Affiliate marketing is one the oldest marketing channels on the internet and has stayed relatively stable for many years. However, marketing through affiliates has evolved dramatically.
There’s no question that the channel is here to stay and provides remarkable, highly consistent ROI. Just last year affiliate marketing drove a 14 to one return for every $1 in marketing spend according to a digital adspend study by PricewaterhouseCoopers (PwC) and the IAB.
Since the business relationship between affiliate and brand is based on well-established performance-based compensation methods, the business objectives of both parties are well-aligned and allow for scale. And now the reward structure, high ROI and ability to scale are motivating leading brands to experiment with marketing activities and partners that are not conventional affiliates. In fact, these channels and marketing partnerships reflect a more solid relationship where both parties work together to navigate risks, improve efforts and share in the profits.
Original affiliate marketing
In the late 1990s and the early 2000s, affiliate marketers drove web traffic and sales to brands. These typically included publishers like coupons, cashback, content and loyalty sites. Measuring marketing performance was fairly standard, with brands tracking affiliate driven conversions and paying out commissions for the online sales driven by each individual affiliate. An example would be powerhouse publishers like ebates.com and fashion house Tommy Hilfiger or a specialized travel blogger and the hotelier Marriott. These types of relationships between marketers and affiliates were typically managed by affiliate networks which specialize in finding affiliates, tracking conversions and processing commissions.
Over the last 10 years the marketing function has been revolutionized through the wide deployment of technology which automated marketing functions, collected data about consumer journeys across all marketing touch points, and enhanced highly personalized advertising and media buying.
While the technological advancements have been staggering, improvements in usability combined with the ability to integrate marketing processes and data flow across marketing functions, channels, CRM records etc allows leading marketers to deploy marketing technology across their own teams, reducing the need to rely on third party intermediation. These developments across marketing functions and channels increasingly include the affiliate channel.
Expansion of partner categories and channels
Over the last few years leading marketers extended their performance-based measurement and reward system, and its ability for scale beyond conventional affiliates, to include meta search engines, aggregators, mobile apps etc. In fact, mobile app development and usage exploded in the last few years.
For example, Shazam is the world’s most popular app for connecting artists and fans through music discovery. It makes sense that monetization would be based on incorporating links to related services where consumers can stream, download and purchase content and that Shazam participates in the online music sales that resulted from usage of its app. The underlying mechanics to track and measure conversions and sales driven by Shazam as well as the subsequent payment processing are an easy and logical extension of the affiliate methodology and technology infrastructure.
These new types of partners and the expansion across different channels call for an expanded category name and partner marketing seems to be better fitting.
Data at scale
The expansion to new, sophisticated partners and channels demanded an equally sophisticated analytics, insights and reward infrastructure. Addressing these demands requires data – large amounts of granular data. Today, brands want to capture meaningful, highly granular conversion data, including SKU, product category, new v returning customers, time, location, channel, device, LTV, offline, online etc.
Brands use data to understand conversion costs, channel and partner category performance and efficiency, profitability across promotions, products etc. These detailed analytics and actionable insights allow advertisers to better manage key partners, partner and product categories, campaigns and promotions, channels etc, driving higher revenues across more profitable products while increasing their operational efficiencies. Advertisers also use the performance data to design tiered reward systems, often based on metrics such as total conversions, premium conversions, booked or consumed conversions, etc.
Advertiser and marketing partner alignment
Tiered reward systems align advertisers’ and their marketing partners’ objectives with higher rewards for more profitable conversions or sales. However, this alignment conceptually looks only backwards, eg the partner driving more business class bookings (and the eventual, actual travel or consumption) received higher rewards for a booking from several weeks ago.
Driving and optimizing campaign and promotion performance looking forwards requires that brands and advertisers share the collected, anonymous data with their marketing partners. That shared data allows marketing partners to identify how they can optimize their own content and audience targeting segmentation efforts to drive more profitable conversions to advertisers to generate higher rewards for them. This creates true alignment between advertisers and their marketing partners.
And that’s how affiliate marketing morphed into partner marketing.
Erik Mikisch, Vice-President of Marketing, Performance Horizon.