Small business, big ambition?
One of the biggest challenges with the traditional affiliate network model is that of latency. Simply put – it takes too long to get started and there is a lot of admin to be done to get from contract stage to launching your program. To emphasise this point, network account managers (across the industry) often recommend that their clients wait up to 3 months before they start generating sales. For more established companies that are already selling via other channels this is not an issue as they build a solid, long-tail affiliate army waiting to be mobilised. In addition, digitally established businesses use affiliate marketing as a complimentary tactic to other, more instant, activities.
This isn’t the case for smaller businesses whose objectives are pretty straightforward – sell, sell and sell some more! As a small business, it doesn’t matter how great your products or services are, or how competitive your pricing; if you don’t drive sales and maintain a healthy cashflow, you could be in trouble. But knowing your audience and investing through the funnel from “awareness” through to eventual “conversion” requires expertise that are often unavailable to smaller companies – where resources are scarce, and focus is most certainly elsewhere. Strategically, it makes far more sense for business leaders to spend their effort investing in medium- and longer-term strategic imperatives to ensure future sustainability whilst relying on performance-based activity to generate revenue in the short term.
Where’s the efficiency?
Start-ups need to be lean and agile, and that often means that early investment in operational activities, such as marketing, are outsourced. Mass marketing across many channels poses its own set of challenges – especially at the beginning when you’re effectively paying for performance data to determine the best way to allocate your marketing spend. This too means having marketers from many different disciplines working on your account which will increase the campaign set-up and management costs exponentially. This poses its own set of problems and makes it very difficult to monitor and forecast the acquisition cost per customer, let alone per sale.
The affiliate marketing conundrum
Traditionally, brands engage with affiliate networks and invest in the channel to drive incremental sales, in order to build relationships with key partners that have broader access to potential customers. For this they sign 12-36-month contracts with their network of choice and pay high set up and ongoing monthly fees for access to the network and its services. Start-ups and small businesses in general are not as focussed on “incrementality” as they are on increasing their bottom line – cash is king after all! For any business wanting to remain lean, the affiliate channel is the most cost-effective way to generate sales for little outlay and virtually no risk, as you only pay for converted traffic.
Small business leaders don’t have the time to speak to account managers at networks or publishers, needed to build and maintain relationships for continued investment. They want to sign up to a service and recruit sales-driving affiliates who will a) generate traffic and b) convert that traffic into sales. If they can push the risk onto others to achieve the same (or better) results then they will do so as this also frees up their time and their staff resources, which can be invested elsewhere in their business. This therefore shifts focus from the traditional 12-36-month investment horizon to a more instantaneous one, where advertisers focus their effort on affiliates such as those using PPC, Google Shopping, voucher codes, cashback and loyalty platforms. Why pay for traffic when you can pay for sales? Furthermore, technology-driven affiliate products, such as those that use remarketing, virtual shopping assistants or onsite optimisation tools are also a great way to convert customers at the end of their journey.
Grow and prosper
As these businesses grow and their priorities change, they will start to look at more feasible ways to utilise the affiliate channel as part of their marketing mix. They will hire internally or engage with specialist agencies to manage their SEM and branding activities which will, in turn, reduce the reliance on these shorter-term affiliates. This is when they’ll shift focus higher up the funnel to drive incrementality by adding depth to their programs. More revenue means more investment which will allow smaller businesses to commit to long-term contracts and pay the high network fees, that give them access to specialist account management services. This is where the value of the affiliate network really lies as their specialist account management teams create, develop, and maintain the many affiliate relationships needed to drive incremental sales beyond the early stages.
The bottom line
Affiliate marketing works on a pay-for-performance model which means that you only pay an acquisition cost for each sale that your affiliates influence. This makes affiliate marketing the most cost-effective and efficient way for any small business or start-up to generate sales. For businesses managers that are time poor and generally lack the skills or resources needed to run their own digital marketing activities, the affiliate channel can really help. Allowing affiliate partners to do the heavy lifting will reduce the time and effort spent on marketing, allow for more measurable and predictable activity and give small business owners and their staff the time they need to focus elsewhere.
Managing Director – Grow