Honestly, I don’t know.
Surely you’ve heard of things like Rakuten, Honey, or RetailMeNot? These are sites that function as affiliates to encourage shopping via discount codes and cash back. Affiliate marketing originated as a way to leverage referrals from other businesses to drive incremental revenue.
In the age of the internet, where buying is just a few clicks away – are affiliates adding value, or just costing businesses money? As with anything, an affiliate strategy is highly dependent on your business. For anything with high margins, maybe giving away a few bucks isn’t the biggest deal, but if your margins are thin, be careful.
The draw of affiliates is that someone has a buying need, they may visit an affiliate then select the store with a good offer. In this scenario the store wins because the affiliate spent their marketing dollars to attract a buyer, drove that buyer to the businesses’ website and converted a sale from a customer who may have purchased elsewhere.
But I’d argue this isn’t how things generally happen in the affiliate world. Consumers have brand loyalty, they don’t have affiliate loyalty. Instead of going straight to an affiliate site when a need arises, consumers go to the brands they prefer and browse around. When they find what they want, they then google around for offer codes to see how they can earn a discount on the thing they were already going to buy. This means the brand spent their own marketing dollars attracting the user and then they’re giving more margin away by paying out to the affiliate once the consumer activates the deal.
Check your data – are your most loyal customers just using affiliates to get additional discounts on the things they would have purchased any way? Consider negotiating with affiliate partners on acquisition strategies and different payout models when they drive new customers vs. deliver back the same ones you already have.
Has your business run any tests to determine how much incremental values affiliates are adding? What’d you find?