Affiliate Marketing is Profit-Driven Marketing: Here’s Why

By Maura Smith, CMO on January 13, 2020

One of the more significant challenges CMOs face is making a solid case to CFOs for channel investment—or in many cases, why additional investment should be made in a particular channel versus another. This isn’t an easy task when you’re dealing with channels that inherently offer no guarantees on return on investment (ROI) like paid search and paid social, yet nonetheless require spend to maintain omnipresence throughout the customer journey.

However, when it comes to the affiliate channel, it offers a comfortable level of predictability and tangibility in terms of tying spend to revenue that other channels don’t necessarily possess. A real life example to illustrate this point would be a CMO telling the CFO that they could spend $.20 and generate $1 every time. Here, the CFO would be inclined, perhaps even compelled, to make greater investment there. Even still, the fundamental problem that exists is that not all marketing departments effectively draw the connection between the dollars they spend to the direct response impact or influence those dollars have on the generation of the new business, sales, conversions, downloads or whatever it is that they are tasked with driving.

Affiliate enables Marketing teams to do just that—across all types of marketing tactics. Yet, it’s also the channel that so often gets overlooked by Marketing and eCommerce VPs and CMOs. Affiliate marketing’s proprietary strength is that it spans all forms of marketing from editorial content to search ads to influencers—the list goes on. And with the advertising costs in paid search and paid social channels only skyrocketing, becoming unsustainable over time, affiliate presents itself as a stable way to subsidize these costs, employing a pay-for-outcome, not pay-for-access model seen in other channels. A typically low barrier of entry coupled with this pay-for-outcome model, make affiliate marketing a channel that can actually turn advertising from a liability into an asset (Note: the affiliate channel’s ROAS sits at 12:1). The following are three ways, strategies you can implement, that can turn your digital advertising from a cost center into a profit center.

  1.  Actively seek acquisition channels where there’s opportunity to create leverage.

There is an undeniable truth: the cost of acquiring high lifetime value customers at a scalable cost is increasingly difficult. High fraud rates, outrageous trading desk fees, limited data views and hard-to-decipher metrics further cloud the data deluge, and this necessitates a new solution. When you rely on traditional (read: expensive) paid channels for your digital strategy, you will inevitably see less than half of every marketing dollar invested becoming working media. But alas, a silver lining: Performance channels (read: affiliate marketing) offering marketers a pay-for-outcome alternative that drive the operating leverage imperative to survival. In fact, recently commissioned research by Forrester Consulting showed that 54% of executive-level marketers place affiliate marketing in their top three customer acquisition channels with 20% of those marketers ranking affiliate as their #1 acquisition channel. You can read the full report here or check out the at-a-glance infographic here.

  1. Measure beyond conversion and understand the touchpoints that influence the customer journey and how they impact lifetime value.

Digital analytics generally define a conversion as the successful finish of a set goal. In many cases, this is the completion of a sale. However, while macro conversions (read: a sale) are important in their own right—they only tell part of the story. If the goal is to find opportunities to drive/fuel additional profits, a strong understanding of the total value of your digital investment (read: better measurements), is critical. By paying attention to the micro moments, there is unique opportunity to get a glimpse into key points of the consumer journey. Paying attention to measurement of the micro conversions enables proper nurturing that can support the consumer’s quest for additional education as they are ushered through the journey. And since the connection between customer lifetime value to profit is so strong, having knowledge of how your customer interacts with your business whether directly or indirectly—throughout their buying journey—is the cornerstone of driving long-term revenue.

  1. Practice profit-driven marketing by optimizing spend based on profits generated, not cost to acquire.

When spend takes on a profit-driven approach, it turns the tables on traditional marketing and essentially transforms it from a cost center into a true profit center. This approach allows the cadre of marketers to shift their mindset: to rethink traditional strategies including KPIs, working budgets and even the customer journey. They are essentially looking at the same old challenges, just in a reimagined way. Again, think of it this way: would you spend $100 just to make $50? Not a chance! But would you spend $100 to make $50 three times a month every month for the next year? Of course you would! And while customer acquisition cost (CAC) is important, you also need to ensure you have profit-driven marketing techniques that lend to client retention and ultimately lifetime value to fuel profits. It’s all about shifting mindsets and tackling efficiencies from a different perspective.

To learn more about how Pepperjam’s Ascend™ affiliate marketing lifecycle technology platform can automate the traditional, time-consuming tasks of affiliate marketing and fuel profit-driven customer acquisition, contact us here.  

Topics:   affiliate marketing affiliate technology digital advertising strategy planning