Affiliate Marketing's Place in Digital Marketing

At the end of June 2010 Econsultancy released its 94-page “Achieving Digital Balance” report where they look into the “best practices for mastering digital strategy and budgets”. There isn’t a tremendous amount of data on affiliate marketing in this report, but enough for me to outline a few interesting points.

While budgeting your company’s online spending, it is helpful to look at the elements of digital marketing based on their main mission. Econsultancy has placed affiliate marketing in the “Acquire” square:

Sectors of Digital Marketing by Mission

I must admit, I absolutely love the above segmentation. However, but I would also argue that affiliates also help in the branding (let’s not forget those link impressions that aren’t being paid for), retaining and growing the current customer base, as well as converting.

“Affiliates” are also listed as first on the “Digital tactics A-Z” list. We are told that this tactic is used “predominantly” by “consumer facing companies, with some excepetions in the business products and publishing worlds.” My personal experience has also been predominantly in the B2C verticals (where affiliate marketing is working extremely well). So, I wouldn’t be able to judge of the B2B marketing much here.

Also, the following statement/observation is made by Econsultancy:

Companies that do well with affiliates have tangible, trackable conversions with a relatively short sales cycle. Otherwise, calculation of transaction value (or lead quality as the case may be) is difficut for the marketer.

In principle, I agree with this too.

Speaking of the typical budget allotment, Econsultancy writes:

For larger companies with active programs, affiliates might make up 9-20% of new customer revenue. In general, marketers report spending less than 10% of their digital budgets on affiliates — often much less.

There are also opinions on pros and cons listed, but I don’t necessarily agree with some of the logic (or observations). So, I’ll omit those here.

In general, this is another solid report by Econsultancy, and once again, it may be downloaded here.

3 thoughts on “Affiliate Marketing's Place in Digital Marketing”

  1. I would agree with the B2B/B2C observation. My experience managing a B2B program was very very different from any B2C programs I’ve managed. The B2B sales take a lot longer, and almost require affiliates to be more hands on with the sales process than they might with a B2C sale.

  2. Geno,

    I apologize if this is posted in the wrong area.

    I am constantly amazed that you turn out such useful content every single day. I am curious for your opinion on something.

    I consult with a lot of high end service businesses, lawyers, chiropractors, remodel contractors, ect. and I am a believer in not listing up front prices on websites or otherwise as it tends to turn their services into commodities. Sometimes with these businesses Internet marketing is a significant lead generation tool and it could be worth trying to set up an online affiliate program.

    This situation usually works fine with offline “affiliates.” Such as paying offline referrers a % commission or sending a gift to previous customers who refer.

    Are Online Affiliate programs effective for service businesses that do not list rates on their site. What if they accept online payment? What if rates are clearly disclosed to affiliates?

    I imagine this looks quite leaky to an online affiliate. Would this turn off all quality affiliates and be a reason for listing rates in a shopping cart. Does AMNavigator have an affiliate program? Since I see that your rates are not listed.

    Perhaps service businesses should only use online affiliate marketing for selling introductory online products which serve more of a lead generating function.

    If it is a good idea to pay online commissions for referring to service businesses that do not have set rates what software solutions do you recommend?

    I often recommend the simple WP eStore and WP Affiliate platform for getting started selling online since it is so cheap and an online affiliate program isn’t always right for everyone—but it’s pretty limited.

  3. @Bruce: Thanks for our comment. But affiliate marketing does work for B2B too, wouldn’t you agree?

    @Luke: A lot of good questions there. Thank you for them. Feel free to email me for a consultation, but, in a nutshell, many service-oriented online merchants run successful PPL (pay-per-lead) programs (and no, AMNav has no affiliate program at this time). Payouts per lead differ from industry to industry. So, in every case you’d want to run its own analysis of the competitive landscape… One place to start is this: Online Guide to Affiliate Marketing

    Once again, thank you, both for your comments

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