The affiliate marketing industry has quickly grown to become an important marketing channel for advertisers. It is a valuable tool due to the low risk, pay-for-performance nature of affiliate marketing and the ability to extend an advertiser’s audience reach. The affiliate marketing channel also has ample growth opportunities for advertisers if the program is strategically implemented.
The six key elements of a well-run affiliate marketing program are:
1. Invest in the Affiliate Channel because it is a valuable component to your marketing mix.
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Most marketers prefer to own the consumer touch points so the affiliate channel sometimes is overlooked or under-invested. However, these third party partners are extending the reach of your brand and driving leads or sales on a pay-for-performance basis. By virtue of affiliates being third parties, they also support your brand in important ways. For example, if you are ‘Advertiser X’ and you have promotions running on your owned and operated (O&O) sites and channels, it may cheapen the brand to consumers, whereas promotions through affiliates will minimize the association with your brand. This helps you maintain your brand equity while also minimizing cannibalization from your O&O sites and channels for consumers who would have otherwise bought from your site without a promotion. Another important benefit of partnering with third party affiliates is to minimize oversaturation. Today’s consumer is overloaded with promotional emails/ads just from Advertisers alone. If the consumer sees too much from any one sender, they will get fatigued and ignore the messages or unsubscribe. By leveraging third party affiliate partners to market on your behalf, you will not overwhelm the user since the user will not associate the oversaturation with your brand.
2. Create defined goals for your Affiliate Manager/team.
Business practices are about achieving strategic and financial goals and that should apply to your affiliate marketing team as well. Well-structured goals will allow people to manage themselves. The trickier proposition is creating these goals in the context of the marketing mix and your other channel leaders. How should the affiliate team’s goals differ and/or support the other channels? For example, the Paid Search/SEM team is often in conflict with the affiliate team since many affiliates leverage Paid Search for their marketing campaigns. If the affiliates are bidding on the same keywords as the Advertiser then the SEM team’s costs are increasing. These are conflicts that can be managed with the right holistic view, internal ground rules and right lens. For instance, affiliates may raise SEM costs but they also benefit the advertiser. They do this by securing additional shelf space, which not only increases the chances of the advertiser or its affiliate closing the deal with that consumer, but the affiliates are potentially pushing down competitor’s average positions on the search engine results pages at the same time.
3. Differentiate your program from the competitive set.
4. Focus on your top affiliates since not all affiliates are created equal.
We have all seen the Pareto principle (a.k.a. 80/20 rule) in action where 80% of the volume or value is created from your top 20% of customers or partners. In the affiliate channel, it is no different. I would guess that your top 20 affiliates represent around 80% or more of your affiliate channel revenues. What this means is that not all affiliates are created equal. You should bet on the bigger players and pare down your affiliate channel to a manageable number. With that being said, there are new affiliates starting off every year so you want to be open-minded and test new players. I have had many instances of new affiliates quickly becoming top affiliates in a short period of time. Pare down your affiliate program to eliminate the smaller/lower quality affiliates so you can focus on the meaningful few – optimize, then expand as necessary. This optimization is similar to optimizing any other marketing channel and activity.
There are also different segments of affiliates: deals, coupons, shopping, loyalty/rewards, etc. The segments are not created equal as well so you need to see which segments are truly adding incremental value at scale and then optimize your portfolio accordingly.
What’s the right number of affiliates? Well, that takes us to the next key element of a well-run affiliate marketing program.
5. Quality is job Number One so monitor affiliate partner activities often.
The affiliate channel is powerful and requires resources, tools and strong relationships to ensure quality. You want a manageable number given the resources that you have at your disposal. Even with a small base of affiliates, you need to set clear rules of what affiliates can and cannot do. There are tools to monitor the web to make certain your brand is not misused as well as in-depth analytics to help identify which affiliates are driving scale, performance and quality. Speaking of analytics…
6. Analytics is a competitive advantage so institute a data and reporting platform that enables granular, actionable analytics.
Advertisers need an affiliate management platform that allows you to quickly evaluate performance by publisher all the way down to sales, commissions and even lifetime value of the customers that the affiliate drives. Those are the basics. The more advanced analytical advertisers will look at click attribution to see which affiliates are driving purchase intent at the top of the funnel and which ones are closing the sale.
What do you think are best practices? Please share with the Retail TouchPoints community in the comment section below.
Greg Kim currently serves as the Chief Revenue Officer at Slickdeals, the nation’s largest and #1 rated social commerce site and mobile app curating the best deals and coupons on the web for 10 million consumers per month. Slickdeals is consistently ranked within the Top 150 most visited sites in the US by Alexa and helps advertisers drive nearly $1 billion in annual sales. Prior to Slickdeals, Greg held senior executive roles at three hyper-growth Internet startups: LowerMyBills.com, People Media and Savings.com. At each of these companies, Greg led various initiatives associated with scale and helped all three companies successfully exit to strategic buyers. Prior to entering the startup arena, Greg served as an investment banker with Houlihan Lokey. Greg earned his M.B.A. in Entrepreneurial Studies and Finance from The Anderson School at UCLA and graduated from The Wharton School at the University of Pennsylvania.
