Value of affiliate marketing questioned..

This post on Revenews reports on a recent story in the latest issue of Target magazine. The story indicates the apparent dissatisfaction of a few merchants with affiliate marketing leading them to question the value of this channel.

I haven't read the story myself, so I don't know the intricate details of the issues involved. A merchant is certainly justified in questioning the value of any marketing channel and ensuring that they are getting a sound ROI.

However, as a provider of affiliate marketing solutions to numerous merchants, I can categorically say that it is indeed one of the most cost-effective channels for merchants/advertisers. Primarily because it is purely a pay-for-performance model -- barring the odd exception. Merchants incur direct costs only when they get results, and that is a difficult proposition to beat.

It is possible though that merchants are incurring higher indirect costs--say, for example, the cost of monitoring affiliate activity and managing affiliates (assuming they are doing their program independent of any network), the cost of protecting their trademarks (which they would incur irrespective of whether they have an affiliate program or not), and even the cost of competing with affiliates in search engine marketing.

It is probably time for merchants to take a hard-nosed look at how they approach the affiliate marketing channel. Do they rely on anybody and everybody to deliver them sales? Or do they look at a select few affiliates? What are the clearly drawn out terms? Should they rely on a small group of trusted partners to protect their brands? Should they be directly competing with affiliates in search engine marketing?

Many more issues and question marks are bound to pop up, because this marketing channel is still evolving. But in terms of value being generated by affiliates for merchants, refer to my earlier post where I pointed to a recent e-Consultancy report.

Affiliates are expected to drive GBP1.35 billion in revenues to merchants this year, which will rake in about GBP83 million for affiliates. Work out the numbers. What channel can offer a better (lower) cost per sales dollar?

Until next time,

Ben Flux

posted by Ben Flux - Traffic Junction @ 10/25/2005 10:02:00 AM