The hidden value of affiliate marketing

20 Jul 2017

Chris Blower

Account Director Chris Blower explains that affiliate marketing hasn’t always covered itself in glory in the past when demonstrating its true value; rewind a decade ago and actually it was a channel heavily stigmatised and regarded to some as “grubby.” There are some hidden benefits of affiliate marketing, and in this think piece, Chris talks openly about where advertisers should be focussing their attention in order to unravel the true hidden value of affiliate marketing.

 

Having been in the industry for such a long time now and having overseen many different clients in various verticals, I feel there is a still a little mystique to everything within affiliates away from the de facto last click model. Sales on this basis are obviously visible within the affiliate network, and through experience, a healthy program will tend to account for +15% of the total share of online sales – some clients may report more.

In the example below, we see things with a different perspective. This is a client who tracks on a popular affiliate network and uses Google Analytics to record all online sales and through here, affiliate accounts for 18.6% of all sales. However, with technology afforded to us at R.O.EYE that looks at every sale with a ‘single-view’ (the full customer journey from start to finish, showing all touch-points), we are able to acknowledge:

  • Affiliate last click sales actually accounted for 10.8% of total sales revenue in June 2017. More interestingly;
  • 8.8% of all sales occurred through affiliates on a first click basis. This demonstrates a strong level of value from the channel at the beginning of the customer journey
  • 2.6% of all revenue generated involved affiliates at some stage in the customer journey where they were neither the instigator nor the closer (First click / last click)
  • The total percentage of sales where affiliate initiated and closed the sale was 5.5%
  • The most lucrative customer journey was a two –step journey: ‘SEO > Direct’, which had an average order value of 151% higher than the average
  • Total latency of an affiliate sale was 10 days on average; whereas direct, it was a more considered purchase with double the latency, 23 days

Metrics likes these are what we focus on within the agency as it allows us to construct real stories on how budget is best apportioned for not only affiliates, but across all channels – and as a result an multi-channel strategy begins to form. Continuing this refreshing look at how affiliate fits into digital marketers’ strategy, R.O.EYE recognises that in order to understand the true value of the channel, there’s an awful lot more than what meets the eye.

Below are some thoughts on how to discover the channel’s hidden talents:

The Last Click Model – We’re an industry focussed on the last click model. Now, I’m not saying whether it’s the right or the wrong way to accurately measure the channel, but we shouldn’t disguise or ignore other stages of the total customer journey. If the industry is going to press on then we need to start reporting on what’s occurring further up the funnel too, where genres such as content, influencers and bloggers, amongst other examples, tend to drive quality value.

With our technology we’ve been able to identify partners who lose out on a last click model but conversely provide customers at the top of the funnel. As an agency we therefore invest in these partnerships and by using first click metrics to measure success we can monitor these all the way to the final sale. If proven successful then we can invest in them further again through either tenancies/bonuses or on a first click CPA model. To use a loose football analogy, instead of affiliates predominantly being goal scorers (e.g. incentive sites), we’re becoming more focussed on the run made by the right wing-back that assists other channels or may actually score a goal themselves.

More Meaningful Metrics – Taking the above one step further, there are other metrics that R.O.EYE feel should be recorded within the channel, such as: What channels are over/under valued (“would I have got that sale anyway”); ‘If click’ (what channels interacted in the path to sale) and profit margin – broken down by most profitable items sold on site, and how can we influence more of the same. Every advertiser will have different metrics to report back on, but a higher amount of consideration should be given to those that will aid construct an multi-channel approach, rather than just treating affiliates in isolation.

The Perfect Customer – The affiliate channel has always been strong in delivering new customers, and these parameters can be passed through the majority of affiliate networks. Within the agency we’ve been focussing on new customers as well  as improving the value and lifetime of the customer through data. Here we can target elapsed customers as well as testing promotions up and down the funnel depending on what stage of the purchase they are at: attention, research, purchase. This is something that we covered earlier on this year in how “Seven is the magic number of customer touch-points for optimal average order values”, so do take a look if you haven’t read this already.

Affiliates as “Free Advertising/Branding” – Affiliate is one of the only channels that doesn’t get rewarded for anything but the conversion. PPC – you’ll pay for each click; Display/programmatic, you’ll be paying on a CPM basis; Email on a CPM also etc…, which for advertisers is great, but is a hidden value that is often forgotten. As per the example noted above, 8.8% of sales in the example were initiated by affiliates, but were not necessarily rewarded for the sale. The industry often writes about the strong ROI of the channel (£13 return for each £1 spent), which makes me think that there is spare budget to fuel the top of the funnel with tenancies or branding activity. This can only be done if recording the first click, or clicks on the run up to the last. Remember: You can only manage what you can measure.

Latency – Recording the latency of all sales is becoming more important for marketing managers as a quicker sale could mean a cheaper total cost of sale. The less PPC ads engaged with, the less paid social ads clicked on etc., will inevitably mean less money spent on acquiring that customer. As identified in the real example above, affiliates are very good closers, and can be highly impactful on how quickly it can close based on the value of a discount or the call to action of the product in question. The technology here at R.O.EYE can record latency over time and our account managers are able to A/B test campaigns with various promotional values to see what works, what doesn’t, and improve the value of the channel moving forwards.

If you would like to chat about how R.O.EYE can help achieve your marketing objectives by incorporating some of themes raised in this paper, please feel free to get in touch with the team on 0161 413 0550.

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