eConsultancy: The value of affiliate marketing today
by Chris Bishop
The value of affiliate marketing today
Based out of the 7thingsmedia New York office, I was glad to attend this week’s Linkshare affiliate network Symposium.
The networking-heavy event had various sessions that were packed with affiliate insights, tips and best practice processes.
However, one session which particularly caught my interest was with Andy Hoar from Forrester Research on the Direct and Indirect value that affiliates deliver to advertisers.
With references to the growth of mobile and the limited actual commerce impact of social media Andy identified three key e-commerce trends that would increase over the next four to five years:
- The growth of online to offline relationships.
- Direct to consumer competition.
- Agile commerce.
With an estimated $1.1 trillion worth of sales being influenced by online, Linkshare commissioned Forrester in December 2011 to study the impact affiliates have on sale and brand image. it did so by surveying 526 US-based online buyers, whilst not referencing affiliate sites specifically, and by also interviewing both affiliates (publishers) and advertisers (brands).
Furthermore, it also produced a forecast for the affiliate industry within the US over the next four years.
The results were highly positive for those working in the channel and say a lot for the future, with affiliate spend forecasted to nearly double in the next four years from $2,489 million to $4,474 million.
I felt the stand out elements of Andy’s talk was around incrementality, propensity to purchase and the brand effect affiliate marketing has on brands today.
This discussion is very much in vogue at the minute and Andy’s thoughts were refreshing and thought-provoking; stating that incrementality should not just be pigeon holed in to new-to-file customers, but instead brands should look at:
- Higher spend levels.
- Higher AOV’s.
- Higher lifetime value across customers.
- Shorter lapsed periods.
He also referenced his theory on ubiquity and needing the digital state of omnipresence, that brands shouldn’t get too hung up on incrementality when viewing what channels they should and should not concentrate on.
Instead brands should look at all channels with the same intent, viewing all channels as virtual shelves. Therefore, if you leave them (as in any marketing channel) empty then someone else will fill them. Failing to reach that demand will do more damage than not being in the space.
From interviews with top advertisers, one Director of online marketing of a multi-channel retailer stated that 50% of the traffic received from affiliate sites are new buyers and another Director stated that affiliates constantly produce higher percentage new to file customers and higher AOV’s.
This certainly backs the view that we hold within the agency that not only are affiliates bringing in difference forms of incrementality and that brands are also looking at this as a wider thought, rather than just simply new to file.
Propensity to purchase
This session was set up by stating people’s reasons to buying online, with unsurprisingly the number one reason being deals.
Of the people surveyed half perceive they get a better deal online, and this perception is reason enough to leave their car in the garage and shop online. Naturally, working within the industry we know this perception isn’t always factual correct!
Secondary to this was the fact that online shoppers have the luxury of viewing a much larger product base where SKUs are vastly less limited than those in on the high street (sorry Mary Portas!).
In the research over half of the respondents (55%) said they always check for deals before purchasing online. This in itself might not be ground breaking however, with over half of these respondents having salaries of $78,000+ this can demonstrate that everyone, irrelevant of salary level, both uses and actively shops via deal sites and are not your assumed “cheapskates”.
The research also found that a third of online shoppers surveyed actually began their online shopping process from an affiliate site. So therefore use the deal sites to persuade and influence their shopping habits prior to intent.
Deal shoppers are commonly viewed as lower value customers (i.e not worth spend your marketing budget on recruiting) but the study shows that shoppers (via affiliate sites) buy in volume, buying four times the amount a regular online shoppers would.
They are actually expected to spend $506 more over 12 months than a non-affiliate shopper. Therefore, brands should re-assess their data and see if this trend is present within their customer behaviour.
A view within the affiliate team at 7thingsmedia is that consumers are becoming as addicted to shopping via deals as they are to shopping itself and this research certainly backs that theory.
The study also looked at the frequency and influence affiliate sites can have on an online purchase. According to the data shoppers will visit three or more deal sites before making a purchase. So does this suggest that if you are to produce a code that you at least distribute this to three deal sites to ensure you are present and avoid losing customers to distraction or competitors?
Looking further at the data 47% of shoppers agreed that they are more likely to buy products if it appears on multiple sites, compared with only seeing the product on the retailer site itself.
In addition, 43% of respondents stated that seeing an offer on an affiliate helped close the deal when they are uncertain of their purchase. Again, backing up the strategic value and consumer behaviour involved in actively recruiting via this method.
As an agency passionately involved within the affiliate industry, we have written several pieces on branding issues within the affiliate channel and how to manage this. Typically these issues are board level concerns due to channel assumptions, history and notion that affiliates simply equals discounting.
We are that aware of these issues and miss conceptions, that we produce a “What is an affiliate” consultancy document and send this to the board for approval.
As emotion and feelings on this subject can be dangerously high within certain companies it is interesting to see that of those surveyed only 8% felt that companies who run a promotion degrade their brand reputation.
Furthermore, 47% strongly agreed that they have a positive feeling to a company when they see offers on deal and loyalty sites, as this represents a brand in touch and up to date, rather than a brand “my dad would buy from”.
For new brands it was impressive to see 42% of surveyed are more likely to try and purchase from a completely new brand after seeing an offer on an affiliate site.
For those interested in viral marketing the study also found that brands who offer promotions on affiliate sites are much more likely to be recommended, with 40% of online shoppers stating they would refer a company that places a promotional offer on a wide variety of websites.
Based on this, is it not then factually true that couponing could be a highly viable way of building a new affluent customer base, drive higher volume sales and equally as important, a positive brand experience?
In summary this research commissioned by Linkshare does seem to state that brands should certainly look to re-consider their approach and thoughts behind the channel.
The various events I attend globally all seem to come back to the concerns over the channel’s incrementality and the potential negative effect it has on brand reputation. All the findings of this research seem to knock those assumptions out of the ballpark!
Obviously this is a sample piece of research and naturally every brand/affiliate programme should be reviewed on a case-by-case basis. However, one clear thing is that brands should explore opportunities and let the data (and fact) lead their strategy, rather than assumptions.
Executives at board level should trust in-house teams, agencies and the networks to keep an eye on the evolving market and react to these studies as necessary – and not dictate the channel on out dated opinion.
For reference, you can download the research here.