The concept of paying an external party to provide you with traffic, leads or conversions is very common place. Partners or Affiliates are estimated to generate over £4 Billion globally making up 10% of the average marketing budget.
Many sectors have seen a rise in partners taking over their entire acquisition strategy. Insurance is now in the age of the aggregator. In the UK, Money Supermarket, Compare the Market, GoCompare and a few select others are so significant that they make up 60%+ of revenue generated for some insurance brands! The battle is no longer with Google for the top placement, it is now centred around negotiations with these powerful aggregators and how much you charge per visit in commission.
Gaming, Adult, File Sharing and Retail are the largest industries when you look at commissions paid where customers come at a premium. Brands are fighting the battle on multiple fronts with their own marketing teams nurturing the same audience.
There are a few ways that affiliates and technical partners can work, but commonly a cookie is created when a prospect visits the affiliates’ site. When that person then visits, converts on the brand site it then records that conversion and the sale is then attributed to the affiliate. This conversion often won’t happen immediately, meaning that a cookie window (usually 30 days) is used.
There are two reasons why brands should use affiliates as part of their combined strategy:
Marketing strategies created by brands are targeted to customers that they can reach – but this is not always the full addressable market. This could be down to competitors, cost limitations or failure to align with the wider marketing approach. Affiliates and Partners can open a new subsection of the market with efficiency at scale. We have seen this with headline terms in PPC, where the large affiliates can warrant the incredibly high CPC’s they are then able to direct traffic to multiple brands, instead of having to convert on a single term.
In a highly competitive landscape, brand value is crucial. However, digital has driven a consumer with greater awareness. The consumer journey is now much more likely to incorporate some sort of marketing and research comparisons. It is tricky for brands to “own” customers if they are simply focusing on converting people who appear as last click in their data. Consumers are equipped with all of the information before converting, but the modern day consumer’s price conscious attitude creates a prime opportunity for an affiliate to present an easy comparison service to drive to a specific brand.
With affiliates we always want to know;
“Would we have got that conversion if we hadn’t advertised via that affiliate?”
In the UK, Directline Insurance does not advertise their main brand on aggregators. This was a conscious choice and they use it as a clear differentiator in their marketing. Every person who gets a quote on their site submits all of their information., They can then easily target them in other platforms. By avoiding paying commissions, their marketing budget can be distributed across other platforms. The issue here then becomes reaching – the “lazy” consumer who goes to an aggregator and considers that to be the competitive marketplace will not go through 5 or 6 different quote flows to get their quote.
There are a few challenges and questions we need to answer to understand the real value that affiliates bring to brands
Managing affiliate programmes are not easy, you have to make sure that your brand strategy is being deployed by sometimes 000’s of separate sites – each with a different contact and approach. Networks have made this easier, but when it comes to an aligned strategy for NCA vs Retention, it’s key that everyone is on the same page.
If you are focussed on NCA you do not want to pay again for current customers. This is a very manual process for many, as it involves match back sheets – excel documents that are the bain for everyone. It is my opinion that affiliates should never be utilised for retention. Once you have the custom the brand should manage that relationship.They have chosen to work with you, it is now your opportunity to retain their business.
How much do we make for that cohort of customers over their lifetime? Customer Lifetime Value (CLV) often does not take into consideration the costs of acquisition for the 2nd+ conversion. This cost could be significant if we have to spend money to retain and re-engage customers. How we originally acquire a customer can show a significant difference in the value of that user over time.
Users who are acquired through offer codes or discounts tend to cost more to re-engage and re-acquire as they are more frugal. Customers who come via a content affiliate are typically highly engaged through SEO and content remarketing, especially through social – something that brands can engage with their customers with at a lower long-term CPA.
In PPC you pay per click; in Email to pay per send; in SEO you pay in content creation, in Social you can pay for clicks also. Affiliates are no different – there are many structures for how you pay; per lead, per sale, per click, commission on revenue.
We believe the future is about contribution to conversion. Its one of the few channels where not only this is possible but it is also required. At CUBED we are showing our clients the value that affiliates bring outside of the last click analytics they currently record using. This shows the impact that an affiliate brings to consumers and shows that in many cases affiliates are not just conversion machines – they are required all throughout the funnel.
The goal then is to pay affiliates for their value. This will mean that their last click conversion impact will sometimes decrease. The goal of this approach is to incite focus on the strategy of the campaign (Reaching the Unreachable or Converting the Unconvertable). This would allow brands to calibrate their efforts in supporting an aligned multi-channel strategy. This means paying higher commissions because these are consumers they would not get through other marketing activity, meaning it is a real opportunity. The issue, however, is typically political – where do legacy contracts and opinions hold up negotiations?
The potential for affiliates to play a major role in the future of customer acquisition is huge. The movement towards an attributed contribution model, allowing for an affiliate to truly showcase their value potential for the brand would likely empower this shift in the affiliates’ importance.
If you’d like to learn more about how CUBED can help your brand or clients improve their understanding of the value of affiliates get in touch!