As marketers, we’re accustomed to being in control—adopting intelligent targeting and tracking solutions, making data-driven decisions and leveraging data and technology to optimize media spend mix, reaching new audiences with personalized content, and more. Because of this, the global uncertainty sparked by Covid-19 has compelled retail marketers to evaluate existing strategies and optimize in real-time as they navigate the current climate. Marketers feeling the effects, whether directly or indirectly, are altering strategic course to accommodate brick and mortar shutdowns, fulfillment delays, and shifts in consumers’ daily lives—changes that naturally impact marketing mix spend allocation.
In the affiliate marketing channel, virus-related changes in commission rates are triggering concerns from publisher partners whose income is directly correlated to the commissions they receive for an attributable sale or conversion when promoting a brand. That said, virus or no virus, these shifts are inevitable in an environment where marketers are aggressively evaluating the unit economics of their growth strategies. Effective marketers always keep their spend allocations fluid-- consistently adjusting marketing dollar allocations to accommodate inventory, cost of customer acquisition, customer lifetime value, product margins, shifts in seasonality and other business KPIs.
Marketers making spend adjustments as they navigate industry shakeups such as Covid-19 should strive to make strategic decisions that prioritize reconciling short term liquidity needs with mid to long term growth. The way that marketers treat their partners today is likely to dictate the health of that relationship for years to come.
Recently, a cohort of household-name brands have suspended marketing dollars for influencer marketing, a partner segment of the affiliate channel. If we pull back the headline, the data tells us that the suspension is tied specifically to paid placements, which guarantee a fixed dollar amount to and influencer in return for a promotional message on a designated platform such as Instagram or YouTube. This pullback is consistent with the spend pauses many other paid media channels are experiencing at the moment, however, this spend pullback is not indicative of the overall health of the affiliate channel amidst the Covid-19 virus. Spend pullback in primary paid channels, an undesirable ‘solution’ for all parties involved, may be necessary for brands that are facing Covid-19-related fulfillment issues and supply chain complexities, but the affiliate channel provides a powerful alternative to subsidize those declines. In the case of influencers, we have seen little measurable retreat in brand’s willingness to compensate influencers on a performance basis. Influencers should consider embracing cost per acquisition (CPA) opportunities contingent upon understanding that the proper attribution methodologies are deployed by the marketer, thereby insuring equitable distribution of commissions based on the influencer's role in the buyer journey.
Pepperjam clients are able to ensure a strong return on marketing spend by leveraging our Pepperjam Ascend™ Affiliate Cloud spend allocation and dynamic commissioning capabilities. These innovations dramatically improve the industry’s legacy last click payment model by delivering automated, equitable partner rewards based on transaction attributes or pre-set campaigns. Implementing flexible payment structures enables marketers to adjust their commission strategies without “going to zero”, a critical tactic in navigating the current climate without significantly risking future recover and growth prospects.
For example, rather than a blanket program commission rate or drastic payout decrease (some brands even dropping commission rates to 0%), payout structures should be flexible and include varying commission rates by product and category. Pepperjam brands can protect their product margins and optimize relationships with all partner segments by customizing commission payouts for orders that include a coupon code, reach a targeted AOV threshold, surpass partner-specific monthly revenue goals and more. Conversely, brands can set a higher commission rate on orders that do not include a coupon code, incenting their partners to drive full-price purchases and reach their custom-curated revenue goals. As a result, brands can maintain relationships across partner categories without compromising their program results.
Maintaining those relationships is critical in a channel where research indicates that an increasing number of marketers are turning to affiliate, a comparatively low-risk, performance-based channel. In a 2019 Forrester-commissioned study, 46% of executive-level marketers indicated that affiliate offers greater control over their media spend compared to other channels and 45% indicated that affiliate delivers a better ROI vs. other marketing channels. With an average ROAS of 12:1, the channel’s pay for performance model offers efficiency and insulation from risk, incurring spend only upon outcome achieved.
In a powerful data sample, the Pepperjam Affiliate Marketing Sales Index for March 2020, which tracks affiliate marketing gross merchandise sales performance YoY across 10 retail categories confirms a 16% increase in revenue year over year across major brand categories for the period March 1-28. Many of these marketers are using the strategies and technologies referenced herein.
For more information on how to lean in to affiliate marketing amidst challenges in other channels, and to see how Pepperjam is supporting your needs during Covid-19, visit: https://www.pepperjam.com/covid-19-resources