What Every CMO Should Know About Affiliate Marketing

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Long considered the ugly stepchild of digital marketing, affiliate marketing has grown to become one of the leading drivers of brands’ online marketing success. It accounts for more than $21 billion in online advertising revenues in 2011, according to the IAB.  

For CMOs seeking ways to guarantee ROI without sacrificing brand affinity or customer value, affiliate marketing is a channel worth considering. It helps them achieve their ROI goals by utilizing publishers to conduct their marketing efforts via multiple media channels on a pay-for-performance basis.

Affiliate marketing’s success for brands is realized when three key parties — advertisers, publishers and affiliate networks — all work toward the same goal: acquiring customers.

The advertiser is the product or service; the publisher, commonly referred to as an "affiliate," is paid for marketing the products or services. In between the two is the affiliate network, which acts as the media planner, tracking system, creative assistant, compliance monitor, optimization engine and bank. In this structure, the advertiser pays only on performance and does not risk any media spend.

The affiliate marketing channel, therefore, helps generate significant value for CMOs since scale is unlimited. Paying for performance is a strong benefit, but there are several others to consider:

1)    Small investment. A minor investment of around $10,000 is all that is needed to start a successful affiliate marketing campaign.  

2)    Cross-channel reach. Affiliate networks specialize in different kinds of marketing, such as email, display, search, social and mobile. It's important to test two to three of these channels simultaneously when beginning an affiliate marketing campaign. 

3)    Speed to market and results.It takes as little as one day after launching an affiliate marketing campaign to see results. Since affiliates are paid only on performance, all marketing efforts are ROI-focused and come with detailed analytics for each channel.

Success for any CMO using affiliate marketing boils down to a five-step process:

Step 1: Define the goal. The desired outcome should either be a lead or a sale, which narrows the field of available and effective affiliate networks.

Step 2: Choose the network. Conduct due diligence before engaging an affiliate network by comparing areas such as tenure, financials, staffing, media channel, vertical expertise, technology and services.

Step 3: Plan the media mix. Share budget, KPIs, demo and geo-location information with the affiliate network so it can provide a comprehensive online media plan for the campaign with equal transparency.

Step 4: Monitor the campaign(s). Once launched, ensure the budget is being spent accordingly, brand guidelines are adhered to and performance is tracked against plan.

Step 5: Optimize. ROI goals are achieved by optimizing each campaign source ROI by paying more for profitable sources to scale volume or paying less and/or cutting off unprofitable sources.

Testing a small affiliate marketing budget for immediate and measurable results, and on an affiliate’s own marketing spend, will make CMOs more efficient and accountable marketers. None of this is possible in traditional marketing campaigns.

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6 comments on "What Every CMO Should Know About Affiliate Marketing".

1. Jim Lillig from Synergy Intermedia
   

   commented on: October 19, 2012 at 12:11 p.m.
   Great article Peter. I would add though that without the advertiser optimizing their sales/lead generation funnel prior to entering the affiliate game, they will probably have mediocre success. Plan on spending at least $5K to $15K on testing prior to launch in a variety of channels (i.e. PPC, PPV, email, display, etc.). Top tier networks will provide agency services as well, assisting the advertiser in leveraging their connections to reduce testing costs and assisting in the optimization of the landing page(s) and funnels. Failing to test and releasing a poorly designed and performing offer makes the network's affiliates no more than virtual guinea pigs. I haven't met a publisher yet that wants to be the crash test dummy for an offer that doesn't convert.
2. Elena Alexseeva from PhotoHand
   

   commented on: October 19, 2012 at 2:08 p.m.
   We bought WP Affiliate Program software for $50 that is super easy to set up and seems to work well so that we can offer affiliate membership to bloggers of our choice. But we'll take advantage of affiliate networks too. In the age of simulated traffic, affiliate marketing is the only transparent arrangement between marketers and publishers.
3. Peter S. Klein from MediaWhiz
   

   commented on: October 19, 2012 at 5:42 p.m.
   Thanks Jim, well said and I agree. The only caveat being that we often will help them with the conversion path, and we are willing to take the financial risks and pay the publisher/distribute internally as part of our agency service. No one likes to lose money, but not everything works out of the gate and some are worth the good fight to get working.
4. Fialupe Alopule from Fialupe.com
   

   commented on: October 24, 2012 at 12:39 a.m.
   hi I just started today and I can't wait to see how its work....
5. Robert Glazer from Acceleration Partners
   

   commented on: October 24, 2012 at 11:50 a.m.
   Hi Peter, I appreciate that your article reinforces the value of affiliate marketing to senior marketers, but as you surely know, it’s not nearly as simple as your article suggests as you seem to overlook the costs of actually running the program once it is established. You write, “For CMOs seeking ways to guarantee ROI without sacrificing brand affinity or customer value, affiliate marketing is a channel worth pursuing.” Unfortunately, affiliate marketing has a dark side too and historically when these program run unchecked, they have not delivered incremental revenue. Coupon, loyalty and toolbar sites have dominated the affiliate scene for years by targeting existing customers. Other similarly low-value affiliates populate the networks and fraud is real problem. Brands don’t have the time or the skills to manage their programs, and often rely on the networks for program management where there is a conflict of interest. As a result, many marketers have given up on the channel or they are responsible for underperforming programs that look good on paper, but aren’t actually driving incremental revenue. Today, savvy marketers understand that affiliate marketing has enormous potential, but requires specific skills, consistent oversight and a re-evaluation of the quality of affiliates in the program. Granted, the CMO may not be directly involved in recruiting high-value affiliates, but it’s a critical piece of the puzzle and not even mentioned in your article. High-value affiliates bring new customers to the brand – a new revenue stream – but finding them and cultivating them is a full-time job. Running a program requires an intimate understanding of how to develop incentive programs that motivate affiliates to become brand ambassadors, as well as consistent oversight to establish and maintain relationships with the affiliates, to measure performance, and to eliminate the double counting that occurs when affiliate is part of a click stream that also includes one or more of the other performance channels-- SEO, PPC, display, etc. More than anything, though, a quality affiliate program requires a reputable program manager and strategist with proven results and the right skills. We speak with prospective customers every day who believe that ongoing program management is an area to save budget, and not spend. Unfortunately, this thinking is backward. By not spending on the program once it is established, the chances of its becoming a truly valuable channel are vastly diminished. We see programs every day where the lack of ongoing resources is the difference between success and failure. Robert Glazer Founder and Managing Director Acceleration Partners http://www.acceleration-partners.com/affiliate-program-management/
6. Peter S. Klein from MediaWhiz
   

   commented on: October 27, 2012 at 12:06 p.m.
   Hi Robert - thanks so much for the feedback. While I do agree with most of your commentary, I do feel that maybe you are not focusing enough on steps 4 and 5 that I listed. I recognize nothing is as easy as it seems (such as putting a kid's toy together in "just 3 easy steps"), but the point is that you can get going immediately with low risk when you choose the right partner. This reinforces your point, not that it is missed. The critical piece of affiliate marketing is what you are stating - constant monitoring and optimization from a trusted partner. As a senior marketer myself (almost 20 years), I place a high value on those with ethics and that focus on driving results. If I am paying someone for that, be it internal or external, I expect to obtain my desired ROI. Unlike traditional offline methods, this provides measurable results whether influenced or not. I don't think it is wise to spend on costs that cannot be measured if they will seemingly make life easier upfront, because in the end, they really aren't doing so when job performance is on the line. I've had a few cleints move back to traditonal offline marketing after years of high ROM results because of a new CMO and their connections, and I've seen this result poorly in Chapter 7 and 11 filings. Performance may not be for everyone after testing, but it is certainly worth testing.

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