Yield Long-Term Value with Smart Ad Spend Allocation

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The affiliate landscape is constantly shifting. Recent innovation includes managing exclusive coupon codes, shortening the cookie window, tracking and rewarding cross-device transactions, commissioning the true influencer of a sale, eliminating payouts on specific products, splitting commissions and more. See a pattern? The technical evolution of the affiliate channel has a singular focus: Adjusting the last-click model. 

Publishers thriving on the last-click model are known as “closers”. They rest at the bottom of the purchase funnel serving consumers with content that finalizes their decision to purchase. Think discounts, free shipping, cash back or a gift with purchase. While these publishers deliver a strong return on marketing spend, satisfy revenue goals and drive site visits, scaling them to prove value is a constant battle. Disagree? Think about this: CMOs, generally, don't attend performance marketing industry events. That is all you need to know about the role these partnerships play.

Expanding the affiliate channel beyond a budget line item requires examining the current state of performance marketing: many in the space cling to the old last-click model of attribution.

The last-click attribution model formed in the late 90s before YouTube, Facebook, Instagram, Snapchat, Twitter, WeChat and other social platforms got their start, let alone existed as dominant forms of digital communication and product discovery sources.

Since the dawn of last-click, publishers have built their strategy to be at the bottom of the purchasing funnel—honing in on attracting consumers to click right before they buy. Many in the industry confuse last-click with value delivery. Big brands, especially the smart and sophisticated ones, do not. Instead, their solution is to avoid the affiliate channel all together or blacklist coupon and cash back publishers under the notion that they don’t add value.

Contemplate performance marketing methods of cash back and coupon sites in physical-world scenarios:

●     The coupon model can be compared to a person, not an employee of the brand, standing in the checkout line of your favorite store. The person is handing out a coupon right as customers get in line to purchase. He gets paid when they shop even if the coupons he shares are invalid.

●     The cash-back model equates to a similar guy standing at the cash register of your favorite store high-fiving customers right before they purchase. If the customer gives him a high-five, they receive a bunch of money back and the high-five guy gets paid for doling out high-fives. Up top!

Back in the digital world, the industry and supporting technology appears to prefer the last-click fueled coupon and cash back models, paying 80% (or more) of their performance marketing dollars to that coupon guy standing outside of our store and the high-five guy standing at the register.

Where’s the long terms value in that? Granted, cash back and coupons do contribute value and generate substantial traffic. However, it’s in a vacuum. The importance of branding and building lifetime customer value is overlooked.

Consider the arguments made by those who practice and preach the cash back and coupon approach:

●     Volume. The brand sees a large number of sales associated with the cash-back site and is coaxed into correlating sales volume with long-term customer value. It doesn’t. It is not uncommon for brands to avoid coupon and cash-back sites, thereby eliminating all money that might have been earmarked for the performance marketing channel. This argument is harmful to the long-term growth of performance marketing.

●     Closer. This argument pontificates coupons or cash-back sites provide consumers with a reason to transact immediately. While there is some level of truth to this, it applies only to a fraction of transactions. Most consumers who have made an online purchase clicked on something purporting to be a coupon code, tried it, found it didn't work and still purchased. Guess what? The site that enticed them to click just got paid.  

●     Incremental revenue. Since the site was the last stop for the consumer that purchased, they should be credited with delivering an incremental sale. What about models that claim to drive 90% incrementality? In actuality, their measured sales volume is 1/10th of the true value because of last-click models. While successfully appearing to close sales, was there a value add for the brand? Consider also that many new customers are actually making decisions based on social influencers but are then persuaded to click for a coupon or cash back at the last minute, falsely attributing credit for "new” customer to a site that did not truly refer the sale.

●     The customer is right. To a certain extent, this is true. However, as discussed previously, the rules of the game have pigeonholed innovation around last-click, contributing to the rise of cash back—paying people to shop at your store versus building affinity that ensures future visits based on loyalty.

Dominant coupon and cash-back models have garnered leverage in conversations with big brands because of high sales volume. While delivering on this, the tactic is built on outdated technology without regard for newer, more sophisticated marketing strategies. Incremental technical changes with emerging content models are measured on the wrong metrics, and thus low leverage in brand conversations focused on last-click.

While cash back and coupon business models have their place, the increasing importance of influencer marketing can’t be ignored:

●     Drive New Customers. According to eMarkter, 85% of brands worldwide focus their content distribution on their own website, meaning that they are targeting consumers that are already aware of the brand. Partnering with influencers for a content campaign gets new eyes on your brand—eyes that are a targeted audience in a digital friendship with that influencer. The “word-of-mouth” aspect of this marketing tactic builds a new customer base and, ultimately, loyal consumers.

●     Provide Reviews, Not Coupons. A polled 78% of millennials reported relying on reviews to make a purchase while only 25% cited ads as their driving factor to transact. Influencers have this strategy mastered. They craft niche content that their readership wants to purchase based on the influencers’ review or style—no discount necessary.

●     Optimizing the Shift to Mobile. With more than 80% of audience and 50% of transactions on social media occurring through mobile devices, the importance of influencer marketing becomes integral to the success of a marketing campaign. 

●     Content longevity. Once an influencer posts their content, it’s live inevitably on their social platforms. Unlike a typical advertising campaign, organically created content from influencers lives on to be seen and acted upon by followers for as long as the promoted product is available. And even if it’s not, brand awareness and loyalty has been built.

When formulating your next marketing campaign, which opportunity will bring more value for your marketing dollars: a YouTube influencer with 500,000 followers that spends hours crafting a review about your product or a partner that trains their customer to wait for a sale and encourages a last-minute click before purchase?

Last-click fueled cash back and coupon performance marketing strategies are short-term solutions. While they yield immediate results, they lack longer term, more valuable metrics like brand loyalty and lifetime value. Working with both traditional affiliates and influencers will provide a brand with the reach they desire. However, only influencer marketing will build brand advocacy and long-term customer value.

 

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