affiliate marketing’s role in media plans
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TRANSCRIPT
Affiliate Marketing’s Role in Media Plans
Presented by:
Affiliate Summit West 2012
Control
Control (cont.)
Control (cont.)Take control
Continual improvement and constant innovation provide the opportunity for fine tuning and maximum control.
“You can't control what you can't measure”
–Tom DeMarco
ConsiderationsThings to consider when looking at Affiliate marketing’s role in your company’s plans
Profit Margins (identifying most profitable sales channels)
Paradigms (corporate philosophy on elements of media plan)
Perceptions (by company, by media agency, by CEO, etc)
Politics (individual personality conflicts and biases)
Programs (understanding complexities of new media options and holding programs accountable to ROI metrics)
Profit MarginsThe ultimate way to build a business would be to hire a
sales force that was totally commission-based
Self-funding Profit Center
Performance-based programs (see Affiliate) are comparable to commission-only sales reps
Self-funding Profit center
Profit Margins (cont.)As an Business Owner, where would you prefer to have most of your sales revenue come from?
Distributor Retailer Reseller Direct
Profit Margins (cont.)Traditional Sales Channels
All sales are not created equal
Distributor – No Ownership of Customer Data
40% – 70+% Depending on Industry (Help get product to market)
Retailer – No Ownership of Customer Data
35% – 60+% Subject to Negotiation (Brand recognition = sales)
Reseller – No Ownership of Customer Data
30% – 40+% Some hold inventory & others drop ship (Discount)
Profit Margins (cont.)With 100% Brand Penetration
If links in the value chain could be removed Business Owners would sell direct all day long
In reality, distribution channels are necessary and provide unique value at variable costs
Profit Margins (cont.)Direct vs. Other Sales
Includes marketing expense
Profit Margins (cont.)Giving away margins
Many companies willingly offer online dealers (that are little more than savvy affiliates) 35%-50% commissions while they are hesitant to offer affiliates even 1/3 as much
It’s important to understand who’s providing what value
Affiliates need to be more efficient in order to survive
Profit Margins (cont.)Increase % of most profitable sales
ParadigmsTraditional media still accounts for
the lion’s share of marketing budgets
Quote about Advertising that
everyone’s heard a million times…
“Half the money I spend on
advertising is wasted;
the trouble is, I don't know which
half.”
-John Wanamaker
Paradigms (cont.)Performance-based (see Affiliate) programs are lumped
in with overall media programs (bound to budgets)
Traditional media focuses on branding metrics like:
Audience ratings, Media share, Reach and Frequency, Gross ratings points, Readership, etc;
Online media focuses on direct response metrics like:
Clicks, CTR, CPC, Revenue, CPA, ROAS, etc.
Paradigms (cont.)Performance-based marketing is considered and
expense by many companies
More nimble companies have realized that performance-based programs can be profit centers
These programs may be attributed to cost of goods sold and become completely self-funding
PerceptionsWhat are some negative perceptions of affiliates?
Affiliates are somehow cannibalizing other channels
Affiliates’ efforts are less legitimate than other efforts
Commission is a dirty word
Irrational fear of affiliates in general
Perceptions (cont.)How is affiliate marketing perceive by key players?
The company as a whole
Sales team
Media agency
CEO and other Executives
Perceptions (cont.)
Perceptions (cont.)How is affiliate marketing perceived by those in the trenches?
PoliticsHow much do personal politics and incentives play a role?
Individual incentives may be at odds
Feel that affiliate is a threat to one’s existing programs
Certain people may criticize without all the facts
ProgramsOnline Media
Sales completed through Company’s Site
Type-ins – Company Owns Customer Data
0% - Shared attribution with Branding efforts
SEO – Company Owns Customer Data
5% – 15% - SEO program costs
Affiliate – Company Owns Customer Data
10% – 20% - depending on ROAS and admin fees
Programs (cont.)Online Media
Sales completed through Company’s Site
SEM – Company Owns Customer Data
15% – 25% - Agency / Vendor Fees + ROAS
Retargeting – Company Owns Customer Data
30% – 40% depending on ROAS and admin fees
Display Advertising – Company Owns Customer Data
30% - 40% - depending on ROAS and admin fees
Programs (cont.)Online Media
Online marketing is infinitely trackable
Online marketing efforts are held accountable to pre-determined metrics: ROI, ROAS, MER, CPA
Most online marketing programs can be held to performance-based metrics
If the program is performance-based, funding should NOT be considered a Marketing Expense. It should be considered a Profit Center.
Programs (cont.)Affiliate vs. Other Online Marketing
Programs (cont.)Affiliate vs. Other Online Marketing (cont.)
Programs (cont.)Online Marketing Budget Allocation
Conclusions
Question:
What commission range am I so comfortable with that I would be happy if sales came in all day long at that rate?
Once you have an answer, it comes down to scalability
SummarySales that happen directly on the company’s site are among the most profitable
Sales that happen on a Retail partner or other distributor’s site cost more and don’t capture customer data
Affiliate marketing is one of the most cost-effective ways to drive online sales
Maximizing the number of sales through the affiliate channel should become a top priority for any Marketing Department
Final thoughts
Why are you limiting the opportunity to make the company more profits?
Potential Additional Thoughts(time permitting)
CPA networks as media buys…pros and cons
How to utilize CPM / CPC affiliate placements
Retargeting as affiliate deal or media buy?
Why don’t affiliates sell more CPM media?
Advantages of pure CPA models
Why are affiliate efforts seen as an affront to traditional media buyers?
Media buyers must be willing to admit their efforts can’t reach everyone
They must also be willing to admit that affiliates have serious expertise
People putting in time and effort that you simply can’t is valuable
Status of affiliates and trademark bidding (segmentation of PPC efforts)
Facebook acquisition opportunities through affiliates