Imagine that you have a vast remote team of marketers that gets paid only when it makes a sale. It seems like an attractive option, with low running costs and no risks, and this is exactly what affiliate marketing networks claim to offer.
These networks aim to push customers through to a brand's website by placing ads on the most-relevant sites for the target audience. If a shopper clicks through and makes a purchase, the affiliate network is rewarded accordingly. It sounds simple, but many marketers have discovered through bitter experience that the affiliate marketing landscape can be a minefield. In the worst cases, they can effectively lose control of how their brand is represented online.
In order for a brand to run a successful affiliate programme it must follow some best-practice guidelines and keep a close eye on the sites offering its promotions.
First, however, it must ensure that affiliate marketing is right for it. Brands in some sectors are unlikely to gain much. An online retailer, for example, will gain more than a company selling low-value, over-the-counter products, such as shampoo. IT companies selling complex products and car marques selling high-value items are also less likely to prosper from affiliate marketing than, say, a clothes retailer or travel website.
For some brands, affiliate marketing is second nature, as they have relied heavily on it to build their presence. Firebox, for example, the creation of two people seeking a way to get a shot-glass chess set to market in 1998, has grown into a global retailer with a turnover close to £20m in 2010.
While the success of a business depends on the proposition, much of Firebox's rise has been based on partnerships with affiliate marketers. The company's product-base of gadgets and toys has meant that promoting the company across multiple sites has helped to attract the casual buyer.
Similarly, as long ago as 2006, loyalty scheme Nectar committed 20% of its ad budget to online marketing, much of which went toward building a more profitable affiliate marketing programme. At the time, Nectar said it had realised it was missing out on a big opportunity to boost its revenues through digital advertising.
Late starters
Others have been slower to latch on to the opportunity. 'For those marketers that are unfamiliar with affiliate marketing, start slowly, align your brand with affiliates that complement your brand values and use channels that you would apply offline,' says Maureen McDonagh, head of ecommerce at Nectar. 'For example, if your highest return is advertising in newspapers, then work with content affiliates. If you get the best results from ads in shopping centres, then work with affiliates that specialise in clothing ecommerce.'
While online brands have been quick to adopt the latest digital marketing techniques, high-street brands are more reticent.
Scholl has recently signed up affilliate management agency R.O.EYE. The footwear and footcare brand began offering its products directly to consumers via its website in 2008 and wants to use this type of marketing to drive sales. It plans to test an affiliate programme in the UK before deciding whether to roll it out across Europe if it is successful.
'We're tapping into a new sales channel, increasing brand awareness and putting our products in front of a new demographic,' says Waseem Haq, head of digital at Scholl's parent company, SSL International.
Avoiding duplication
All brands that sell goods online would be well-advised to consider the potential benefits of affiliate marketing for their business. However, it also important to remember that long-term profitability is reliant on more than this.
'Many marketing managers still don't know what affiliates do, but they're happy to use them because they see the channel as risk-free and one that results in extra sales that your own marketing programme wouldn't generate,' says Martin McNulty, client services director at affiliate and search agency Forward3D. 'Neither of the above assumptions is necessarily true all the time.'
McNulty takes the view that brands with advanced digital marketing should consider how much revenue they already make from search and email marketing before making any decisions about affiliate marketing activity. If the latter will only generate sales that would otherwise have been made via existing programmes, there is no point in rewarding affiliates with commission.
Brands that start an affiliate marketing programme must also realise that affiliates effectively become their representatives. It is therefore imperative to provide creative, guidelines and other tools that ensure their activity is in line with brand values and entice consumers to buy products. It is then essential to track sales - a service that affiliate networks and agencies also offer. Many brands use multiple networks when running a substantial affiliate programme, while others choose to monitor sales in-house.
Another key to success in this area is clear communication. Bookmaker Coral provides affiliates with detailed updates on what products they should promote. It also tells them what promotions are working best and what new promotions are available to run.
Furniture retailer Harveys started to use affiliate marketing in September 2008, and the channel now accounts for about 20% of its online sales. It also represents a substantial proportion of Lastminute.com's business, not least because the travel brand has implemented a series of updates to its programme to ensure its affiliates are always on-message.
Ensuring that affiliates bid only on search terms that will not damage the brand is a key part of a successful programme. If affiliates bid on the same paid search terms as the brands they are promoting, both will effectively lose out.
Dominant channel
The ultimate goal of any affiliate marketing campaign is to increase revenue. A side-effect of this is that it may become a brand's dominant marketing channel, as has happened with Nectar. According to McDonagh, who runs the programme, affiliate marketing has become a more significant part of Nectar's marketing mix than many offline channels, and underpins the success of the loyalty brand.
'For Nectar, the affiliate channel has become an integral part of the business, and brands that started out as an affiliate partner, including eBay, Play.com and Amazon have now become a core part of the overall Nectar programme,'
she says. 'As a result, eBay was a significant part of our above-the-line promotion through TV and press last year, with a multichannel approach to ensure the optimum response.'
Achieving this type of success with an affiliate programme may take several years, but brands starting out in this space should not be daunted. There is a huge network of affiliates that would welcome the opportunity to promote the hundreds of brands that do not currently use the emerging channel.
LASTMINUTE.COM MAKING AFFILIATES FEEL WANTED
Lastminute.com has relied heavily on affiliate marketing since it started working with agency Commission Junction in 2003.
The travel website's positioning for 2009 was to 'inspire travellers and act as their champion'. The brand felt that a fresh approach was needed to engage with affiliates and work with them as a team.
Lastminute.com decided to open up its affiliate programme, to make partners feel part of the process and drive a desire to generate further sales.
It sent them bi-weekly emails including updates on the best-performing products and offers in their key sales areas. The brand also created a blog to provide real-time information and ran prize competitions as part of a plan to make Lastminute.com a must-visit for affiliates.
The company provided advice on how affiliates could earn more and targeted dormant affiliates by highlighting the most relevant offers to get them working again.
These tips, advice and incentives were only part of the outreach programme; Lastminute.com also provided affiliates with the tools required to land it additional sales.These included a range of creative units, such as bespoke banners for bigger partners and email newsletter designs.
For review sites, which account for a big proportion of affiliates, Lastminute.com added targeted, market-specific offers to run against each relevant review.
Importantly, the brand also encouraged its affiliate partners to offer feedback on the scheme and invited them to its headquarters.
Monitoring shows that clicks generated from affiliates are up 22.4% year on year, resulting in a revenue rise. Bookings for hotels on the site were particularly strong, with revenue 130% ahead of targets.
Lina Patel, affiliate manager at Lastminute.com, said the strategy also led to affiliates becoming a permanent part of the brand's online marketing planning process - a sign of their growing importance.
FIVE TIPS FOR AFFILIATE SUCCESS
* Use a reputable affiliate network or agency - Draw on their knowledge, experience and relationships with affiliates.
* Keep your affiliates informed - Use multiple communication channels to let them know about developments, and upcoming online and offline marketing campaigns. Listen to their views, too.
* Be prepared - Ensure you have all the tools you need, including a range of creative and clear messages about what you are trying to achieve.
* Be aware of the competition - Know what's happening in your industry, and use the information to your advantage.
* Watch and learn - Monitor affiliate sales and ensure that affiliates are not simply gaining commission through sales that the brand would have achieved anyway through search or email marketing.