Performance marketing, and in particular affiliate and search marketing, has been the backbone of the phenomenal growth of the web as a sales and marketing channel. The next phase of its growth could see brands using social media to turn ordinary consumers into affiliates.
Based on cost-per-action (CPA) models, affiliate marketing involves third parties being paid commission based on the completion of “actions” such as email signups, brochure requests and even purchases by site visitors. And the attraction is clear, as it provides brands with additional, incentivised marketers who can help build both brand and bottom line.
It’s no surprise then that Econsultancy predicts affiliate marketing will drive £4.62bn UK online retail sales this year – a 12% year-on-year growth.
Part of the reason is constant innovation within the sector from brands, agencies, networks and affiliates themselves, all of them always looking for new opportunities.
Domino’s is moving affiliate from the professional marketing companies to individuals
For example, in July Domino’s Pizza said it had seen online sales grow to £56.9m – 32% of all sales – in the first half of 2010, boosted by an increase in online and, in particular affiliate, marketing activity.
The company has always been a pioneer of interactive technologies, being one of the first and highest-profile brands to allow ordering through interactive TV’s red button, but in the past year it has launched major initiatives on both Foursquare and Facebook.
The latter, first reported on Marketingweek. co.uk on 10 March, saw it work with BLM Quantum and Affiliate Window to test a new “social affiliate” widget that combined social media and affiliate marketing. Anyone using the widget would be able to promote Domino’s on their page, earning 50p for every sale made though their ads.
This, and its Foursquare campaigns, led Domino’s Pizza CEO Chris Moore to credit the online sales increase to the brand’s social and affiliate activity. “Our main Facebook site has in excess of 36,000 fans and there are numerous fans of individual store sites too,” he said in July. “In addition, we have led the way with social media initiatives such as affiliate marketing, our superfans programme and a link-up with Foursquare, the location-based social media site.”
Domino’s Pizza is likely to become a benchmark for brands looking at how affiliate marketing techniques can be applied within the still-fledgling social media advertising space.
Despite the hype and popularity of sites such as Facebook and Twitter, there are still relatively few case studies of how they can positively affect brands. Performance-based marketing, however, looks likely to be one answer to this.
Ketan Mistry, affiliate manager at building and DIY brand Wickes, says social media is a land of opportunity for the CPA-based model.
“Social media is what everyone’s focusing on,” he says. “No one’s really doing it well in our sector, apart from a few examples.”
Ben Carter, head of central online marketing services at Betfair, says the success of Domino’s Pizza on Facebook is no surprise, with the conditions ideal for success.
“It’s where the hype is at the moment and it’s where the audience is – they were already being followed by thousands of people before it launched – and it’s a campaign that really focused on ROI,” he says.
The Domino’s approach is about moving affiliate marketing from the professional affiliate marketing companies to individuals, making them affiliates in their own right and therefore helping to make social media become accountable and tangible.
Carter cites Betfair’s own member schemes, which rewards referrals and works alongside traditional CPA activity, as another example.
“We have traditional affiliate relationships, deals with all the major comparison sites as well as some sports affiliates, but we also have our own member scheme called ’Refer and Earn’,” he says. “It’s all about rewarding people when they refer Betfair to their friends.”
“What we’re now looking at is how we can use social to really take that to the next level,” he adds. “So you get a bounty, you get £25 if you refer a friend and they become active on Betfair and then you get another triggered bounty if your friend becomes a high roller, winning lots.”
Most importantly, Carter adds, both this and Domino’s approach empower individuals who may have never considered being affiliates, or even knew what it meant.
“The Domino’s model is all about rewarding individual customers. It’s rewarding your average Joe who is telling his mates to go and buy pizza,” he says. “The definition of affiliate will change in the social sphere.”
McCain Foods is another brand that’s using affiliate to understand the power of social. It’s working with Strongmail and Omnicom Affiliates to let people share online offers on social platforms like Facebook, Twitter and Bebo.
Nicola Ech-Channa, communications manager at McCain Foods, explains. “Social helps McCain move beyond the traditional CPA model by allowing us to track and capture leads in a viral environment on a performance basis.
“Furthermore, by expanding our reach via social media, McCain is better able to measure the actual impact of social lead generation and build a holistic picture of activity in this space resulting in more efficient management of the overall cost-per-lead and ROI for the channel.”
At its heart, affiliate marketing has always been about technology, driving the growth of comparison brands such as Moneysupermarket and Comparethemarket. Technological focus at the moment is very much towards mobile, with some of the leading mobile sales drivers working on the affiliate model.
One such is VoucherCloud. It’s a location-based app that provides users with money-off deals for nearby venues – ranging from restaurants to nights out. Major brands such as Pizza Hut, Red Letter Days and Subway are on board, and others look at it as a sign of things to come.
Helen Southgate, senior online marketing manager at Sky, says, “The emergence of voucher applications such as VoucherWallet and VoucherCloud offer a very interesting route to market for acquisitions and brand awareness in getting the customer to consider your brand in their decision-making process or even more importantly to plant that need and awareness in their mind.”
“Imagine a potential customer walking into a shop and receiving a push notification from your brand to visit your store and get 10% off. It’s marketing at its most exciting with endless targeting options and, of course, it’s on a CPA basis.”
Angela Greenwood, online marketing manager at Red Letter Days, says the company believes mobile apps are a good way to undertake geographically-based targeting and offer exclusive promotions.
“That’s something we’re looking to make use of much more in the future,” she says. “At Red Letter Days we’re always looking to work with innovative affiliates, no matter what channel they use to promote us and, as it’s such a dynamic industry, there’s never any shortage of new opportunities to reach new audiences.”
One of the most interesting innovations recently comes from the new entrants in the network space. The traditional approach sees brands work with affiliate networks, such as TradeDoubler, Affiliate Window and Commission Junction, which manage the relationship between the brand and anyone who wants to be their affiliate.
While that is still the norm, increasingly media agencies have stepped up their affiliate capabilities to manage relationships between brands and affiliates more closely; OMD, Walker Media, BLM Quantum and Media Contacts have all launched own-brand affiliate networks in the past year.
One theory is that these agencies will cream off the top-earning affiliates from the networks and manage relationships directly, but another is they will lead the charge for affiliate-based activity within social networks.
But Kevin Edwards, strategy director at Affiliate Window and current IAB affiliate marketing council chairman, says networks will never be marginalised.
“Affiliate networks are increasingly seen as the first place to come to for those companies looking to push their technology out as widely as possible,” he says. “Given networks will have instant access to hundreds of advertisers and thousands of affiliates, there is an obvious ready-made audience of companies receptive to new ideas and technologies.”
In time, networks could offer an apps-style approach to new technology solutions, with companies able to integrate their tools and widgets with affiliate networks’ tracking, offering additional promotional methods to affiliates and extra coverage for advertisers, adds Edwards.
“All of this could be delivered with the commission shared between the affiliate and technology company,” he says. “Networks and advertisers will also look to develop these tools themselves, expanding linking methods beyond text links and banners.”
But regardless of the question mark over the future power of networks, what is clear is that the CPA model remains at the forefront of online innovation, with the fledgling social and mobile marketing sectors providing clear opportunities. l
Matt Bailey, independent performance marketing consultant and former chair of the Internet Advertising Bureau’s Affiliate Marketing Council.
“If you’re a finance director at a brand you want to use performance marketing models as they make perfect sense – you want to push as much marketing down that route as possible because it works. But brands need to take more control of it themselves. At the moment most brands that run affiliate campaigns don’t have direct relationships with affiliates. If they want to expand in this space they’re going to have to take control rather than rely on any third parties.
The future will see networks facilitating the long tail and driving additional volume, but the relationship with the big media owners – Facebook, for example – will be managed by a media agency or the brand itself. Integration with social media will be generated through bespoke partnerships. A network will provide one banner for multiple affiliates, but one media owner might equal the same volume, therefore a more bespoke relationship is needed.”
Tom Young, acquisitions manager at Citi UK for the Citibank and Egg brands.
“We’re looking at opportunities to do with mobile at the moment. Egg is an online bank so our largest branch is egg.com. We’re looking at something that ties in buying things in the real world with a mobile application. That would be particularly interesting for us, especially if it’s on a performance basis.
A mobile application could know where you are located via geodata, so you can search clothes shops nearby, and get commentary around them, meaning you get a level of external credibility from other customers.
You’ve got the social element encouraging the way people pay – that’s what we find interesting. It’s other customers saying that discounts are available in these places, if you get this certain product. This could create a virtual street map for the discounts. It’s something that we’re looking to go into.”
- Cost-per-action-based marketing is estimated to be worth £4.62bn to the UK ecommerce market this year, with brands such as Domino’s Pizza describing it as a major factor in its online growth through the first half of the year.
- Social media and mobile are providing new innovation channels for the sector, with location-based applications increasingly popular.
- Innovations such as social media are also empowering individuals to become affiliates.
- But this could potentially see traditional affiliate networks marginalised, with brands and agencies taking on more responsibility for themselves.