Affiliate marketing, also known as partnership marketing, is considered by many to be a key part of a brand’s marketing mix.
Yet this channel is still not as prominent as the likes of traditional digital marketing such as paid search, SEO, or social media. While Australia is still behind more developed markets such as the UK and US, it has advanced rapidly in recent years with the evolution of different affiliate types and new technological advances. According to the 2019 Awin report, over 70% of Australia’s top 100 retailers are running an affiliate programme, and 20% of new customer acquisitions are from this channel.
Breaking down how it works, affiliate marketing is about forming partnerships and paying primarily on performance. Brands will pay a commission to an affiliate for any sales or actions that were generated from their referrals. Affiliate partners come in all shapes and sizes, from incentive and loyalty websites, to review blogs, to marketing technologies, and everything in between. Whilst it’s true that the volume of affiliate sales is still primarily driven through discount partners, the landscape has seen its own innovations, with Buy Now Pay Later (BNPL), brand-to-brand partnerships, and even big publishing houses moving towards an affiliate model, being some of the many trends that are making a wave in the past year. Much of the draw of affiliate marketing now resides in the creativity and diversity of affiliates plying their trade in the industry.
What makes up an affiliate programme?
At the heart of this channel are the networks and SaaS platforms, which provide the technology to track a customer’s journey, a marketplace for brands and affiliates to connect, as well as a way of processing commission payments. Finally, we have the agencies such as Navigate Digital who work closely with both the networks and affiliates to manage and grow a client’s affiliate channel. With all these attractive propositions available, you may wonder “how can I get involved?”. Many challenger and small and medium-sized businesses struggle to find when the correct time to launch an affiliate programme is, and the logistics behind running a successful programme. Here are a few things to consider.
Balancing the costs
The first consideration is to do with the different costs involved. Although these can seem daunting, the reality is that many costs are performance-based, and the channel typically boasts a high ROI. You will need to pay commission to your affiliates, network/SaaS fees, and agency fees (if applicable). It’s common for networks & SaaS platforms, as well as the odd affiliate partner, to also charge integration fees to get set-up. Offers and discounts are another powerful tool at your disposal that can influence margins and finding the correct balance in all these moving parts will go a long way towards a successful affiliate programme. Finally, some of the bigger affiliate partners charge placement fees for more exposure to their audiences. These are optional, but worth considering as an additional cost.
Once you have all these costs at hand, and using a target ROI, you can determine the volume of orders you need from the affiliate channel to make it viable. Ask for feedback from your agency and/or network to better understand the opportunity.
Source: IAB Affiliate Marketing Industry Review 2021
It’s a marathon, not a sprint
Another point that is important to understand, is that affiliate and partnership marketing is a long-term strategy. Every affiliate programme takes time to build up, as you work on onboarding and optimising more and more affiliates. You need to plan ahead and think about what the potential is in a year or two years’ time and not just the short term. The longer you run your affiliate channel, the more partners will be working with you, and the more revenue they will generate for your business.
You will also need to think about the kinds of partners that you want to work with and plan your strategy around this. Finding a couple of key partnerships can propel your affiliate programme a long way, so it’s important to dig into the potential.
Navigate’s experience with challenger brands
As an agency, Navigate has a successful history of growing and launching challenger brands. One great example is Rusty, who’s Australian affiliate programme was launched in 2015. Navigate has since managed it from 2017, optimising their programme and delivering growth in revenue through the affiliate channel. Our objective was to deliver 100% revenue growth year on year and to build better programme awareness amongst affiliates in the market.
To approach this objective, we established consistent communications and worked closely with key affiliates in maximising campaign opportunities both on Rusty and the industry side. To keep campaigns cost-effective, key tactics utilised included commission increases in exchange for exposure and ‘spend and save’ campaigns that helped boost not just revenue but also AOV. One of our biggest avenues of growth was the student audience. By partnering with student portals such as UNiDAYS, it allowed us to tap into a powerful market. Overall, under Navigate’s management, we saw a revenue increase of 178% year on year in the first three months. In 2020, the programme continued to see growth with revenue increasing 134% YoY, highlighting what a successfully run affiliate programme can provide for your brand in the long term.
Affiliate marketing will continue to be a progressive option in the marketing mix as more brands develop their digital and eventually omnichannel marketing. Understanding the risks involved with launching a new channel and determining how to get started are some of the concerns many run into and that’s where we can help. At Navigate, we’re here to provide our expertise in helping you not just find your footing in the affiliate world, but to nurture it into a successful part of your business. Whether you already have an affiliate programme and need additional support, or want to learn more about starting one, reach out to us for a conversation.
Jack Ou, Account Executive
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