Affiliate Marketing: Smart Merchants’ Road to Incrementality and ROI

by Missy Ward

Disclosure: If I'm not making money through affiliate links on the post you're currently reading, it's an oversight on my part and will be corrected soon.

If you're involved in marketing today, you know that it no longer matters how much your audience purchased from your marketing efforts, but how much more they purchased because of those efforts.

Incremental Sales Drives True ROI

The revenue generated from customers in addition to what they intended to by when they shopped a merchant's store (whether online or brick-and-mortar) are incremental sales.

Whether it be additional items or higher-ticket items that are being purchased, instead of what was originally being targeted by a marketing campaign (or even if they were not targeted by a marketing campaign), these incremental sales are what smart merchants are looking for.

Successful marketing campaigns begin with an understanding that incremental sales, not total sales should be used to determine ROI on marketing programs.

The Case for Affiliate Marketing and Incrementality

Before diving in to some fascinating statistics, it's important that you have an understanding of what affiliate marketing is and what that channel can do for your overall marketing plan.

What is Affiliate Marketing and Why is it So Awesome?

Affiliate Marketing is a comprehensive term that refers to performance-based marketing and advertising programs in which advertisers (a.k.a., retailers or merchants) and marketing companies (a.k.a, affiliates or publishers)are paid when a specific action is completed; such as a sale, lead or click.

Combining performance-based marketing and innovation helps retailers and affiliates grow their businesses in dynamic ways. Campaigns should be highly targeted for each retailer, so that everyone can be successful.

Affiliate Marketing done right creates win-win opportunities for both retailers and affiliates.

What Makes Affiliate Marketing Different from Other Forms of Advertising

Affiliate marketing has successfully reversed the traditional value proposition of advertising and also allows for real-time measurement of ROI. Unlike other forms of traditional advertising where fees are paid up front and do not depend upon the success of the ads, advertisers in affiliate marketing only pay for successful transactions.

Since affiliate marketing is trackable and measurable down to the click, merchants can measure everything from the cost of acquisition to incrementality (e.g., new customers of new customers or average order value).

Affiliate Marketing is Growing

According to Forrester Research, affiliate marketing spend is projected to reach 4.4Billion by 2016. Smart merchants are harnessing mobile marketing, online-to-offline tracking technologies and shaping commission models based upon attribution statistics.

As affiliates are on the cutting edge of content creation, mobile apps, emerging technologies, social media and niche marketing; the affiliate channel creates a unique value proposition for merchants.

Here's What You Don't Know About the Affiliate Marketing Channel

Steve Denton, vice president of Marketing Solutions at eBay Enteprises, gave an extremely comprehensive keynote address this January, at Affiliate Summit West 2014.

Steve has been in digital media for 13+ years and before joining eBay Enterprise, he was president of Rakuten Linkshare. I've known Steve since 2001. He knows affiliate marketing. When Steve talks, I listen.

But more than that, he is in a unique position to provide access to data that the majority of companies involved in the the affiliate space (myself included and likely all my readers) have never laid their eyes on.

As eBay Enterprise provides commerce technologies, omni-channel operations and marketing solutions, Steve has access to rich, proprietary commerce data on their 2000+ global clients.

Below is Steve Denton's keynote address at Affiliate Summit on video. He used a very solid data set which he elaborates on. Grab a cup of coffee, sit back and relax to 45 minutes of affiliate marketing data laced with funny Steve-isms.

Affiliate Marketing Statistics that Will Blow Your Mind

Here are a few data points that stood out to me:

49% of customers that close from the affiliate marketing channel are new customers.
If an affiliate is involved in the click path, the average order value is higher.
12% of the time, affiliates are 1-step closers.
More than 20% of affiliate clicks leading to a purchase were the first touch (a.k.a., “the introducer”)
73% of all conversions occur within 24 ours from the last affiliate click.

Today, with a plethora of overlapping marketing campaigns and crazy discounting, the affiliate channel proves to be extremely robust when it comes to incrementality.

No longer should a smart merchant ask whether they should add affiliate marketing to their mix our question whether their affiliate channel is really valuable.

The questions merchants should be asking now are:

“Where do I get more of these awesome affiliates?”
“How do I support them to ensure that we both have long-term growth and profitability?”

Thoughts???

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Missy Ward

Co-Founder & President at Affiliate Summit, Inc.

Missy Ward has been in affiliate marketing since 1999. She is the Co-Founder and Co-CEO of Affiliate Summit, FeedFront Magazine, GeekCast.fm, Founder of AffiliateMarketersGiveBack.com and manages many of her own affiliate sites.