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IREU Top500 The Customer Report: 2018

IREU Top500 The Customer Report: 2018

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Guest comment: The Real Value of Affiliate Marketing

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by Kevin Edwards

Affiliate marketing finds itself at a crossroads in its online evolution, grappling with the dilemma of how best to acknowledge and therefore apportion marketing spend based on the ‘value’ different digital channels offer.

As affiliate marketing fragments and advertisers look to ensure they’re de-duplicating their online marketing channels, so the traditional affiliate payment of last click wins is coming under increased scrutiny. Affiliate marketing has built an industry based on the premise that regardless of the click to sale conversion path the final referrer takes the whole prize for converting a potential customer into an actual one.

This model has served the affiliate industry well; given year on year growth rates, the affiliate channel could generate sales close to £5bn for online retailers this year. Nearly every high street and online retailer runs an affiliate programme and common wisdom asserts a flexible, attractive and well run campaign could result in as much as 30% of an advertiser’s online sales.

But affiliates co-exist alongside search and email campaigns, display and price comparison activity with advertisers tracking much of this activity on a performance basis, only wanting to pay for a single referrer across all their channels.

Few, if any, affiliate networks would query this logic but what such practice highlights is loading affiliate reward at the point of transaction ignores valuable affiliate traffic that acts as an initiator or contributor earlier on in the purchase cycle. It also raises questions and concerns amongst advertisers about the type of affiliate who is mostly likely to take the commission at the expense of affiliates early on in the purchase chain.

There is a received wisdom, borne out of assumed logic that so called incentivised traffic (offering the consumer an extra carrot such as a voucher code, points or cash reward) often trumps all other clicks, kicking in close to the point of purchase and taking 100% of the commission. A logical conclusion therefore would be to look at the additional points in that chain and start dividing the commission up to reward all contributors. This could be towards the first click, last click or carry equal weighting.

So far, so good but any change to commission models has to be backed up with solid data and all the data and number crunching indicates there are relatively few affiliates involved in a typical affiliate sale, as few as 1.2 for certain sectors; redistributing affiliate commissions could in practice have a negligible impact on the amounts paid out.

And therefore, contrary to the popular conception above, incentivised traffic plays a relatively minor role in cookie overwriting. In fact what different affiliates categories have shown is they’re relatively standalone, more likely to impact similar sites to themselves (a voucher site overwriting another voucher site’s cookies for example) than weave between different affiliate types.

So whilst the concept of redistributing commissions may be sound, it does little to affect payments or offer clarity on whether value is being rewarded.

Quite the opposite, there is a growing belief that multi-attribution of commissions is based on a false premise; a click acting as the arbiter of value. In essence everything that sits either side of the click; the editorial message, incentive or offer that drove the click, to the customer profiling information such as new versus repeat, persistency, average spend and so on are the true determinants of the value.

Therefore wouldn’t it make sense to use these varying ‘quality’ metrics to determine commissions? Not only would these metrics give assurances to advertisers they are spending their commissions wisely but it avoids the lack of clarity that faces affiliates from a multi-attribution model.

Ultimately the gains for the industry would be twofold; greater confidence that affiliates are adding value and their commissions are reflected in this value and increased advertiser spend for the channel.

Kevin Edwards is strategy director for Digital Window

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