Affiliate marketing can feel a lot like Marmite at times, you either love it or you don’t. For those of us falling into the love category, we recognize its remarkable strengths as a growth channel.
- It’s a coveted channel for winning new customers and controlling ad spend. In fact, it’s widely regarded as many executive marketers’ #1 channel for customer acquisition and spend control.
- There is a rich diversity of publisher partners–many of which are simply not financially feasible to work with in other channels.
- It operates on an inherent pay-for-performance, not a pay-for-audience-access, model — which provides a natural insulation against risk as compared to paid channels.
By contrast, some have preconceived notions about this category—and yes, your boss may be one of them. So, to assist in your efforts to convert your boss into a lover of affiliate, here is a collection of some myths and misconceptions along with the evidence you need to debunk them.
Myth #1: “Affiliate is a niche channel. Fine for what it is, but limited in scale and business impact.”
Quite the opposite is true. Many reputable third-party analysts have assessed the size and growth potential of affiliate marketing. According to Business Insider, it accounts for 16% of total retail sales and other research companies have put the figure at 18%-20%. If affiliate is only accounting for a few percent of your sales, it’s more likely because you don’t invest properly in the channel, not because the potential to produce more isn’t there. Partnerize conducted a study with 1200 marketers from leading brands in the retail, travel and finance sectors in 2018 and found that 96% of brands had an affiliate program, and 54% of brands surveyed drove 30% or more of their sales from affiliate and partnerships.
Compound annual growth rate (CAGR) estimates for the category, globally, generally run about 10%. Moreover, this Pepperjam study shows marketers view affiliate as a primary business driver.
Net, affiliate is big. And it’s only getting bigger. You just need a strategy and the right technology to make it a major profit center for your business.
Myth #2: “Affiliate just subsidizes customers that were going to buy from us anyway.”
All marketers are concerned about incrementality: the extent to which a media channel drives new revenue for the brand. This myth of customer subsidy emanates from a belief that affiliate shoppers fill their carts only to hop out in search of coupons to bring the price down. There is some truth here. Some people do this. But there is ample evidence that support affiliate programs drive strong incremental sales, especially when they are constructed and maintained with care.
To prove it, we analyzed the sales driven to cashback and coupon sites across our clients, which many believe are the least incremental. We found that 38% of conversions were to “net new” customers—people who had never purchased from the brand previously (AKA, first-time buyers). That’s just one important source of incrementality. Here’s another: affiliate customers typically have higher average order values (AOV) than those driven through other channels, meaning that you sell more to these customers in the affiliate channel than you do through other channels. New customers and an overall higher average order value sound like incrementality to me. Further, it is very easy to structure an affiliate program, so it only pays on net new customers or on above average AOVs. The most advanced tech platforms let you create commissioning rules that ensure you only pay your partners when they drive net new or incremental value purchases.
Myth #3: “Affiliate is riddled with fraud.”
In the late 1990s and early 2000s, when most affiliate programs were cost per click (CPC), there was, indeed, a lot of click fraud. Today, most analysts agree that affiliate has a lower incidence of fraud than other marketing channels because it is measured by hard metrics (Read: Was a sale made, or not?). By contrast, most other media are measured by soft metrics like impressions or views through attribution.
Net, you’ll find a lot more fraud when you lift the bonnet of other marketing channels than you will with affiliate, and the industry is getting better and better at detection and prevention. There is fraud out there, and it is believed to affect between 8-9% of affiliate sales—$1.4B of a $15B industry. But just as with other digital channels, whether your program experiences significant fraud relates directly to whether you take steps to protect yourself. The top networks and tech platforms have implemented anti-fraud solutions that detect and prevent fraud through AI and machine learning analysis. Brands that put basic protections in place need not suffer from significant fraud.
Myth #4: “The return on investment (ROI) in affiliate is not good.”
Some marketers question the ROI of affiliate but multiple industry studies have shown that affiliate offers the highest ROI and ROAS of any digital marketing tactic, except for sending emails to your own lists. A recent study from the Performance Marketing Association showed an average ROAS of 12:1 for the channel. A cross-section of Partnerize clients show a ROAS of 18:1 on average. Studies from diverse sources including the IAB have shown ROAS of 15:1 to 20:1.
In conclusion, attaining more budget for this channel starts with dispelling myths about what can be an amazing profit center for so many brands. When you come to the table with data and facts, it’s not hard to change your boss’s mind about the affiliate channel. You may well end up with more budget and a full seat at the CMOs table.
