Affiliate Marketing Ranks As A Primary Channel For Customer Acquisition .

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1Affiliate Marketing Ranks As A PrimaryChannel For Customer Acquisition AndRevenue GrowthHow Affiliate Puts Marketers In Control With PerformanceTransparency And Pricing Model FlexibilityGet startedFORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAM OCTOBER 2019

AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTHOverviewMarketers Must Pursue Every ChannelFor Customer AcquisitionCurrent StateApproachCustomer acquisition stands among the most critical businesslevers for any brand, yet Forrester research shows that marketerslock themselves into focusing on search as their primary discoverymarketing tactic. This occurs despite an understanding thatcustomers use a diverse set of channels to discover the productsand services they purchase.1OpportunityConclusionThis study examines the role that affiliate marketing plays increating operating leverage for the brands that have an affiliateprogram in place today. Study participants whose brandshave affiliate programs believe the channel 1) drives significantacquisition and revenue for their companies and 2) is less affectedby issues like brand safety, fraud, and ROI visibility than otherprominent marketing vehicles that employ a pay-for-access model.FORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 20192Key FindingsAffiliate marketing is highly effective forcustomer acquisition: Affiliate was a keydriver of new customers and revenue forstudy respondents.Affiliate is less likely than other channels toworry marketers over ad fraud, channel ROI,and rising media costs. However, marketerscan struggle to understand and communicateaffiliate’s value.Pricing flexibility is a key driver of affiliateadoption: No pricing model (SaaS licenseor variable on performance) dominates, andmarketers value flexibility in pricing theiraffiliate programs.

AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTH3OverviewAffiliate Should Be A Key Part Of ModernMarketers’ Customer Acquisition Strategies“Please rank each of the following digitalmarketing channels in terms of how importantthey are for your organization’s customeracquisition efforts” (Showing top three rankings)Rank 1Rank 2Rank 3Current StateApproachThe marketers who oversee affiliate programs enthusiasticallyendorse the channel as a key customer acquisition vehicle. Infact, marketers cited affiliate marketing as important to customeracquisition efforts more than any other channel, including paid socialand paid and organic search.Affiliate marketingSpecifically, a majority of executive-level marketers who oversee theirbrands’ affiliate strategies ranked affiliate marketing as one of thethree most important acquisition channels, with one in five reportingthat it is their most important digital marketing channel today.Display (incl. video and banner advertising)20%19%15%54%Paid d and organic search12%16%PR/influencer marketing11%14%40%15%Retail advertisingConclusion13%11%15%39%Word of mouth/referrals13%FORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 201912%11%36%Base: 178 US director who are responsible for or influence their organizations’ affiliate marketing strategiesSource: A commissioned study conducted by Forrester Consulting on behalf of Pepperjam, September 2019

4AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTHOverviewCurrent StateAffiliate IsA MajorRevenueDriver ForBrandsUltimately, the gold standard for evaluating a marketing channel’s value to an organization is its ability todrive revenue for the company. In this area, too, respondents ranked their affiliate programs among theirmost significant revenue drivers. More than half of marketers in our study ranked their affiliate programsas one of their top three revenue drivers, and 19% ranked it as their top-performing channel overall.Affiliate marketing is a top revenue driver for organizations today.ApproachOpportunity“Please rank eachof the followingmarketing channelsin terms of how muchrevenue they drive foryour organization.”(Showing top three rankings)ConclusionRank 1Rank 2Rank 3Affiliate marketing19%Display (incl. video andbanner advertising)13%18%Paid social13%20%Retail advertising19%PR/influencer marketing8%Paid and organic search18%Word of mouth/referrals10%FORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 40%39%34%Base: 178 US director who are responsible for or influence their organizations’ affiliate marketing strategiesSource: A commissioned study conducted by Forrester Consulting on behalf of Pepperjam, September 2019

AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTH5OverviewMarketers Believe Affiliate MarketingSuccessfully Drives AcquisitionCurrent StateMarketers believe their affiliate programs are highly important totheir customer acquisition goals and that these programs drivesignificant revenue results. They also report that affiliate marketingis highly effective for finding new customers.ApproachForty-two percent of affiliate marketers say that their affiliateprograms are successful, and 33% highly successful, at drivingcustomer acquisition. Yet 35% say they struggle with knowing howto measure affiliate’s incremental revenue impact, suggesting a lackof channel visibility in their measurement and reporting systems.OpportunityConclusionFORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 2019“How successful are your affiliate marketingprograms at driving your customer acquisitionefforts uccessful20%Not successful3%Not at allsuccessful2%Base: 178 US director who are responsible for or influence their organizations’ affiliate marketing strategiesSource: A commissioned study conducted by Forrester Consulting on behalf of Pepperjam, September 2019

AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTH6Concerned with establishing channel ROI:OverviewAffiliate Programs Are More LikelyTo Avoid Typical Channel PitfallsCurrent StateApproachMarketers know that executing programs for different marketingchannels brings challenges that must be addressed. For example,respondents told us they are concerned with ad fraud andestablishing the ROI of paid search and search engine optimization(SEO). They also struggle with the rising costs of media in retailadvertising and paid social, and they see ad fraud as a significantissue for paid social, search, and display.OpportunityConclusionBy comparison, affiliate marketing was less of a concern in thesekey areas. Affiliate was 16% less likely to raise ROI concerns thandisplay, 40% less likely to raise rising cost concerns than paidsocial advertising, and 44% less likely to be seen as a fraud riskthan paid social advertising. Affiliate was also 17% less likely to beviewed as a challenge in measuring channel performance and 16%in establishing ROI compared to PR/influencer marketing.Affiliate 31%Delta 16%Concerned with rising cost of media:Affiliate 20%Paid social 33%Delta 40%Concerned with ad fraud:Affiliate 19%FORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 2019Display 37%Paid social 34%Delta 44%Base: 178 US director who are responsible for or influence their organizations’ affiliate marketing strategiesSource: A commissioned study conducted by Forrester Consulting on behalf of Pepperjam, September 2019

AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTHOverviewAffiliate Programs Held Back ByLack Of Understanding And InertiaCurrent StateAffiliate marketers revealed that their primary concerns aboutaffiliate cover three areas: 1) issues with key stakeholders notunderstanding affiliate’s value, 2) a lack of understanding of how tomeasure affiliate’s impact on revenue, and 3) a continued emphasison historically prioritized channels.ApproachOpportunityConclusionMarketers raised two issues: First, a lack of stakeholderunderstanding limits their ability to quantify incremental impacton revenue and arises from affiliate not being accounted forin attribution or brands’ analytics systems of record. Second,historical inertia enables the same channels they have always beenusing. Therefore, it is the job of affiliate marketers to educate andadvocate to key stakeholders on the value of the channel and toprioritize the need to integrate channel data into their attributionsystems of record.7“Which of the following concerns do youhave about affiliate marketing in particular?”Rank 1Rank 2Rank 3Key stakeholders don’t understand affiliate marketing’s value or potential11%10%16%We don’t know how to measure the incremental impact on revenue12%13%10%Other channels have historically taken priority9%13%10%Inability to reach customers through that channel with scale10%7%11%We don’t think we have the skills or expertise to manage a program9%9%9%We don’t have the time to dedicate to affiliate marketing7%10%8%Affiliate only drives end-of-the-funnel activities6%12%6%FORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 2019Base: 178 US director who are responsible for or influence their organizations’ affiliate marketing strategiesSource: A commissioned study conducted by Forrester Consulting on behalf of Pepperjam, September 2019

AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTHOverviewAffiliate Programs Drive SignificantBusiness Benefits For MarketersCurrent StateApproachMarketers running affiliate programs told us the channel is asignificant driver of revenue and customer acquisition, but thebenefits marketers associate with affiliate are broader thanthese two critical areas. For instance, they reported both higherquality prospects and improved affinity and revenue from existingcustomers. They also believe that affiliate programs, which areoften paid on performance, provide transparency.OpportunityIn other words, those brands that currently deploy affiliatemarketing programs receive value from them but must learnto effectively communicate quantifiable, measurable value tostakeholders that control budget and prioritization — and besupported in doing so.8“Which of the following benefits do you associatewith your affiliate marketing program?”(Select all that apply)53%Enhancing our loyalty efforts52%High-quality new customerprospects/names51%Performance transparency48%Increasing affinity and revenuefrom existing customers46%Greater control over mediaspend compared to other channels45%Improved marketing ROIvs other marketing channelsConclusion43%Closing new customer sales36%Control over our media spendFORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 2019Base: 178 US director who are responsible for or influence their organizations’ affiliate marketing strategiesSource: A commissioned study conducted by Forrester Consulting on behalf of Pepperjam, September 2019

AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTHOverviewPricing Flexibility Is A DriverOf Future Affiliate AdoptionCurrent StateApproachMarketers indicated that pricing flexibility is a key aspect of theiradoption of affiliate marketing programs. Marketers in our studywere evenly split on whether they currently set budgets basedon prioritizing predictability through a fixed-price model or if theyrequire a commercial model that is adjusted based upon programperformance. Additionally, nearly 60% of respondents reportedthat having access to pricing model flexibility from their solutionproviders is either important or very important to them in choosingtheir affiliate solution providers.OpportunityIn other words, no one pricing model currently dominatesmarketers’ approaches, suggesting an ongoing need for affiliateprovider pricing flexibility.9“Which of the following best describes how youraffiliate program is funded?”51%49%Affiliate budget is fixed atthe start of a budgeting cycleAffiliate budget is variablebased on revenue performance“How important is budget flexibility (i.e., havingaccess to different payment models) for you inyour affiliate program?”28%ConclusionImportant or very importantSomewat important59%13%Not/not at all importantFORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 2019Base: 178 US director who are responsible for or influence their organizations’ affiliate marketing strategiesSource: A commissioned study conducted by Forrester Consulting on behalf of Pepperjam, September 2019

AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTH10OverviewConclusion: Affiliate Opportunity andOperating Leverage AwaitsCurrent StateAffiliate programs have shown significant benefits in customeracquisition and revenue generation while mitigating marketerconcerns with other discovery marketing activities like rising costsand fraud. To drive adoption and elevation of affiliate programsinternally, marketers should:ApproachOpportunity Understand and communicate the value of affiliate tostakeholders. Historical bias to other marketing channels andoutdated information on the affiliate category are not a strongbasis for strategic decision making. Counteract this by moreeffectively quantifying and communicating the benefits affiliateprograms drive.Conclusion Leverage affiliate as a primary channel in their overall mix.Misconceptions about affiliate marketing should not dictatethe brand’s ability to derive immediate value in the new customeracquisition and revenue generation.FORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 2019Project Director:Nicholas Phelps, Market ImpactConsultantContributing Research:Forrester’s B2C Marketingresearch group

AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITIONAND REVENUE GROWTH11OverviewMethodologyCurrent StateThis Opportunity Snapshot was commissioned by Pepperjam. To createthis profile, Forrester Consulting fielded custom survey questions asked ofmarketing decision makers at firms running affiliate programs. The customsurvey began and was completed in October 2019.DemographicsGEOGRAPHY100% USRESPONDENT LEVEL38% C-level executive20% Vice president42% DirectorApproachENDNOTES1Source: “Paid Search And SEO Shouldn’t Be Your Only Discovery Tools,” Forrester Research, Inc., February 5, 2018.REVENUEOpportunityABOUT FORRESTER CONSULTINGForrester Consulting provides independent and objective research-based consulting to help leaders succeed in theirorganizations. Ranging in scope from a short strategy session to custom projects, Forrester’s Consulting servicesconnect you directly with research analysts who apply expert insight to your specific business challenges. For moreinformation, visit forrester.com/consulting.Conclusion 2019, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Informationis based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester ,Technographics , Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of ForresterResearch, Inc. All other trademarks are the property of their respective companies. For additional information, go toforrester.com. [E-45122]17% 1B 25% 500M to 1B19% 200M to 500M19% 100M to 200M20% 10M to 100MFORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY PEPPERJAMOCTOBER 2019SELLING MODEL67% Both direct and throughpartners33% Direct to consumer only

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AFFILIATE MARKETING RANKS AS A PRIMARY CHANNEL FOR CUSTOMER ACQUISITION AND REVENUE GROWTH . 9 Pricing Flexibility Is A Driver Of Future Affiliate Adoption Marketers indicated that pricing flexibility is a key aspect of their adoption of affiliate marketing programs. Marketers in our study

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