Performance marketing is based on the premise that you only pay for results. Every programme has its own targets, goals and definition of ‘results’ to mean sales (CPA), leads (CPL) or even downloads (CPD).
Once you understand this simple payment model, it can be applied to almost any online activity imaginable. It is also incredibly cost effective, as the brand sets the commission levels for each product or action. If there are no sales, then it doesn’t cost anything other than the nominal network fee.
The affiliate industry has always inspired and fostered innovation, for better or worse. Tapping into new traffic sources, monetising them and offering real value to brands is something that affiliates excel at.
Here are a number of challenges that most marketing managers have faced at some point. The good news is that there is a cost effective affiliate solution to each one.
The set-up is relatively easy within the framework of an existing affiliate programme and I would highly recommend testing each one if applicable to your brand.
1. Basket Abandonment
The Problem: Abandonment rates vary significantly, but it is a perennial concern for any ecommerce business.
- The average abandonment rate from various figures quoted by a number of respected research companies such as Forrester and Marketing Sherpa is 66.47%.
- An estimated £1.02bn worth of shopping transactions were lost in the UK during 2011.
- A study by Experian revealed that 44% of all UK shoppers abandoned at least once during the same year, usually due to forced registrations or needlessly long registration forms.
The basket is the last hurdle to conversion and these figures should be at the forefront of concerns for any brand.
The Solution: Email remarketing. Both Ve Interactive and Salescycle can capture a customer’s email address in real time, as it’s entered into the form field. If the customer abandons before making a purchase, they are sent an email reminding them to complete the transaction. If the customer returns though the remarketing email and completes the transaction, then standard rate of affiliate commission is claimed by the remarketing company.
The most common concerns that we hear from clients when discussing this solution are usually surrounding legality, intrusiveness, cookie compliance, branding and cannibalisation of the affiliate channel. Each of these is addressed thus:
- The laws governing this method, are the Data Protection Act 1998 (DPA) and the Privacy and Electronic Communications Regulations 2003 (ECR) which is a European Directive adopted by the UK. Neither of the companies mentioned retain user data either, ensuring complete compliance.
- Remarketing is commonly considered to be part of the sales journey. One of the surprising statistics is that emails which are personalised with the customer’s name convert much higher than generic reminders, suggesting that consumers are comfortable with this method.
- The tracking technology uses Java Script and is not reliant on cookies. Remarketing is therefore unaffected by the EU ePrivacy Directive.
- All remarketing content needs to be signed off and approved by the advertiser before the campaign starts, ensuring compliance with existing brand guidelines.
- Both companies use a ‘soft’ cookie which will not overwrite existing affiliate cookies. This will not affect existing affiliates.
This is not a solution intended to replace site testing, as every ecommerce company should be constantly striving to improve its abandonment rate. However, this will rescue a significant number of those sales otherwise lost to the competition.
User experience is the most important consideration of a campaign like this. Overly sales orientated emails should be avoided in favour of customer service focused notifications.
For Affiliate Managers everywhere, this really is an essential programme component.
The premise behind all display activity is to deliver adverts tailored to individuals’ interests, thus focusing spend on potential customers who are most likely to convert. The IAB’s annual AdSpend study showed a 13.4% year-on-year increase through 2012.
The Problem: The traditional challenge for marketing managers when faced with any display opportunity is finding enough budget to keep testing until the campaign yields a positive ROI.
Traditional online display relied on bulk buying impressions using a CPM. There have always been a number of downsides to this model, including transparency and the associated cost. Impressions charged using a CPM often included those served on irrelevant sites, with little or no chance of converting customers.
It could be argued that this increases brand awareness, but measurable, quantitative sales and stats are essential when building a business case to continue this activity and to secure on-going budget.
The Solution: Several companies offer behavioural retargeting solutions using a CPL/CPA payment model, such as GDMdigital and MediaFORGE.
On average, around 95% of visitors leave an e-commerce site without making a purchase and a recent study by Criteo found that retargeted customers are 70% more likely to complete a sale. By also utilising product recommendations, retargeted visitors have spent on average 50% more than non-retargeted consumers.
The rapid rise of real time bidding (RTB) has opened up the possibility of behavioural targeting on a CPL/CPA payment model. RTB has experienced a year on year growth of 112% in the UK through 2012 and now accounts for 12% of the total display activity. Sky currently invest 35% of their total display budget in RTB and predict they will increase this figure in 2013.
RTB allows unsold ad inventory to be bought in real time at a much reduced rate. In its most simplistic form, it works as follows:
- The user clicks from one webpage to another.
- A bid request is sent from the exchange, to the retargeting company.
- The bid request includes a number of attributes and information relevant to that particular user. The display company will then choose to bid or not.
- If the bid is successful, the display company then serves relevant creative to that user.
These companies only get paid if they can convert that display activity into consistent sales or leads. This removes the risk from the advertiser and makes it a compelling proposition for any affiliate programme.
If successful, the brand only pays commission on each sale. If unsuccessful, the same brand awareness argument from before still applies, but without any of the unnecessary expenditure. In all likelihood, if the campaign is not converting, it will be dropped. However, nothing will be lost by testing it and a successful campaign could really contribute to sales targets.
Integration usually involves pixels for retargeting and a short cancellation notice period is usually required also. Most companies use existing creative, modified using their own templates. Full control is still retained over branding and other parameters can be applied to the campaign also.
3. Video Content
Good quality video content has become firmly established as an invaluable tool for reaching new customers. YouTube is now the world’s third busiest website and the growth in video consumption over the past few years has been staggering. A recent study by Entertainment Media Research on behalf of Visibility IQ revealed some very interesting stats.
- 78% of adults who use the internet watch at least one video a week.
- Women are more likely to watch brand related content
- 96% of those that watched product demonstration videos cited purchase consideration as their main motive
- 57% have gone on to purchase an item after seeing an online video.
The Problem: The key challenge for most marketing managers is how to deploy this video content to effectively generate consistent, measurable sales. Doing so can also make an effective business case for more video content, therefore contributing to more sales.
As it stands, most brands will have a Youtube presence for the benefit of their SEO and social media channels. However, the affiliate channel should not be overlooked and can monetise good quality video content, using it as an effective and measurable selling tool.
The Solution: There are a number of affiliate video networks such as Coull and Linkto.tv.
Coull embed unique affiliate links in existing video content, allowing publishers to promote your brand’s video content and earn commission from any sales generated. They also connect publishers and advertisers, helping to bring your brand to new audiences. Coull is also partnered with the Google Affiliate Network.
Linkto.tv charge a monthly fee to tag ‘hot spots’ in video content with item descriptions and links to the advertiser page.
The conversion rates are impressive, as brands can say a lot more in a 30 second video than using a one sentence text link. At Tug, we’ve seen consistent conversion rates over 7% for this type of offering.
Downsides – As Coull is a network in its own right, they take an override to generate their own revenue. In order to offer their affiliates the same commission level as a direct affiliate on your existing network, commissions need to be set 30% higher on Coull. However, the advantages are that this is CPA with no additional set-up fees or on-going monthly service fees.
Linkto.tv charge an on-going monthly fee to use their technology.
The key to this type of campaign is the nature of the content used. Informative, descriptive and useful content will be more engaging for users, yielding higher conversion rates. Regularly updated content is also useful.
Email has long been established as one of the most effective direct marketing channels, with an unrivalled ROI. The ability to reach the inbox of a targeted potential customer can be used tactically to support other channels, or to drive new customer acquisition as part of a wider campaign.
The Problem: Building and maintaining quality lists involves a number of technical considerations. Ensuring deliverability, retaining subscribers through quality content and developing continued growth are huge challenges for anyone operating in this space.
Buying lists can also be a false economy. Quality varies significantly, which is reflected in the price. The customers will be ‘cold’ and will have no idea why they are receiving information about your brand. This in turn can potentially harm your IP, as many customers will mark your carefully crafted prose as spam. Sending an email is a simple procedure, but developing a large list with the ability to drive significant sales when needed is a specialist skill.
While the techniques for building quality lists can be found readily with a quick Google search, these require a significant investment in time which is not always available when dealing with shifting business objectives.
The Solution: Affiliates have been building large email lists for some time now, as the value of this tried and tested medium has become apparent.
Email affiliates were probably amongst the first innovators in digital marketing, carefully building their lists and segmenting them accordingly for targeting purposes. Continued testing, optimisation of HTML and high quality broadcast IP’s are all at your disposal using a CPA/CPL.
These email lists can be tied to an existing site, as in the case of voucher code affiliates. The larger UK voucher sites have upwards of 4 million subscribers each, which they promote a selection of offers to on a weekly basis.
Larger advertisers have more options in this regard, as the affiliate is mainly concerned with conversion rates. However, tenancy placements are available along with solus opportunities, depending on budget and objectives. Hybrid payment models are becoming increasingly popular, but also afford smaller brands the opportunity to test this type of promotion.
Dedicated list builders are also available. These can be more expensive depending on how targeted the campaign will be and usually have more options in this regard. Geotargeting and niche-specific lists may increase costs, but will no doubt provide a higher conversion rate.
Downsides: Email campaigns require negotiation around the payment terms and the level of discount used.
It is essential to understand the levels of margin available per sale for the brand and to offer terms within a tolerable CPA. This can be made more difficult when factoring tenancy payments also.
Testing is required using different affiliates to find the optimum partners for on-going campaigns and the results of each campaign should be analysed for success and profitability.
Used correctly though, affiliate emails can provide a tactical solution which drives large traffic volumes, additional sales and brand awareness when needed.