Performance Marketing is a concept whose time has come in India. It has been around elsewhere for over a decade now but in India the concept is just taking baby steps. Performance Marketing is also popularly known as Affiliate marketing. The affiliate or the marketer gets paid only when the pre-defined performance is delivered. No performance – no payment, period!
Even till 2-3 years back Performance Marketing was neither evident nor much in practice in India as e-commerce itself had not evolved much.Now that e-commerce trade has taken off in India, the number of big online retailers has also multiplied. With growth in online trade the performance marketing industry is also on an upward swing.
So What really is Affiliate Marketing?
It is interplay of three core constituents: the retailer (or the seller or the merchant), the publisher (or the affiliate or the marketer) and the customer. In simple words, the publisher pushes the customer to perform a desired action – a view, a click or a sale – for a retailer’s product or service. The retailer in turn pays a commission to the marketer only when the action takes place i.e. the performance is delivered.
There are different types and categories of performance marketing. Readers will perhaps be more aware about the Cost-per-mile and cost-per-click type of performance programs. Cost per action (CPA) isa per-sale program. Some popular programs under this category are cashback, price comparison, coupon, deal site and email marketing. Each of these programs have their importance in the online marketing strategies depending on the product and service being offered.
Importance of Affiliate Channel in Digital Marketing Spend
Because the industry is in a nascent stage, greater challenges lie in the understanding of the advertiser. The merchants or the advertisers are not yet fully aware of the value an affiliate channel adds in driving total sales. Most of the programs mentioned above are in fact media properties and should be treated in similar manner.
All affiliate sites have their own loyal customer base. The advertiser needs to pay its affiliate partner in order to get customers from this loyal fan base. Advertisers often feel that they end up paying repeatedly for the same customer. But then, same holds true for any other media channel. Advertisers repeatedly advertise on the same channel to generate sales.
What really matters is the ROI which affiliate marketing channel delivers. Time and again it has been proved that affiliate channel delivers customers and repeat customers at lowest cost. In study conducted by Forrester Research in 2012 following was said by Director of Internet Marketing of a Luxury Retailer
“Affiliate channel customers are profitable for us…..”
Infact it was found out in the same research that Promotions run on affiliate channel encourage trials, without degrading brand perception amongst consumers. In fact it helps to keep the brand fresh in consumers mind thus leading to increased sales.
Performance marketing gives opportunity to new, small as well as extabilishedmerchants to advertise on wider and bigger affiliate platforms. This way they are able to reach out to lakhs of defined online shoppers and also maximize return on their marketing budgets, while achieving positive ROIs.
While discussing the future of affiliate industry we cannot turn a blind eye to the grey practices that some affiliates are engaged in. A large chunk of affiliate commission pool is being eaten by such affiliates.
Affiliate marketers buy big pools of inventory or ad-space on illicit sites like the pornographic or piracy sites.These sites are used to “stuff cookies” (falsely signal retail partner that sale should be attributed to the cooking stuffing marketer) into users’ computer which then converts a normal transaction into a sale shown as driven from affiliate channel.
Such activities should be banned immediately and strict action should be initiated against all those involved in this for the industry to clock a real and positive growth. Similar activities in USA have attracted jail term * too. In India, as of nowthe big ecommerce giants seem to have turned a blind eye against underground grey marketers.
While there is no official study on the size of the industry, channel checks suggest that for the last financial year the total commission shared with affiliate partners is approximately Rs.100 crore on the channel driven sales of over Rs.1000 crore.
Considering that the total size of Indian e-commerce industry is $2-2.5 billion(Rs12-Rs15 thousand crore, excluding travel sales), affiliate marketers are driving 7-8% of total e-commerce sales. Compare it to UK where 18-20% of transactions are being driven by affiliate channel. Affiliate channel is also much more cost effective as £1 billion spent onaffiliate channel drove sales of over £13 billionin 2013. Global giant Retail Me Not’s Q1-FY14 show increase in Net-income by over 50% hence proving that market is big and still growing and has years of growth ahead for itself.
According to Sachin Bansal of Flipkart the Indian ecommerce sector will grow to $50-70 Billion by 2020 which will be driven by E-commerce becoming major contributor for Retail sales, and will be considered as primary source of shopping in consumers mind. Hence Indian Performance Marketers have loads to piggy bank upon and just have to offer just the right “touch points” to the consumers in order to become their go-to channel whenever they think of online shopping and spending money. Based on worldwidetrends and performance by affiliate marketing channeland Indian shoppers’ knack for bargains and savings,the future of Affiliate Marketing Channel is bright and is bound to be more important here than anywhere else globally.
About the author: Aman Jain is the Co-Founder at GoPaisa NetVentures Pvt Ltd., an online cashback site. Aman is responsible for overall spearheading the business direction of GoPaisa.com and looks after brand building and marketing strategies for the brand.
To contact the author, email at firstname.lastname@example.org