Affiliate marketing is an effective channel for driving sales, leads, downloads and registrations. It is the future of sustainable customer acquisition strategy in a space where cost of customer acquisition is increasing everyday. Today, almost every top Indian e-commerce store has an affiliate program. In India this paradigm shift happened in the last 2-3 years, when advertisers started testing this channel and discovered that affiliates provide twice the returns in comparison to other digital marketing campaigns. Today all big Indian e-commerce players have Affiliate Campaigns, some run in-house affiliate campaigns like Flipkart, Amazon while others prefer to run their campaigns through multiple affiliate networks like PayOOM, OMG, Cuelinks and DGM. In developed markets like UK, USA merchants get 10-20% of their total revenue from affiliate channel, in India this percentage is on the higher side, as per my estimation it should be over 25%.
Today, Affiliate channel is growing at a rapid pace and has become an essential tool for marketers; following are a couple of things, which make this channel most popular channel among marketers.
1. You Pay Only for Performance: As quoted by John Wanamaker ” Half the money I spend on Marketing is wasted; the trouble is I don’t know which half. ” Almost same is the dilemma of every marketing manager even in digital marketing arena, they first need to burn a good amount of money in various marketing channels to discover which channel converts for them and where they are just burning money.
The solution to this problem is a marketing channel that works on pure performance and here affiliate marketing comes into play. For those of you who are not aware of this concept, affiliate marketing is a concept where a third party Known as Affiliate, acts as your virtual sales team and promotes your website/ products and every time a visitor makes a purchase, or any other pre-determined transaction like a lead or an app download, you pay a commission. Unlike traditional advertising here, you will only pay for pure performance.
2. Low Cost of Customer Acquisition -: The Cost of Customer Acquisition (or CoCA) is the most critical metric every marketing manager needs to determine to grow and maintain profitability. Your CoCA will vary from channel to channel. If we take an example of Indian market, in the lifestyle segment due to intense competition between multiple well-funded players, Cost of customer acquisition can go as high as 1K however, for the same players CoCA through the affiliate channel it is only 25%-30% of other paid channels. At Payoom, we are working with almost all top merchants in lifestyle category and average CoCA we get for our advertisers is around INR 200 – INR 350. CoCA vary drastically from merchant to merchant and niche-to-niche for instance an apparel seller will have a different CoCA and a Furniture seller will have an entirely different one.
Before I jump to the next point I also want to introduce you to one more metric i.e. “Lifetime Customer Value” of the customer that you have acquired. Here one needs to take into account, how much value that the customer is going to provide you via repeat purchases over the duration of the company. Example: If I am ABC.com and I am in the business of selling T-shirts, and it costs me Rs. 500 to get a new customer online who does a purchase of an average order value of 500, it seems like a pure business loss, but if I see value from repetitive buys that customer will give me, it will be nothing compared to the value I get.
3. Alternative Channel for Traffic -: Getting targeted traffic to your website is the most important task for any e-commerce. The most common medium for this is SEM however prices for search engine traffic are ever increasing, due to increased demand and bidding wars. If we talk about getting organic traffic also known as SEO traffic, it is today one of the most difficult tasks as thousands of websites compete for top ranks plus you also can’t rely on Google, one new update and you are out of the game. So the best alternative here can be Affiliate Traffic, your affiliate network will give you a good share of voice on a number of affiliate websites that get traffic from virtually all sources which allow to capitalize or piggy back on traffic that has already been paid for. Furthermore, affiliate traffic is more reliable because you develop direct relationships with affiliates you are driving traffic from.
4. Easy to start -: Gone are the days when it was difficult to find reliable affiliate partners, with the availability of so many good affiliate networks it’s very easy for advertisers to start affiliate campaigns, it’s always good to start with multiple affiliate networks, to get more reach. An affiliate network is like a matchmaking service between advertisers and publishers; who will act as your virtual sales force. Affiliate networks monetize by taking a part of the commission. The key to getting your affiliate program off the ground is to find the right affiliate network for your company.
5. Brand Building -: Once you have a large force of affiliates promoting your Campaign, you have an opportunity to showcase your Brand to the online world through top Affiliate websites, affiliate newsletters etc and by doing this your exposure will increase exponentially to your targeted Customers. It will also lead to word of mouth marketing and help you in going viral. Overall, it will help you in getting into consumer mind space and helps you with Brand Building.
6. Exposure on Multiple Inventories/Channels -: Every affiliate network has a different set of affiliates like coupon sites, loyalty sites, review sites, media buyers, email marketing affiliates, social media affiliates, price comparison sites etc and also have rich experience of running similar campaigns in your niche. Therefore a good network will give you exposure on multiple channels and inventories and will charge you only on performance.
About the author: Sudhanshu Kapoor is the Chief Executive Officer of PayOOM Digital Media. He is a digital marketer with over 4 years of experience in the online space with an expertise in Affiliate Marketing and Business Development.