Affiliate Marketing Is Broken But Ecommerce Companies Can Adapt Online market dynamics have changed over the past several years but marketers largely have not.
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We've all heard digital marketers say, "You don't need to sell advertising on your site, you can just take a percentage of a sale through affiliate marketing!"
While that may have rang true five years ago, affiliate marketing has changed dramatically — for the worse. Much of the action has now morphed into coupon affiliate sites like Coupon Craze and eBates. It boggles the mind why some of the biggest merchants in the world support these sites so wholeheartedly, because actually they're paying them for sales they've already made.
The goal for all ecommerce marketers should be incremental sales growth, but that is hard to do when you're paying twice for an incremental sale with these coupon affiliate sites.
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For the uninitiated: You know how when you're checking out online, there's always a field for a coupon code? Naturally, you've now learned to go online and search for coupons from the store. You might do it for shoes, electronics, or health products. (I do it for domain names.) You're happy, because you saved money you otherwise would have spent.
If you're the store owner, you see the predicament right away. There was a user who was about to purchase something at full price, and somehow they input a coupon code and cut in to your margin. Now you have to pay the affiliate site for something that they didn't even refer, a commission to the broker, and offer a discount on the purchase. Ugh! It bums me out when I explain this to clients and see the dismay on their faces.
How affiliate marketing should work.
In a world where everything in affiliate marketing worked, a customer would be going on Coupon Craze to use it as a discovery platform. Today, it's the opposite!
Sites like RetailMeNot say that they curate the best deals for their visitors, but they don't. Affiliate sites should theoretically work like Groupon and drive incremental sales, but Groupon and Teambuy's deals don't scale into actual customer acquisition. Consumers and merchants are also starting to feel "daily deal fatigue" as well.
Related: The Secrets to Leveraging the Insatiable Consumer Appetite for Mobile Coupons
Time to cut out the middle man.
Marketers have become dependant on affiliate brokers like Commission Junction (now CJ Affiliate), LinkShare (now the Rakuten Marketing Network), and eBay to handle their affiliate sales. Instead of depending on brokers, how about showing affiliate publishers' sales by giving them limited access or even screenshots to your Analytics campaigns? In the past you would get access to amazing sites that could increase your incremental sales and get your name out there by paying broker fees.
Times have changed. You won't see any incremental sales today from paying brokers fees. I recommend directly calling the unique site or publisher you want for your partner. Make your own deal without going through a broker.
Reallocate your affiliate budget for your best marketing efforts.
By cutting out the affiliate, you get to play with more resources. Reallocate the money you were spending for affiliate marketing to proven customer acquisition channels wherever your sales are good, and some of it exploring new acquisition channels.
In the meantime, build your own coupon page and optimize those pages to drive search traffic. It might cut a bit into your margins, but at least you won't unnecessarily pay an affiliate marketer. For example, Felt Noir has begun using coupon codes that have good SEO results without utilizing any affiliate networks (Disclosure: I'm a partner with Felt Noir on this initiative).
Affiliate marketing is more dismal by the day, but you can still develop incremental sales by working to become independent of the current system. You can create a robust sales funnel that isn't reliant on third parties while everyone else continues following the leader, chasing smaller and smaller ROIs.