Affiliate Marketing still cost-effective but budgets shrinking
A Big Hand for the Little Lady full London, 11 September, 2008:
More retailers than ever see affiliate marketing as a very effective sales channel but reduced budgets are affecting traffic and turnover, according to research published today.
The Affiliate Marketing Survey Report 2008, conducted by digital marketing research publisher E-consultancy and affiliate marketing agency R.O.EYE, found that 46% of merchants rate the channel as very cost-effective for driving customer acquisition, up from 44% last year.
However, comparisons with last year’s survey show that the average proportion of online marketing budget designated to affiliate marketing has dropped from 18% to 14% since 2007, and that the proportion of online sales ascribed to affiliate activity has decreased from 16% to 12% over the same period.
Restricted budget has jumped from fifth place to second place in the hierarchy of barriers to successful affiliate marketing. Despite the inherently low-risk nature of performance-based affiliate marketing programmes, less money is being invested in this area. This research highlights the importance of a well-managed affiliate marketing campaign, ensuring the channel is driving incremental sales.
Almost 60% of merchants surveyed acknowledged that affiliate relationships and sector experience are crucial to a successful programme, reflecting the need to prioritise investment in internal resources or outsourcing.
Other findings show that sales generated by SEO and content sites have eclipsed those of paid search and loyalty/cash-back sites.
The Affiliate Marketing Survey Report 2008 is based on the findings of a survey of more than 250 merchants and 150 agencies in July.
Linus Gregoriadis, E-consultancy’s Head of Research, said: “Whilst the research represents something of a wake-up call for the industry, the good news for affiliate marketing is that merchants continue to regard it as a cost-effective channel for driving customer acquisition. However, there has been a slight decrease in investment in affiliate activity which can be attributed to several factors.
“Whilst reduced budgets due to the economic downturn may be partly responsible, merchants are also getting better at getting traffic directly to their sites and they are also refining their approach so that they are not paying out for sales unnecessarily.”
The report identifies the most significant affiliate marketing trends as the rise of super-affiliates, brand-bidding and growth of cash-back sites. Some 45% of respondents highlighted brand-bidding as the most significant trend.
Mark Kuhillow, Managing Director of R.O.EYE, commented: “The 2008 report has clearly sent out some key messages for the industry. With budgets being reduced as a result of the economic situation, this has had a direct effect on the traffic and sales merchants and agencies have received through the channel.
“While more merchants than in 2007 view affiliate marketing as a very effective channel, almost 70% are spending less than two hours per week communicating with their affiliates and policing them. It is more important than ever before to forge strong relationships between merchants and their affiliates to protect volume and the channel’s efficiency. This report highlights the changes the industry and exposes the end of ‘easy pickings’ for affiliates.”
APA response in due course …
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