Affiliate marketing has its pros and cons — advocates and detractors. The industry is booming but there are many merchants that have negative opinions of the channel. They have seen fraud or low return on investment. Sometimes consumers don’t want or need their product. Often, merchants just haven’t put the right resources into the channel.
But it’s not hard to find examples of companies that have shown consistent affiliate-sales growth over many years. In fact, I profiled one in May, at “Affiliate Marketing Report Card: Jane.com.”
I’ve found that the common mistake for negative merchant attitudes on affiliate marketing is unrealistic expectations. The truth is, affiliate marketing is not a silver bullet for online growth. This channel needs a solid strategy and consistent management from the beginning.
Take the case of a merchant who recently told me that he “hated” his affiliate marketing program. It was launched by a previous employee several years ago and was, essentially, forgotten. The sales volume was so low, monthly expenses barely exceeded $100.
I’ve found that the common mistake for negative merchant attitudes on affiliate marketing is unrealistic expectations.
Upon examining the program, I found several simple errors. The affiliates were approved automatically. There were no newsletters sent. No coupons, deals or promotions were added. The data feed was not optimized or updated. Affiliates had no incentive or education on how to promote the products.
Too many merchants launch with no clue how to properly manage the relationships. They don’t appoint the right people to take charge. They don’t create the right infrastructure. And they don’t communicate with affiliates the way they should.
Return on Investment
Merchants often anticipate immediate sales from new affiliate customers and rapid overall growth. This is unrealistic. They don’t understand why existing customers return through affiliates and they question the lack of ROI during the launch process.
Every affiliate program is different but, in general, it should take at least six months for a new program to begin generating regular sales. The ROI might not happen for 12 to 18 months. There is no meaningful way to forecast affiliate growth. There are too many variables involved, with hundreds of moving parts. However, a program of 24 months typically yields 10 percent to 20 percent supplemental growth in year over year comparisons. If the program is being relaunched, sales will (hopefully) begin to grow within six months.
When an affiliate manager is hired, either in-house or outsourced, add the salary and fees to the overall marketing budget. Without the proper management, the channel will remain stagnant. The affiliate manager is a crucial role and should not be delegated to inexperienced personnel. But for the first year, calculate the ROI using only the commissions paid and network fees, not the cost of the manager.
There will always be crossover (among various sales channels) with customers. For example, print catalog users from the 1980s started using the Internet in the mid 1990s and early 2000s.
As more customers became comfortable with shopping online, the in-house channel debates began. Catalog managers started accusing the newly hired Internet marketing managers of stealing customers. In 2017, attribution is still a hotly debated topic. But it’s now largely understood that it often takes more than one touch point to close a transaction.
Some merchants are unhappy with the promotion practices of loyalty and coupon affiliates because of the higher ratio of existing customers. This is a valid point and should be discussed at the highest levels of those merchants. Smart managers find the balance to work with them or exclude them entirely. Trust between these two sides comes only when the relationship is nurtured and rules are enforced respectfully.
But it’s now largely understood that it often takes more than one touch point to close a transaction.
Using the auto-approve function in the major affiliate networks such as ShareASale and CJ Affiliate is the best indicator of a bad start. Even if some filtering rules are applied, such as auto-approval of only United States-based affiliates, there is no guarantee they will obey the terms-of-service agreements any better than foreign affiliates. The worst offenders — paid search, toolbar, browser extension, and coupon sites — are often U.S.-based affiliates.
Affiliates outside of the U.S. are capable of delivering U.S. traffic with new customers. The manager just has to find the right ones to allow into the program.
All affiliate applications should be approved manually in a timely fashion. Some managers prefer to check applications weekly but affiliates want approval within 24 hours, if not sooner. They lose interest and patience otherwise.
Fraud is a concern in affiliate marketing, but it’s usually not the fault of the affiliates themselves. Credit card fraud is always a risk in any channel. Thankfully, technology has advanced to mostly eliminate this threat.
Using multiple affiliate networks can create duplicate orders. This may look like fraud to the unexperienced merchant or manager but it’s a technical issue, not fraud.
Affiliates in traditional cost-per-sale programs will try to beat out their competitors to earn the commission on a transaction but they do not necessarily commit fraud while doing so.
Violating terms-of-service agreements isn’t fraud either. In many instances, programs launch without firm or enforced agreements. The merchant only files complaints after they realize how the affiliates are promoting the merchant’s brand. This is when ecommerce managers start throwing desk chairs through windows and cursing the affiliate channel. But again, it’s not fraud. It’s the merchant not understanding how to regulate the partnerships.
Affiliates will test the boundaries. Even if you have a readable affiliate agreement, they will proceed with their normal promotions until the manager enforces the terms. I addressed this at “For Affiliate Marketing Success, Know Your Affiliates.”
Not the Right Fit
The hardest concept to explain to merchants is that affiliate marketing might not work for them, at least not now. They read about affiliate marketing and they dream about overnight success. But if the product is untested, if the website is new, or if there is no community of significant support for the brand, affiliate marketing isn’t the right channel. When you start with zero sales overall, you’ll most likely have zero sales through affiliates in the next year.
Scroll through the networks as an affiliate and look at programs in different categories. Many of them have not had any sales through the affiliate channel in days, weeks or months. The merchants launched without a strategy and most likely walked away, hoping for a miracle.
Growth through the affiliate channel takes a coordinated effort from the merchant, the manager, and the affiliates. One of the hardest parts is managing expectations from all parties involved.