In its early stages, affiliate marketing was revered as a simple way to monetize websites, but as digital channels scrambled to earn credit for sales, its sterling reputation quickly dulled.
What’s more, as online marketing matured and big-name retailers entering the e-commerce sphere demanded more transparency from their partners, affiliate programs have come under tougher scrutiny. New analytics tools have also exposed deficiencies in many affiliate practices, leaving some business owners skeptical of its value.
But affiliate marketing is a valuable channel that accounts for more than 10 percent of all online sales — a lofty number compared to newer channels, like social commerce — and most online retailers with more than a million dollars in sales have some sort of affiliate marketing program in place.
The potential within affiliate marketing is evident. But how do business leaders with struggling programs bridge this gap and reap these once-promising rewards?
Assess Where Your Program Stands
Running a high-quality affiliate marketing program can make a huge difference in your marketing ROI, but if you don’t know how your program measures up, you might be paying for something that’s not working — or, worse, working against you.
Here are six key signs your affiliate marketing program needs an upgrade:
1. There’s a lack of cross-channel attribution and transparency. Tracing your clicks back through the purchase funnel is a complicated process. Poor attribution and missing referring URLs that pinpoint where affiliate traffic originates can leave business owners with a skewed perception of growth.
2. Incremental growth is stagnant. If you shut down your program for a week and your top-line revenue remains unchanged, your program might be mostly targeting current customers instead of facilitating incremental growth. Affiliates should add value to your company — whether that’s through new customers, a larger average order value, repeat purchases, etc.
3. You don’t have an experienced and efficient program manager. To drive quality growth, your company needs an experienced affiliate program manager. Whether he’s an in-house resource or from an independent outsourced agency, he should spend at least 50 percent of his time working on the program and have strong relationships within the industry. Without a committed manager, results will likely falter.
4. Affiliate sites don’t align with your brand. Affiliates should always support your brand and marketing strategy. If their content doesn’t align with your brand or product, you should be skeptical. Those who employ devious tactics such as trademark SEO, forced clicks, and trademark poaching also raise red flags.
5. The majority of affiliates are everyone’s affiliates. About 80 to 90 percent of affiliates include loyalty/toolbar or coupon sites, many of which often use deceptive or misleading tactics to generate a click and set a cookie without the user’s intent. You want to see affiliates in your program who are related to what you do.
6. Affiliates are abusing the last-in click. In programs that lack transparency and proper attribution, companies can pay commissions to affiliates who hop on the clickstream right before the point of purchase. This usually isn’t what you had in mind for your affiliate partners.
If an affiliate program isn’t delivering the results you anticipated, you might feel inclined to eliminate it entirely. However, by doing so, you would miss out on a channel with minimal upfront risk and the potential to deliver a high ROI.
CEO of BrandVerity David Naffziger says that failing programs often reward affiliates who have intercepted transactions that would have happened regardless of their participation. But, he says, technology can quickly and easily identify affiliates who aren’t adding incremental value.
Enter the New Era of Affiliate Marketing
Advances in reporting and tracking have allowed online retailers to manage their affiliate programs more effectively, identify and eliminate low-value participants, and deliver real incremental revenue from more credible partners.
A new generation of marketing leaders have evolved inefficient and costly first-generation programs into more sophisticated ones that translate into new customers. To revive your program and transition into the second generation of affiliate marketing, consider these tips:
- Get to know your affiliates and what they are doing. Ask questions such as, “Can you show me an example of this campaign and where it’s promoted?” when things don’t add up.
- Conduct a conversion rate analysis. Look for affiliates who convert well above the site average and try to understand the reason.
- Ensure that affiliate reporting is extensive and accurate. Affiliate reporting should overlap with other marketing channels and identify the percentage of new customers — which would ideally be more than 50 percent of affiliate sales for a smaller brand.
- Consult an independent brand/trademark monitoring service. Services such as BrandVerity assure that affiliates aren’t using the brand in paid search so you don’t pay for duplicate sales or actions.
- Consider sophisticated attribution tools. ShareASale and Impact Radius, for example, offer valuable services that alter payouts to affiliates based on individual order attributes rather than pay affiliates a standard sum for every transaction.
- Hire an expert to audit the affiliate program. These experts can assess affiliate and network activity and value and provide an unbiased third-party assessment of the program.
One company that pioneered the new wave of affiliate programs is Tiny Prints, a member of the Shutterfly brand family. Its strategic brand alignment and clear focus on incremental growth from content partners set it up for continued success. In particular, the company instituted four fundamental principles that differentiated its approach:
- It excluded loyalty and toolbar affiliates and severely limited coupon site participation.
- It got picky about affiliates, declining nearly half of all applicants.
- It used attribution to limit low-value practices and ensure that the right partners were paid fairly.
- It committed to a dedicated team of more than three full-time employees for the program.
As a result, Tiny Prints’ program grew more than 50 percent annually for five years, earning four industry award nominations and general recognition as one of the best-run programs in the affiliate industry.
The lesson is clear: To capitalize on an affiliate marketing program, you have to invest the necessary time and resources. Don’t throw away marketing dollars on an underperforming affiliate program; scrutinize it closely or enlist the help of an auditor. Your faith in affiliate marketing will be restored.