By Ronny Sage on February 4, 2016
Affiliate marketing is one of the most efficient and cost-effective ways to reach your target customers. The performance-based channel offers tremendous opportunities for advertisers, yet marketers often stop short of realizing its full value.
Many marketers begin affiliate programs with managed networks, start seeing results, and simply let the programs continue on autopilot. While this approach may generate revenue, it lacks continual optimization and innovation, causing marketers to overspend for revenue performance at the expense of profitability.
An alternative to this traditional network model is an agency and technology approach, which blends the human element of an agency with the automation benefits of technology.
With this methodology, advertisers pay for the tracking technology alone, without needing to share a percentage of revenue with the network. This approach allows for increased returns, on both investment and return on advertising spend (ROAS).
Leveraging an Agency and Technology Approach
At Rise Interactive, a Chicago-based digital marketing agency specializing in media, analytics, and customer experience, we have transitioned some of our clients from a traditional revenue or commission-share network to Impact Radius’ model. After analyzing each brand’s traditional network contract, and the potential savings in costs, we made the recommendation to transition to a more client-focused solution. In these situations, the brands had maximized the technology available on the traditional networks, and their programs could not mature any further.
We saw great success with this agency and technology approach when we transitioned a major retailer from a large traditional affiliate network for a four-month trial. During this period, Rise and Impact Radius generated a 564% return on investment for the brand. Additionally, in November and December—the crucial holiday months—the campaign generated a 23.6% increase in return on advertising spend.
Above and Beyond the Traditional Network
While the agency and technology approach allows brands to maintain a similar advertising reach within an affiliate program, it can accomplish much more. The true value of this approach is its focus on profitability, and the granularity of the reporting and data generated.
Focus on profitability
Using a technology solution, an agency with deep affiliate experience can establish different commission rates at the category or product level. For example, higher margin products or services can be configured to generate higher commission payouts. The goal is to establish the right commission structure across the board. Commissions can also be tiered based on whether an individual is a new or returning customer. At Rise, we also monitor other media channels’ performance to gain advanced insights around the traffic source, then act on those insights to further drive efficiencies within the commission structures.
Every advertiser should already be reconciling cancelled, returned, or fraudulent orders, but with the right technology, advertisers can also optimize commissions by measuring shoppers who jump from a checkout page to an affiliate site simply looking for a coupon code (also known as leapfrogging). Should a brand pay 100% commission to the publisher when this happens? In a traditional network model, this is a double whammy—the affiliate did not play a large role in driving the customer to the site, and the brand is now lowering its profit margin due to coupon usage and has possibly already paid a cost per click to get the customer to the site.
Deeper understanding of how affiliate fits within the full customer journey
For many, affiliate marketing sits in its own silo as a marketing channel with last click attribution, potentially minimizing its true value in the overall conversion funnel. What role does affiliate marketing play, if it is not the last click?
By using deduplication and attribution technologies, an agency can monitor the impressions, clicks, and conversions across many marketing channels. The goal is to help brands better understand how channels interact with one another, and the role each channel plays within the customer journey.
Having this data is just one part of the equation. Working with the right agency partner can turn the insights from this data into action to optimize commision rates, thereby increasing a client’s top and bottom lines. Understanding which affiliates are driving true incrementality is key to running a successful affiliate program.
By moving away from a revenue or commission-based network fee model, advertisers can achieve a greater transparency into their affiliate programs. They can also feel more confident that they are accurately compensating their publishers. This will enable them to ultimately reinvest the savings generated from an agency and technology approach into growing their affiliate programs, using publishers that drive incrementality, or by expanding their reach across other digital channels.
Ronny Sage is an Associate Director of Digital Strategy at Rise Interactive, a digital marketing agency that specializes in digital media, advanced analytics, and customer experience. For more information about taking an agency + technology approach to your affiliate marketing campaigns, please reach out to Rise Interactive.