Affiliate Marketing is a circa £9 billion online digital marketing channel that not enough brands embrace to grow their businesses. Today, you’ll learn how affiliate marketing can help your business achieve incremental growth.
I’m Elliot Myers; I’ve worked in Affiliate Marketing since 2013 and have helped brands from Barclays to Gymshark scale through affiliate partnerships.
I currently run an Affiliate Marketing consultancy called The Affiliate Marketing Advisor that I founded in 2019. Since then, we have helped brands generate over £25 million in sales at an average return on ad spend of £7.
My book, The Advertisers Guide to Affiliate Marketing, can help newcomers understand how the channel works and where to start; check it out on Amazon.
We will cover topics from the basics to strategic models you can apply right away to get tangible results.
The £9 Billion Opportunity
The 2018 IAB UK report found that in 2017 brands generated £8.9 billion in sales through the affiliate channel, an increase of 9.2% vs the previous year.
While new data is not yet available, it is safe to assume that this trend has continued, especially into the global Covid 19 pandemic that pushed record amounts of consumers to shop online.
Affiliate Marketing was born online; it is an internet-first channel that allows brands to reach millions of prospective consumers through partnerships with website, application and platform media owners.
At its core is tracking. Brands can view the number of clicks and sales resulting from a partnership and primarily pay a commission for sales only.
The result is that it creates a default level of transparency and accountability with brands harnessing data to calculate metrics like return on ad spend and cost per sale.
Our View On Affiliate Marketing
We define Affiliate Marketing as:
‘Affiliate Marketing is a tracked partnership between a media owner (Affiliate/Publisher) and a brand (Company) whereby the media owner is paid a commission when a consumer they persuade to visit the brand’s online store makes a tracked purchase.’
Here is a practical example of how it works:
- Anna owns a sportswear business
- Bianca runs a fitness blog
- The two form a partnership where Bianca earns a commission for tracked sales 4. Bianca proactively promotes Anna’s company and drives new consumers to her online store
- Anna sees an increase in visitors from Bianca’s efforts and rewards, the resulting tracked sales with a commission payment
Engaging Different Segments Of The Market With Affiliates
The market comprises all consumers who could purchase a product or service. Different types of consumers exist; dormant consumers are unaware of a product or service.
Considering consumers are aware of a product or service and are weighing up their purchasing options.
Purchasing consumers are ready to buy; they likely have more than one option and only need to finalise their decision rationale.
Affiliate Marketing can help brands reach and influence each of these segments.
Awareness focused media such as product round-ups and editor’s top picks can move dormant consumers into consideration.
Review and informational media can move considering consumers into purchasing.
Monetary incentives offered through affiliates can be the deciding factor for purchase ready and price-sensitive consumers to choose one product over another.
Increasing The Effectiveness Of The Marketing Mix
Our client Heist-Studios sells foundation wear such as tights and utilises various digital marketing channels to drive sales.
When a dormant consumer is impacted by a social or display ad and moves to consideration, they may perform an inquisitive search such as ‘best women’s tights.’
Heist-Studios itself doesn’t feature organically on the search results; they appear in three paid Google Shopping Ads.
Affiliates that feature Heist appear in organic positions 1, 2, 3, 6, and 9. The features are all review articles that recommend the brand and validate the original ads that got the consumer interested in tights while working to persuade them to purchase from Heist over competitors.
The features increase the chance of Heist converting dormant consumers that follow this path into customers. Therefore the upfront budget invested reaching dormant customers through other channels becomes more efficient due to a higher amount of resulting sales.
The same is true for offline ads; if Heist had run TV ads instead of social and display ads and consumers followed the same path, the TV investment would have become more efficient.
The result of greater efficiency boosts business effects such as profitability and the overall return on investment from marketing efforts.
Another benefit of brands ranking on important terms through affiliates is an increased share of search results. Affiliate complements organic SEO efforts and is a potential shortcut to brands wanting to appear on desirable terms speedily.
Segmenting Affiliates To Serve The Market
We can divide affiliates into four ways of serving the market:
Macro Awareness – Partners that create mass awareness and are best suited for engaging dormant consumers
Micro Awareness: Partners that can drive targeted awareness and are best suited for engaging select groups of consumers
Macro Incentive – Partners that focus on driving sales from mass amounts of price-sensitive consumers
Micro Incentive – Partners that focus on driving sales from targeted groups of price-sensitive consumers
- Lyst – An online virtual shopping mall that displays a diverse range of brands to consumers searching for clothing products
- WhoWhatWear – A digital magazine that covers select brands and targets a particular audience with written content
- Quidco – A cashback website where consumers receive money back when they purchase certain products (Quidco pass the commission they earn from a sale as a cash reward to their members)
A journey could be a consumer visiting Lyst for tights, then searching Google to validate brands they are considering with a query like ‘best women’s tights’ and deciding to buy from Heist-Studios.
If the consumer is price sensitive, they could visit Quidco for cashback on their purchase to get them to make a final decision.
Macro Awareness Example
We used Lyst as a previous example of a macro awareness partner.
They conduct their marketing to attract as broad an audience as possible to use their shopping platform.
Their broad approach to marketing makes them appealing for clothing brands that want to expand their customer base and reach many consumers.
Brands can benefit from partners like Lyst to reach and influence dormant consumers.
Micro Awareness Example
We used WhoWhatWear as a previous example of a micro awareness partner.
Their marketing is narrower than a partner like Lyst. While they want a lot of readers, they want a particular type of reader that will find their content interesting.
This type of partner usually excels in ranking for relevant search terms for brands that want to target their readership.
WhoWhatWear, for example, ranks on highly desirable terms for our client Heist-Studios.
This type of partner is best suited to helping brands move, considering consumers toward making a purchase.
Macro Incentive Example
We used Quidco as a previous example of a Macro Incentive partner. They use price-based incentives to persuade price-sensitive consumers to make a purchasing decision.
Quidco advertise widely, including on television in the UK. They aim to draw a mass audience that will become members and find a brand they want to purchase from via Quidco.
The best way to utilise a cashback partner like Quidco or a voucher code partner is to offer consumers an incentive that gives them a deal and encourages them to do something valuable for the brand.
For example, a brand could offer a 10% discount code if a consumer meets a minimum spend or purchases additional products.
The consumer gets what they want, which is a deal. The brand receives something valuable, which is higher spend or more items purchased.
We strongly recommend brands do not give away margin through discounts and pursue a discounting race to the bottom.
Brands should tactically use price incentives to drive strategic goals; increasing average order value is one example.
Micro Incentive Example
Micro incentive media owners help brands persuade select groups of price-sensitive consumers to make a final purchasing decision through price based incentives.
One example is Kidstart. They are similar to Quidco in that they offer cashback; however, Kidstart targets parents that want to save money for their children. The cashback gets paid into an account on behalf of the child.
The Kidstart audience is price-sensitive parents, and they are an attractive partner for brands that want to target parents.
The same advice for Quidco and voucher sites applies; brands should engage Kidstart with mutually value-adding incentives.
A Breakdown Of The TAMA Affiliate Model
We summarise the model discussed as:
Awareness – Make them see it, activate dormant consumers and create desire.
Consideration – Make them want it, engage those considering and move desire to action. Purchasing – Make them purchase it, overcome price sensitivity and finalise action. Macro Awareness – Highest visits, lowest sale conversion and lower average order value. Micro Awareness – Higher visits, lower sale conversion and lower average order value. Macro Incentive – Lower visits, higher sale conversion and higher average order value. Micro Incentive – Lowest visits, highest sale conversion and higher average order value. A Practical Example Of The Model
Our client Roman (AKA Roman Originals) works with Lyst and Quidco.
Lyst serves the Macro Awareness segment of the market and, as a result, has significantly higher visits, a lower AOV and lower sale conversion.
Quidco serves the Macro Incentive segment of the market and, as a result, has significantly fewer visits, a higher AOV and much higher sale conversion.
Our results across all of our clients are consistent, with few exceptions.
General Advice For Brands
In closing, here are some general pointers for navigating affiliate:
Check the Contract
- Understand how the fees work when you select a network or SaaS provider 2. Understand the sale validation process to avoid paying a commission on refunded sales
- Understand how exclusivity works if there is a relevant clause
Understand the Tracking
- Do not pay a commission on VAT, delivery fees or card processing charges 2. Deduplicate where possible to avoid paying for sales closed by another channel 3. Implement server to server tracking to future-proof against cookie blockers
Affiliate is Hands-On
- Recruitment and relationship building are the only ways to scale affiliate 2. Approving a lot of affiliates will not produce results; only authorise affiliates that you have had a conversation with to your program
- You can recruit outside of the Affiliate Network or SaaS and utilise the open web and tools like Breezy to find new partners
Do You Need Affiliate Marketing Help?
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