Recent changes in digital media prices are making brands anxious about their marketing budgets and for good reason. The price of digital ads has increased 20-40 percent this year compared to 2021. Fortunately brands willing to adapt their affiliate marketing strategy to capture new ecommerce sales and re-engage existing customers are well-primed for success.
Before we dive into the affiliate marketing opportunity and strategies that can propel a brand forward, even in the face of rising ad costs, let’s set the stage for the challenges brands are up against.
Competition and inflation driving ad prices up and profit margins down
Brands are competing for the attention of a dwindling pool of customers who are watching their discretionary spend more closely. As inflation reaches its highest level in the UK in 40 years and U.S. consumers are projected to slow spending on high-value goods in the next six months, brands worldwide are experiencing challenges. They are working to increase profit margins with a reduced amount of potential customers at a more expensive digital ad cost.
Here’s the reality. Unfortunately, ad price hikes have infiltrated just about every digital channel and industry.
- Facebook advertising costs increased 53.9 percent YoY since 2017
- Google’s cost per lead has grown across 91 percent of industries YoY since 2019
- Google’s cost per click rose across 57 percent of industries since 2021
- Instagram’s CPM rose 23 percent YoY since 2019
The dramatic surge in digital ad prices is leaving brands frustrated and searching for new ways to capture (and keep) market share. Thankfully, the affiliate marketing channel is a cost-effective strategy that can have an immediate impact on a brand’s profit margin.
Affiliate marketing: An obvious choice in the current landscape
Affiliate marketing provides brands the ultimate transparency into campaign performance and ensures they only pay for what performs. This offers a seemingly risk-free approach to spending digital dollars while balancing volatile ad price fluctuations. Brands are no stranger to the affiliate channel. In fact, retail contributes 43 percent of the affiliate industry revenue and 81 percent of global brands have affiliate programs.
With affiliate marketing, the brand determines the action they want its consumers to take and only pays affiliate partners once that specified action has occurred. For brands, this desired action could mean a consumer completes a shopping cart transaction or provides their email address in exchange for a discount code.
As CPCs and CPMs are trending up across all the major digital channels, brands now more than ever require enhanced visibility into their media buys and performance. Leveraging affiliate marketing, retailers get insights into the campaigns driving new customer acquisition, the best return on ad spend (ROAS), plus answers to the question – which campaigns should we invest more marketing dollars in?
While digital ad price hikes are a nuisance for brands, rising ecommerce average order values (AOV) driven by affiliate marketing are a welcome relief. More expensive shipping costs are encouraging consumers to place fewer unique orders, but larger overall orders in an intentional effort to save money. With more substantial AOVs, brand fulfillment costs decrease while their profit margins expand.
Greater transparency coupled with more predictable revenues further solidifies the significant impact the affiliate channel has on a brands profitability and growth in the wake of escalating digital ad costs.
Increase profitability with an in-house affiliate marketing program
Brands who manage their affiliate program in-house gain access to flexible commission structures, campaign control, real-time performance insights, and more fruitful, long-term affiliate relationships all of which contribute to increased profitability.
An in-house affiliate program also enables brands to circumvent hefty network fees, up to 10-30 percent on top of the commissions owed to affiliates. This represents relevant spend that can be reinvested into a brand’s top publishers by creating custom campaigns to elevate performance and profits. Oftentimes, 90 percent of a brand’s traffic comes from 10 percent of its publishers. The top 10 percent of publishers signify the brand’s most valuable partners.
Let’s explore four specific benefits brands gain with an in-house affiliate marketing program:
Direct affiliate relationships
Develop one-on-one relationships with publishers and provide incentives and payout customizations. Also, get direct feedback from publishers and an understanding of what’s working and what’s not in order to quickly pivot and optimize campaign performance.
Real-time performance data
Get campaign performance data in real-time instead of waiting for campaigns to end for enhanced visibility, cost savings, and instant optimizations. Leverage campaign-level and offer-specific reports to unlock insights into the individual performance of campaigns and make data-driven decisions regarding spend, payouts, performance, and creative assets.
Gain transparency and additional control over the selection of affiliates running your campaigns, increase insights into where the campaigns appear and ensure brand integrity with consumer privacy and data protection.
Voucher code management
Bypass social code “leakage” from coupon sites by dynamically creating unique voucher codes. Plus access greater visibility to ensure you are assigning the proper voucher code to the right affiliate with the audience most likely to convert on that specific promotion.
With ad prices at an all-time high, revenue generating and cost-saving opportunities are now more important than ever. So in this environment, managing an affiliate program in-house is an essential step toward optimizing marketing spend.
Get started – Expand profit margins with an in-house affiliate program
To learn more about why you should bring your affiliate program in-house and the features you need to grow your profit margins, download the ecommerce affiliate marketing checklist.