The state of affiliate marketing post COVID-19: Interview with Stuart McLennan
As ad spend sees a sharp decline over the past few months, the affiliate marketing space appears to be holding its ground. In fact, according to a recent affiliate publisher survey from Rakuten Advertising, majority of publishers reported that it’s “business as usual”.
We recently caught up with Stuart McLennan from Rakuten Advertising about the state of affiliate marketing post COVID-19. McLennan provides an insight into changing consumer behaviour in relation to advertising and outlined how the channel has evolved over the years.
There has been a widely reported decline in ad spend since the COVID-19 pandemic. What impact has this had on affiliate marketing?
Unlike traditional media, affiliate marketing has been somewhat immune from the decline, largely because it’s a truly performance-based channel. In a climate where every marketing dollar is being scrutinised and branding budgets are being slashed, advertisers can continue to invest in a channel that delivers results and return on investment.
Of course, it would be remiss to say affiliate publishers haven’t been affected at all – publishers rely on the investment and partnership of advertisers, some of whom have had to pause relationships or reduce commission rates for a range of reasons no one could have previously predicted. However overall the Rakuten Advertising network has experienced 49 percent MoM growth since February, showing the strength of the channel in tapping into the influx of online consumers during the COVID-19 pandemic.
In what ways is affiliate marketing distinct from traditional advertising?
Affiliate marketing is unique in that it’s a true performance channel – publishers are rewarded on a commission basis when they refer a sale for an advertiser. It’s a low risk and cost effective channel to both to tap into new audiences and foster loyalty with your existing customer base.
Historically, there has been a lot of misinformation around affiliate marketing, and the channel has sat somewhat outside of the traditional marketing mix. But affiliate marketing has evolved significantly in the last five years and improvements in affiliate technology, personalisation and automation is helping scale the channel and prove its effectiveness.
Advertisers have complete control over their costs and can offer different commission rates on different customer types, products or categories (alongside many other data points). The reality is affiliate marketing is the only channel where ad spend can be directly tied to a retailer’s business goals in this way.
On the flip side, publishers also have complete transparency into how they might build their commissions and what kind of customers and products they’re referring, so they can work in partnership with advertisers to better meet their goals and grow their own businesses and revenue.
Have publishers noted changes in customer behaviour over the past few months?
Absolutely. Results from the survey showed that publishers are benefiting from increased traffic levels as consumers stay at home and look for engagement and interaction online. 61 percent of respondents said that site traffic had grown organically, and 42 percent said traffic from social channels had increased.
With there being financial uncertainty as we head into a recession, publishers also noted that consumers are responding well to deals and offers – 58 percent of publishers said they are seeing stronger performance from brands that are actively providing offers in the market.
We also asked publishers some open-ended questions around what overall trends they were seeing. There was a common thread as to what their customers were buying (which aligns with what we have seen as a network), such as increased sales across homewares, home improvement, food, fitness, consumer electronics and beauty. There was significantly decreased sales for travel.
How can publishers adapt their marketing and promotions to cater to new customer demands?
The COVID-19 pandemic accelerated the shift in consumers moving online. Publishers have a unique opportunity to not only help brands attract these new customers and assist in brand discovery (via content, information and recommendations, for example) but also to sustain them and encourage repeat purchases (via loyalty and cashback incentives, for example).
Publishers that use the data available to them to understand what and how consumers are buying will be best placed to be nimble and adaptive to changing customer demands.
What are the benefits of affiliate publishing during this time?
Affiliate publishers align with consumer browsing and shopping habits, which gives advertisers and brands the opportunity to tap into different consumer profiles and preferences. There are a lot of price-conscious Australians at the moment, who will naturally be drawn to deal, offer and loyalty publishers for added savings. By partnering with these publishers, brands have a direct avenue to these consumers at this time.
In a similar vein, content consumption is at an all-time high, and there is an opportunity for advertisers that partner with content sites to tap into audiences that are looking for inspiration and education on what to buy, and from where.
How can brands better utilise affiliate marketing – what opportunities do you think are being missed?
Overall affiliate marketing often flies under the radar. The premise of the channel is simple, but the technology that underpins it has evolved and now offers sophisticated targeting and personalisation opportunities for brands. The breadth of affiliate publisher models is also expanding – from content players to image recognition technology to publishers that drive online-to-offline sales. The publisher mix is a far cry from the days when affiliates were limited to deal and offer sites.
Brands that truly nurture a broad range of affiliate partnerships and publisher models and invest in the channel as it evolves will see the rewards of new customer acquisition, improved margins and better customer experience.
What advice do you have to marketers who are managing tightening budgets?
Working within tight budgets is nothing new to the majority of advertisers, particularly as digital disruption and changing consumer behaviours have resulted in businesses questioning the effectiveness of their marketing. As such my advice in these times is the same as it has always been. Advertisers who focus on creativity and a ‘test and learn’ approach will find more effective ways of reaching and converting customers. Given the nature of affiliate marketing, now is the perfect time to trial new publishers, experiment with incentives and adopt some of the new features such as dynamic commission which help drive marketing effectiveness. You’re paying for performance, it’s win-win.
Stuart McLennan is the senior vice president, APAC Region at Rakuten Advertising.