One marketer is a big fan of it, the other gets around it: affiliate marketing. The channel is not usually the most popular in the marketing mix of online retailers. This is partly due to the fact that it is a difficult channel with many limitations and there has been little innovation in recent years. However, that now seems to be changing. In this blog, we'll delve deeper into the channel, discuss our vision for affiliate marketing and make a prediction for the future.
The affiliate channel has a number of rules that many marketers can have difficulty with. A first point is the high degree of closeness of the affiliate networks. Where you are mainly in control of channels such as SEA and e-mail yourself, with an affiliate, you are largely dependent on the possibilities within the networks. For example, some networks require account managers to be able to acquire publishers and you are not allowed to adjust commissions without informing the network itself. A rather outdated way of working. In addition, the fact remains that you can actually only communicate indirectly with the consumer and thus partly relinquish control.
Secondly, there are very limited targeting options within affiliate marketing. Depending on the publisher, each visitor will see the same message. This means that you cannot communicate in a personalized way with the potential customer or respond to a specific need. Only in terms of the content of your message can you vary in communication. For example, it can be viewed very differently with content publishers than with e-mail publishers. What you can also do is take a critical look at the publisher's target group and determine whether it might be relevant.
In addition, if you want to improve the return of your webshop, affiliate will probably be the last channel that will help you with this. In search of shopping, you can reduce your costs relatively easily, for example by scaling back campaigns that focus on exploratory consumers. Such an adjustment does not have to have a direct impact on your turnover. In fact, by making smart choices or targeting more specifically with SEA campaigns, you can often even improve your return. Although an affiliate is essentially a performance-based channel, a reduction in effort and/or costs, on the other hand, almost guarantees a reduction in revenue.
Finally, the fact that the channel is a separate silo. By this, we mean that the channel generates its own data and you cannot use these insights to optimize within the marketing mix. An important challenge in collecting data will be the disappearance of third party cookies. Within Google Analytics, it is possible to gain insight into the performance of the channel, but due to the measurement system that the affiliate networks themselves use, turnover always differs from what you see within the networks. Where is the truth and to what extent does the channel add value?
If you read the paragraphs above, you would almost ban the channel from your marketing mix and make the curve around it even bigger. Despite the channel's instructions, however, we see that affiliate offers almost every retailer an excellent opportunity to set up performance-based collaborations with many different segments of publishers. If used correctly, this could even account for 5-10% of the marketing mix of each webshop in terms of turnover. In addition, it remains a channel that allows you to easily generate volume at a relatively low cost and is perfect for setting up action-driven promotions.
As mentioned, there are many different publisher segments that actively target consumers in the exploratory, comparative and decisive phase of the purchase funnel. This allows the channel to make a good contribution to the entire funnel. Despite the fact that the target options are limited, this does not have to stand in the way. After all, when you work well with a publisher who is an authority within a certain product category, you reach a target group that is almost impossible to target through other channels.
The ease with which you can acquire new consumers and the high support value are important reasons for advertisers to do affiliate marketing. The latter is often referred to as a major advantage, even though no compensation model is used that takes into account the actual added value of publisher. Neither awarding a commission regardless of the share of the customer journey and the payment based on last cookie count (as happens within Google Analytics) are not exactly fair. So the truth lies somewhere in between. To better understand this, let's dive deeper into the channel's associated cost/reimbursement model.
The way in which you incur costs within affiliate is completely different from any other marketing channel. In contrast to, for example, search, shopping or display campaigns, within an affiliate, you usually only pay when a conversion takes place. The “problem” lies in the fact that, to some extent, you pay the same commission to the publisher of the last touchpoint, no matter how many clicks and which channels contributed to this conversion. You can award a higher or different fee to certain publisher segments, but this is largely based on assumptions. Indeed, the actual added value of the publisher is not taken into account. This rigid compensation model is exactly what makes the channel somewhat obsolete and that many marketers may have trouble with. Is there no other way to do this?
To resolve the discrepancy between activity, value and reward, TradeTracker introduced in 2017 real attribution. In doing so, they want to give advertisers more control and insight over their campaigns and try to make the way publishers receive commissions fairer. In addition to the traditional last click model, TradeTracker developed five new models and the ability to create your own custom model. This allows the advertiser to decide for himself which value is assigned to which touchpoint.
More and more self-managed affiliate platforms are being added, such as Partnerize and Impact. Where traditional affiliate networks also allowed you to partly enjoy account management, these parties position themselves more as a SaaS platform where you are the network yourself. Because this allows a lot of time to be invested in the development of the tool, they are able to claim the attribution piece more and more, although within their own platforms. These are great developments within the channel, but for now, this is not the holy grail. This is because this only takes into account the touchpoints within the channel and not the contribution of the other marketing channels.
So where does the solution lie? Ideally, you'd like to reward publishers based on a multi-touch attribution model that fits your specific business model. What would also be a nice step is if this is not done channel-specific, but cross-channel and also takes into account what happens throughout the customer journey. When you can assign commissions at publisher level based on these factors, you can make much more informed choices. At the same time, this guarantees transparency between advertiser and publisher - which is so extremely needed.
This innovation recently started from Odyssey Attribution. This is a multi-touch attribution tool that integrates with Google Analytics and provides insight into the actual performance of the marketing channels. By linking costs per channel, the platform allows you to make budget decisions based on this. Not only at the channel level, but even on the basis of campaigns and at publisher level. At Yellowgrape, we see this as a good basis for uncovering the actual added value of a publisher.
That is why we are also looking with interest at developments such as Odyssey Partnerships. This is an affiliate platform that focuses on rewarding the incremental value of a publisher. By combining the insights of both platforms, this platform allows you to apply a multi-touch attribution model. In the coming period, we will also investigate whether the existing networks can embrace this vision and make this renewed “ecosystem” their own.
The goal is to make the channel no longer a separate silo, but a full part of the entire marketing mix. As a result, the affiliate channel is finally getting the fresh wind of innovation it so desperately needed.
These innovations can ensure that affiliate marketing is seen in a broader perspective and that the market will be increasingly broken open. As a result, this will include various disciplines in the future, such as influencers, larger comparators and marketplaces. In this way, it can be seen more as a channel where various collaborations are centered with your “partners” and the term affiliate marketing no longer covers the load.
