Last year I was fortunate to be a part of a great industry event Affiliate Management Days London organised by the affiliate Geno Prussakov. This was my first Affiliate Management Days conference, and I must say I really enjoyed the event. Besides joining the other speaker’s presentations, I was invited to make one of my own too. In this post I will summarise the main points from my presentation.
My presentation was divided into two parts. This post covers the first part of my presentation where I spoke about the present challenges in measuring affiliate marketing performance. Overall, I identified eight major issues, which complicate or negatively affect affiliate marketing performance.
1. Conflicting interests
As an affiliate you want to maximise income. What merchants are looking for is profitable incremental growth.- Merchant
Everyone wants to have sales and make money, but also to build trust and add value, because once they trust they will start buying the products you recommend. – Affiliate
The first issue that negatively impacts affiliate marketing performance is the difference in the stakeholders’ (i.e. merchants, affiliates, networks and agencies) motivations for starting an affiliate programme in the first place.
You may say: Well, everyone is in affiliate marketing because they want more sales and revenue. I agree, primarily, the objectives of the stakeholders engaging in the channel are more or less similar. At the bottom line, they all seek to increase customer volumes and generate revenue and sales.
In some cases, however, their intentions may go beyond that. For example, many merchants and increasingly many affiliates, especially large ones, are now looking at affiliate marketing as an opportunity to grow and strengthen their brands. The fact that merchants are concerned with their branding is probably not new. However, the fact that a growing number of affiliates wish to invest in their brands is an emerging development. And while affiliates’ interests are changing, the remaining stakeholders still quite often believe that the only motivation for affiliates is commissions. Affiliates, therefore, continue to be treated as a pure ‘sales-force’ rather than ‘equal and brand-aware partners’. And this is something that gets in a way when it comes to optimising performance.
The implications of conflicting interests between the stakeholders are several. If merchants and affiliates are driven by different motivations, they will form dissimilar expectations to their programmes. To achieve their dissimilar intentions, partners in one affiliate relationship might, therefore, work towards achieving different objectives. And this can further lead to uncoordinated use of resources and unfocused activities. These unfocused activities, in turn, can complicate goal achievement and eventually turn their programmes into a costly exercise. Collectively, this may result in stakeholder dissatisfaction and frustration with the channel.
2. Changing stakeholder needs
No network will give a list of potential affiliates to a client because the client can use it as a recruitment list through a cheaper network. – Network
Some networks don’t allow direct contact certainly don’t discourage it. – Network
A further issue with current performance measurement practices in affiliate marketing is the fact that stakeholder needs in terms of what they would like to see and measure are changing, whilst what is being reported on by the tracking systems typically stays the same.
Increasingly, stakeholders ask for more qualitative and ‘balanced’ measurement of their programmes. They ask for tracking of the affiliate activities and customer online journey beyond last click.
Besides, some of them still demand the basic right to have an open and direct communication with their partners, something that is currently still forbidden by some of the affiliate networks.
Finally, the stakeholders ask for the development of improved compensation plans. And some merchants express their willing to reward affiliates based on the contribution they make not only in generating a sale, but also in influencing customer decision-making.
These new needs challenge the present measurement systems provided by networks and force them to look for new previously unreported metrics, able to justify the value of the affiliate channel.
3. Channel competition
There is a lot of competitor monitoring right now. It is a fairly small industry. – Network
[Affiliate marketing] is the only channel judged on pure value [sales]. – Network
Another challenge that complicates and drivers change in affiliate measurement is the intensifying competition between the different online marketing channels and also their rivalry based upon non-financial measurement.
Every Internet marketing channel is associated with the specific marketing objectives that it serves and also the particular commission structures that it operates. For example, display advertising is typically associated with branding, search engine marketing with traffic and affiliate marketing with performance-based services, which can be used to generate sales and revenue.
The association of affiliate marketing with performance-based sales solutions and objective quantitative measurement has indeed benefited the affiliate industry for a long time. At present, however, the escalating channel competition based on qualitative measurement (including the measurement of such things as targeted reach and customer attention and engagement at different points on the buying cycle) makes this position somewhat unfavourable, because affiliate networks do not typically report on the qualitative measurement that companies are looking for. Whereas their competitors aggressively develop quality-based metrics and successfully attract their share of both brand-aware and performance-oriented business market. If the situation is to change, the unique selling proposition of the affiliate channel needs to change.
4. Standardised measurement
Everyone measures things off the same wave length and off the same measures. – Agency
We do look at the same set of metrics. For certain campaigns we will have different targets, but the metrics are more or less the same ones. – Merchant
The next challenge of the present measurement practices in affiliate marketing is its standardised nature. In spite of the indisputable advantages of a standardised approach to performance measurement in marketing, standard measurement is subject to some weaknesses.
The first shortcoming of standard measurement is related to standardised marketing objectives. Marketing objectives represent one of the most common performance criteria, which we use to compare planned vs. achieved targets. To be relevant benchmarks for such comparison, objectives should be adjusted for each new marketing activity in order to accurately articulate the desired outcomes and also set the direction for the planned actions. In my work, I found that, affiliate marketing objectives frequently stay unchanged. They are often taken for granted and are standardised. They remain the same over time and, as a result, deprive affiliate programs of focus and direction, as well as new opportunities.
To build on the previous example, the majority of the stakeholders recognise that affiliate marketing contributes to brand exposure and awareness, which they currently get for ‘free’. Yet, present revenue-oriented objectives do not aim at the achievement of such intangible benefits as, for example, brand enhancement, because branding has traditionally been regarded as difficult-to-measure and from the outset has not been associated with affiliate marketing.
A further limitation of standardised measurement is that it operates a ‘classic’ set of metrics, mainly determined by the capabilities of the present tracking technologies. Because these metrics are defined by technological capabilities rather than by marketing managers, they are typically not tied to specific marketing objectives. Instead, they are considered standard. They are tracked not because they represent something meaningful but because they are available for tracking. As a consequence, they do not really reflect the programme’s performance, but rather showcase technological capabilities. So in the majority of cases, they do not really give us an accurate picture of the real performance of affiliate programmes.
5. Unbalanced measurement
Affiliate marketing suffered a little bit because we have always chased the last click, that is the nature of our business, so it shouldn’t be any surprise that affiliate companies are focused on converting sales. – Network
Although the main goal is a sale, when the sale does not take place, customers are still exposed to an ad. It is like in display advertising. – Network
In theory, one of the most frequently mentioned principles for effective marketing performance measurement is a ‘balanced’ choice of metrics. The choice that gives equal weight to both tangible and intangible, financial and non-financial, and short-term and long-term metrics. Just think of the commonplace balanced scorecard approach to measurement for a moment. It balances financial, customer, internal and innovation metrics, and by doing this also strikes a balance between financial concerns of the involved stakeholders, customer interests, process concerns and innovation concerns during day-to-day operations.
In my work, I found affiliate marketing measurement to be clearly ‘unbalanced’. In particular, I saw that the metrics typically employed were highly financial, quantitative, short-term and performance-driven. These metrics involved considerable numerical data but lacked the other, the opposite side of the performance, something that made measurement partial, one-sided and financially based. It is a little bit like seeing only one foot of an elephant.
This can come as a surprise, but many of the stakeholders, I spoke with, expressed their dissatisfaction with this lack of balance between financial and non-financial data reported. They said they were interested in more customer-centric metrics. They said they wanted to know more about the value affiliate marketing brings and at the bottom line to understand whether it ‘cannibalises’ other channels, and whether they can get the sales that they receive from affiliates via other online channels.
6. Technological limitations
Whenever you use a different tracking solution, they are never exactly the same, there are always a few discrepancies between the two. – Merchant
We use additional tracking to track our affiliates, display, search and email. So we look at sales path. We have tracking internally, so we can pull it all together. It is not easy though… – Merchant
The next limitation of performance measurement in affiliate marketing is the industry’s over-reliance on technology. Again, my work revealed that the stakeholders tended to focus on the technology-side of measurement and were convinced that the type of tracking technologies adopted was the only key to success.
The technological aspect of measurement is undoubtedly important. It provides the basis for the whole performance evaluation. However, ‘blind’ over-reliance on technology alone may be problematic.
Let me exemplify this. In many organisations using affiliate marketing, tracking is done with the help of several tracking solutions. Most companies would use networks’ tracking systems, but would also supplement those with additional tracking such as Google Analytics, their own in-house or third-party tracking. Although each of these solutions would provide valuable insights on performance, the results they would offer are most likely to be difficult to compare. In fact, because the different tracking systems are often incompatible, the discrepancies in the results may reach up to 25%.
Now, there are further technological limitations with regard to last click, for example, that we could speak about, but this might be the topic of a different post.
7. Procedural limitations
Sometimes merchants use affiliate marketing to push their competitors out-of-the-way or are doing it because their competitors are doing it.- Affiliate
We check affiliates once, when they join, but not afterwards because it is very time-consuming. – Merchant
Lets move further… A non-technological weaknesses of affiliate measurement is the somewhat unstructured and sometimes perhaps a somewhat mechanistic approach to the actual process of performance management and measurement.
One serious drawback of approaches to measurement is that some critical phases or steps in the process are unintentionally left out or purposefully omitted by the stakeholders. For example, in spite of its widely recognised importance, many organisations skip the research phase of the process. Several stakeholders seem to hold an assumption that since affiliate managers work at the forefront of the industry, they automatically stay updated. They assume that their experience is rich enough for starting a new or running an existing affiliate programme without doing additional research. In the rapidly developing environment, however, the lack of research can be an issue. For instance, no previous experience can determine whether the online channels that are used ‘cannibalise’ each other or not. This question can only be answered by means of continuous research and systematic data-mining.
To give another example, one more procedural limitation of the affiliate measurement processes is the absence or only a partial consideration of such key step as the identification and subsequent creation of critical success factors, such as achieving a good match between a merchant and an affiliate. The analysis of these conditions is absolutely essential, because without it or with only a partial analysis, the companies may risk staying unaware of the factors that potentially impact the successful implementation of affiliate marketing programmes.
8. Affiliate marketing myths
Some merchants don’t really realise value of voucher code sites, they might even say: I don’t want to work with them. But then they quickly realise that the amount of overall sales drops off. – Network
I think businesses need to understand what it is that they are trying to achieve and not run it [an affiliate programme] for the sake of running it. – Merchant
On top of all the limitations I mentioned, there are numerous myths about the affiliate marketing industry. Some of the examples are:
Affiliate marketing only brings price sensitive customers
Affiliate marketing is not a necessity, customers would purchase anyway
Incentifier affiliates don’t drive much traffic, content affiliates are better affiliates
Voucher codes and cashback sites overwrite content sites
There are several affiliates involved in a sale
People research and then buy through cashback
Cashback and voucher code sites damage the brand
Voucher code sites do not bring any value
So what can one do to improve the measurement process? And how should the measurement approach change to become more effective?
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