Last month the Acceleration Partners team traveled to Seattle for the annual Shop.org Summit, where we had great conversations with marketers from all across the country. Over and over again we heard how e-commerce sites are tired of trying to game the system.
There’s been a major sea change in digital and performance-based marketing over the last few years. As the industry matures, digital channels are no longer seen as separate silos. They’re being integrated into overall strategy with a renewed focus on brand integrity.
The days of looking for short-term digital gains are over. The most innovative e-commerce sites are now focused on building long-term programs that add real value.
A New Generation of Affiliate Marketing
Nowhere is this more clear than in affiliate marketing, where industry leaders are busy upgrading their programs to the new ‘Gen 2’ of affiliate marketing.
Robert Glazer, Acceleration Partners’ founder and CEO, hosted a roundtable at Shop.org on how to transition to a next-generation affiliate program. Companies large and small attended to find out how to get the most out of their affiliate programs.
The problem for merchants is that many affiliate programs appear to be sources of easy revenue when in fact they are major cost centers full of fraud and off-brand promotion. Affiliate programs can deliver incremental and performance-based revenue, but only if merchants upgrade their inefficient Gen 1 programs to Gen 2 programs that emphasize high-quality partners and multi-channel attribution.
Here are six major areas where Gen 2 programs separate themselves from the first generation.
1. Program Management
Gen 1 programs tend to be managed by whoever is available in-house, generally an employee with limited experience who is stretched between several channels. Or, management is turned over to the affiliate network, which potentially constitutes a serious conflict of interest.
Gen 2 programs, on the other hand, are overseen by experienced in-house managers or specialized third party firms that partner with the in-house team.
2. Success Metrics
In Gen 1, success is judged by the number of affiliates in the program and the overall revenue brought in by the program, regardless of whether it’s actually adding value.
Gen 1 programs place the greatest value on affiliates that generate the highest volume of referrals. The affiliate immediately before the point of sale always receives the commission, regardless of whether they did the work of bringing a new customer to the site.
Gen 2 programs compensate affiliates based on who they are, the type of promotion they do, brand relevance, and the value they bring, not simply their volume.
4. Affiliate Make-Up
Over 80 percent of affiliates in a Gen 1 program are loyalty/toolbar sites or low-value coupon sites, many of which use deceptive tactics.
Gen 2 programs strive for the top twenty affiliates to comprise less than 50 percent of the program. They focus on building relationships with high-quality content partners such as blogs.
5. Use of Networks
Gen 1 programs tend to use multiple, competing large affiliate networks, mistakenly thinking more networks will bring greater reach.
Gen 2 programs tend to operate on fewer networks, eschewing the bigger-is-better philosophy of Gen 1. They also work with Software as a Service (SaaS) platforms and other technology partners to craft custom solutions.
Gen 1 programs have little to no transparency when it comes to affiliate activity, even lacking a referring URL that shows where affiliate traffic originates.
Whereas, in Gen 2 affiliate programs, transparency and referring URL data is imperative – and demanded – for all clicks and sales.
If you’d like to revamp your affiliate program with an emphasis on quality, transparency and performance-based outcomes, reach out to our team.
Photo via Bryan Wright on Flickr.