarding their purchasing preferences going forward.
Things to Consider Before Integrating With an Affiliate Program
You’ve spent precious time and money building brand awareness and reputation. You need to ensure you opt for an affiliate program that aligns with your brand ethos and ensures that you get placements on high quality, relevant sites that your audience is likely to engage with.
You also need to ensure you find the right partner to help you achieve your goals. For example, while extensive couponing may work well for brands seeking to gain widespread exposure, niche content, reviews and email links may be better affiliate vehicles if your main aim is to maintain price points and keep your brand intact.
How Affiliate Marketing Could Potentially Cause Conflict With Retail Partners
Affiliate marketing can lead to channel conflict if you are using an affiliate program to support your retail network, with affiliate leads being sent to retailers for them to convert. In this scenario you will be indirectly charging those retailers a commission for the privilege of converting your qualified prospects. Suffice to say – they won’t be happy.
If you are considering using affiliate marketing as a way to gain access to customer insights (such as sales conversion data through your retailer lead generation efforts), then there is an alternative method that doesn’t require the retailer to pay for traffic, and therefore mitigates the risk of potential conflict with your partners.
Instead of leveraging affiliate marketing programs as a way to obtain conversion data, you could utilize other third-party tracking technologies and offer this as an option to your retail partners. Doing so will display a strong message of support, as they will essentially be able to benefit from the traffic you refer to their site, without having to pay commission on resulting sales.
Summing It Up
It’s important to make sure you know how your new affiliate program will feed into your other marketing campaigns and efforts. Your affiliate program is only as successful as the data you provide so ensure the data used by your affiliates is correct and up-to-date by sending regular product feeds to your affiliate network. This will alleviate the potential problems that originate from bad data – including those unnecessary clicks and frustrated customers.
Blog post by Joe Williams, Senior Manager, Brand Solutions for ChannelAdvisor
Want to learn more about beginning or expanding your e-commerce presence? Take a read of our Branded Manufacturers: Get Off the Sidelines and Win Online eBook.