Affiliate marketing continues to be one of the most important growth drivers in the online marketing mix. The popular form of advertising has seen few negative effects even during the Corona year and in 2021 the signs are still indicating growth. What are the benefits of affiliate marketing? What pitfalls should companies look out for? And what are the current trends? We take a closer look.
Affiliate marketing is a form of performance marketing in which a company works together with one or more sales partners, known as affiliates. The company provides advertising material for this purpose which the affiliate uses on its platforms for relevant marketing measures. Affiliate marketing is performance-based - the company only pays if the affiliates trigger a certain customer action, typically an online purchase in the e-commerce setting.
Performance-based compensation also accounts for one of the great advantages of affiliate marketing: cost efficiency. Companies ultimately only spend their money on results achieved – thus affiliates are motivated to perform well. There are several different flexible commission models.
- Pay-per-sale - The company pays a percentage of the sale price for each purchase made through affiliate marketing.
- Pay-per-click - The commission is based on the number of users an affiliate directs to the company website (regardless of whether a sale is made).
- Pay-per-lead - Affiliates are rewarded when referred visitors leave their personal details on your website by filling out a contact form.
Affiliate marketing can be launched quickly and with minimal investment. Comparison portals such as CHECK24 or Idealo or established test and topic portals such as CHIP are ideal for placing products or offers with affiliate links. If you want to work with a larger number of individual affiliates, you can contact established networks and platforms such as ShareASale, Amazon Associates or CJ Affiliate. On these you will find many content authors and social media users with large reach who want to generate additional income through affiliate programmes.
Working with affiliates yields other practical benefits. For example, if publishers, especially bloggers, link to the company's website, the backlinks can improve the search engine ranking of the company's homepage. There is also the possibility that some affiliates will become more involved with the advertised products within the cooperation and thus become customers themselves. In addition, affiliates can also give valuable feedback, for example when they write product reviews or comparison posts.
Which brands is affiliate marketing particularly suited to?
Young companies in particular can benefit enormously from affiliate marketing: Instead of setting up their own blog or social media channels from scratch and having to deal with video production, SEO, analyses, monetisation and more, suitable affiliates with their platforms and reach can ensure the right marketing measures and lead generation. In addition, the high level of cost control suits the often still limited marketing budget of young companies.
At the same time, established brands and companies can also bring a breath of fresh air into their own online marketing with the help of affiliate marketing. Depending on the industry and subject area, this often opens up new and as yet unknown channels. For example, the car manufacturer KIA has been running a successful affiliate campaign since 2018 with the aim of increasing enquiries for a test drive. A focus on content publishers in the automotive sector with an attractive commission of over €100 per high-quality lead has ensured that 35 percent of all test drive requests are now generated via the affiliate channel.
While companies whose products appeal to a broad audience - e.g. food, beauty or travel - can choose from a large number of relevant affiliates - such as travel blogs or beauty guides - brands with more niche products have to search a little harder. This effort is worth it, however, because there is now a relevant and targeted online community for almost every niche topic. For example, Etsy, the e-commerce provider for handmade and vintage products, was able to launch a successful, incentive-based campaign around Halloween. Various publisher verticals (DIY blogs, wedding blogs and tech blogs) from the UK, USA and Canada took part with creative contributions and ensured that Etsy was able to increase its sales volume by up to 35 per cent.
The down side
Despite all these benefits, companies should of course not dive naively into the world of affiliate marketing without considering the particular challenges and risks involved. The results of affiliate marketing can be difficult to predict. This is because many affiliates try to produce traffic for numerous companies, sometimes on an irregular basis. Sometimes companies also find that affiliates are marketing products and services to the wrong target audience. This can lead to a low conversion rate and higher bounce rates on the website.
Tip: Increase your chances of reaching your performance targets by getting advice on how to set up a programme, how to make realistic projections and how to brief and manage affiliates properly.
Unfortunately, there are also always people with a criminal agenda who use affiliate programmes to make money from fake leads. eBay famously helped the FBI stop two scammers who had made $28 million from their affiliate programme. There are numerous sophisticated fraud methods that marketers should be wary of - here are just a few examples:
- Using bots or scripts to mimic clicks on links and website visits by users.
- Conducting transactions with stolen information such as personal data or credit card details and then refunding or cancelling purchases at a later date
- Spamming purchased email lists
Tip: Before you bring a partner on board, check their website to make sure there is nothing suspicious there and the content is related to your business. Look at the affiliate's social profiles and also compare the follower count with the number of interactions.
The foundation of affiliate marketing is based on tracking a user's online activity. However, there are increasing concerns about the privacy and data of users. For example, Apple has introduced the Intelligent Tracking Protocol (ITP) to prevent first- and third-party cookies. However, most affiliate tracking applications rely on cookies for sales attribution. So, as cookies are pushed back more and more, it becomes harder to accurately measure a programme's performance and return on investment.
Tip: Ask affiliate tracking software providers how they handle ITP and other browser/user privacy issues. Consider using a self-hosted first-party cookie or server-to-server (S2S) affiliate tracking app for better results.
Trends in 2021
Current industry trend topics also reflect the importance of flawless tracking. According to the Trend Report 2021 from xpose360 and AffilliateBLOG.de, 59 per cent of affiliates surveyed see cookie consent tools as the top trend in 2021. These tools address the aforementioned privacy issue by enabling user opt-in for cookies. On the merchant side, customer journey tracking is particularly high on the agenda as it can be used to better measure the value of affiliates.
Even if affiliate marketing brings with it some challenges, it is still predicted to have a great future in the industry. According to the Trend Report, 75 per cent of merchants expect greater sales from affiliate marketing in 2021.