Interactive Seven 2009 Supplement - Marketing Week

MWIB_260209_p021 19/2/09 17:25 Page 21
INTERACTIVE AFFILIATE
alone. As a result, affiliates must demonstrate additional benefits and
innovation. Some affiliates could have a loyalty angle or offer a unique
look or a balanced strategy for the best possible ROI.
Consequently, there is more pressure to complete sales quickly,
before the customer looks elsewhere for a better offer. Affiliates have
a shorter period of time to complete a sale and must provide not only
more content, but also value-added incentives, such as product
bundling, to drive sales.
The industry insiders warn that affiliates should no longer rely on
a single tactic of “promotions and incentives online”. New and creative
innovations, such as quoting sites, product reviews or even ties
to celebrity fashion sites, should be used to build momentum.
Challenges
Affiliate marketing is no longer a new medium, but one that has
matured and now yields results. One challenge now facing affiliate
marketers is how to accurately predict the revenue generated by online
sales and the resulting commission. In one analyst’s words: “Affiliate
marketing can be a victim of its own success by outperforming targets
and therefore eating into already-reduced budgets.”
Meanwhile, affiliates expect a rise in problems associated with discount
vouchers. They feel that they could face issues to do with the
unauthorised and incorrect use of the codes. This includes unauthorised
distributors, redemption via a channel that was not the intended
distribution route, misrepresentation of the terms of offers and even
unmoderated content.
Robert Glasgow, managing director of Webgains, points out that
an interesting dilemma for affiliate marketing is where it should sit
within the organisation of, say, a major online retailer. Should it be
an integral part of advertising or is it a part of the marketing budget
akin to “trade marketing”, and therefore more focused on volumes?
Aligned to this issue is whether affiliate marketing should be handled
by the advertising agency, or the marketing or sales director as a
tactical tool. “This issue has remained confused for many years.
Perhaps the catalyst of a recession will firmly cement affiliate marketing’s
place as part of the promotional effort in one camp or the
other,” adds Glasgow.
Impact of recession
The economic downturn has affected every industry and, to an extent,
affiliate marketing is no exception. But affiliates have an advantage
in that online shopping is viewed as a cost-effective alternative to shopping
on the high street. Research by a membership community for the
internet retail industry suggests that 68% of shoppers went online for
Christmas presents last year. This trend provides affiliate marketing
with the opportunity to build on its position as a key component of
web strategy and to demonstrate the returns it creates.
Dietrich says: “Tightening budgets may also act as a catalyst to
change the model from a CPC model to a CPA model.” There are many
advantages for those looking to invest in a CPA model. As a variable
cost it can be capped at whatever level an advertiser requires and, crucially,
it offers a measurable ROI
that can be tailored to whatever
format best suits the campaign.
The US market has already
started the transition towards
CPA, with big-name retailers
choosing to run their price comparison
site presence through a
CPA model. This trend is also
gathering pace in the UK, and
with budgets coming under
greater scrutiny, CPA may soon
become the dominant model.
Existem Affiliate Management’s
Russell says: “The current
“Affiliate marketing
ties in well with this
[consumer
research] trend, as
it ensures brands
have maximum
exposure across
multiple sites”
Liane Dietrich,
LinkShare
Follow the code: The IAB code of conduct for vouchers illustrates
how customer service is at the forefront of the affiliate industry
economic climate, while favouring online retailers in some respects,
is imposing pressure on the margins.” This has resulted in greater
scrutiny of the profitability of the affiliate channel and, as a logical
consequence, a questioning of many of the basic assumptions surrounding
the channel.
Opportunities
Affiliate marketing strategy is making inroads into more sectors beyond
packaged goods and automotive, and could be a lucrative strategy for
marketers in the retail, travel and finance sector. “On one hand, traditional
players such as Marks & Spencer and Yahoo! are looking at affiliate
marketing seriously, while on the other consumers are enjoying
online shopping more than high street shopping,” according to Peter
Rowe, head of Affilinet UK.
While demonstrating ROI is the biggest challenge for affiliate marketers,
according to Dietrich, it also presents the biggest opportunity.
Recent work by analyst house Jupiter Research reveals that consumers
are more internet-savvy than ever before, searching longer and using
more sites before arriving at a decision. “Affiliate marketing ties in
well with this trend, as it ensures brands have maximum exposure
across multiple sites,” adds Dietrich.
The way forward
The key to successful internet selling is to follow fairly simple rules,
such as making the website user-friendly and closely matching the
search term to the ad, as well as the ad to the offering. Alex Walker,
marketing manager for merchant Virginia Hayward, says this is crucial
to cost-effective PPC marketing, but also has relevance for affiliate
marketing. This is because, if the affiliate closely matches their
site/PPC advertising to the offering from the merchant, then they maximise
their chance of completing a sale following their referral.
It would be desirable, both from the point of view of the affiliate
and the merchant, if sales could be completed without relying on discount
codes. However, Walker adds: “In my view, this is only possible
if the merchant concentrates on an excellent site and product range,
and ensures that affiliates do their utmost to promote this as accurately
as possible.”
Affiliates should be treated as a member of a partnership and not
just as a service provider. As managing ROI is now even more important
when budgets and results are viewed more critically, affiliate marketers
must seek to find more innovation in their offerings and add
value to their services as they enter a period of consolidation.
Marketing Week Interactive 21