When you hear ‘affiliate marketing’, you probably think of voucher codes, cashback sites and other third-party networks. But affiliate programs have evolved – a lot. Here’s Annabel Gray with the full story.

Of course, those assets still remain a part of the melting pot, but as a branch of a wider digital strategy the channel now works to deliver more than just sales. And while US and European brands storm ahead with innovative and incredibly fruitful affiliate programs covering all levels of the marketing funnel, Australian businesses are simply getting left behind.

Evidence to this are the new findings from the Performance Marketing Association (PMA), which just released its first ever industry-wide study of partnership and affiliate marketing spending in the US. Conducted by PWC and the PMA, the research showed that in 2018 the US spent more than $6 billion on performance marketing with a whopping average ROAS (return on ad spend) of 12 to one – much higher than other digital marketing channels. The highest portion of ad spend (39%) was also with content publishers and bloggers.

It’s figures like this which explain why affiliate marketing overseas is widely considered to be one of the most cost-effective customer acquisition tools for brands. Global sales are at more than $37 billion and the channel is expected to grow a further 10% by 2020. 

In spite of this, Australian brands are still nipping at the heels of their US and European counterparts, who have already made affiliate a key part of their strategy. Only 70 out of the top 100 retailers in Australia currently have an affiliate program, with uptake in other areas expected to be even lower. In international markets this rate is much higher and the reason it’s not reflected here is because Australian businesses aren’t aware of how far the industry has progressed, nor understand fully the impact it can have on their growth.

What has changed with affiliates?

Previously, affiliate marketing professionals were mostly concerned with a consumer’s last click. However, we now know that a customer journey includes multiple touch points. This means that publishers who were driving top-of-the-funnel activity, such as brand awareness, were not being recognised for their effort and the commission would instead be awarded to another publisher highlighted at the bottom transaction stage.

This naturally caused issues for both publishers and brands, as content publishers didn’t reap the rewards from their work. In turn, this would cause brands to question the incremental nature of the affiliate channel since they saw all of their channel sales driven from cashback and coupon sites.

Thanks to advancements in technology provided by the affiliate networks and platforms however, this has since allowed us to move beyond the measure of the last click model. The data now lets us discover which touch points are most valuable for a brand when guiding the customer further down the purchase funnel.

From here, brands can then implement an attribution solution that rewards different publishers for their influence and impact for the business. There is no one-size-fits-all strategy so a tailored solution should be created for each program.

And this is exactly what is happening in the US and Europe, with brands on board with dedicated strategies designed to reap the rewards. So why then are Australian businesses still stuck in the affiliate rut?

We’re afraid and unsure

If it ain’t broke, don’t fix it – right? It’s not that Aussie brands aren’t seeing ROI on affiliates because we are. One third of Australian businesses with affiliate programs are investing at least 10% of their online marketing budget in the channel, however the gains could be significantly higher than most brands realise.

As marketers, we all know how hard it can be to get buy-in for new or less-researched channels. Yet since its inception, affiliate marketing has yielded great results for businesses. Consumers lapped up voucher codes and cashback schemes, making the most of any saving they could get. In recent years though, brands have found that this simply isn’t bringing new eyes to their products. The frugal customer still hits up voucher code sites, but now a new generation has brought with them a whole new type of affiliates – partnership marketing. 

From influencers on Instagram touting their ‘outfit of the day’ to brand-to-brand alliances meaning you can now order Deliveroo via Tripadvisor, partnership marketing is everywhere and at the forefront of the modern affiliate revolution.

There’s a difference between knowing the power of partnership and turning it into a successful campaign though. Australian brands are particularly slow on the uptake of partnership marketing because they simply don’t know who to partner with. Should they send their products to the country’s biggest Instagram stars, or just a select few micro-influencers? How do you manage the commission structure higher up the marketing funnel? Which platform offers the best ROI for their brand?

Privacy and mobile-first strategies

Another area where we’re overly cautious is privacy. Like many other digital channels, affiliate marketing grew faster than the industry could keep up with and as a result, legislation, technology and compliance all came to the party a little too late for some brands, who experienced the downsides of an untried and untested marketing method. The channel has since evolved however, with new updates to privacy tools and customer tracking now available, yet for some reason Aussie businesses are still nervous to get on board.

Changes in consumer behaviour have also fuelled the growth of software development kit (SDK) solutions to track mobile activity. For example, we know that customers are no longer engaging with brands through one medium. With smartphones, tablets and different browsers at work and home; a typical customer journey has become increasingly complex across a multitude of devices and Australian advertisers need to understand this in more depth and what they need to do for engagement at all touch points. 

Interestingly, mobile adaption is prevalent here in Australia, with us having some of the highest penetration numbers in the world, and smartphone ownership is now at 95% for 18 to 34 years-olds. However, in Australia, only one in five transactions will occur on a mobile device which is low compared to other countries like Japan and Indonesia. The appetite is clearly there, but the functionality is not, which is letting our businesses and consumers down.

Time to step up, or miss out

Essentially what Aussie brands need to realise is that times have changed, and affiliate marketing is much bigger and more important than previously thought. The customer journey is not linear, instead their brand experience will make up a multitude of different touch points across different platforms, and therefore we must think differently too. 

In order to catch up to the rest of the world we need to overcome concerns about privacy and data, set clear and measurable objectives, and invest in implementing the right types of innovative and strategic affiliate marketing campaigns that will yield the high returns like those of brands overseas. The opportunity is there, Aussie brands just need to step up and take it.

Annabel Gray is associate director Australia at Silverbean

Further Reading:

• Will brands band together to keep Amazon at bay? Partner marketing forecast »
• The antidote to wasteful ad spend – where marketers go wrong »

Image credit:Ben White