Affiliate Marketing

The #1 Channel Your CMO Needs To Invest In To Futureproof Your Business

Lets start with what would seem like an obvious questiona simplified, but surprisingly accurate, representation of the choice many marketers face today. Would you rather choose:

  • Option A: Pay $100 for an ad placement that gets 1000 impressions but leads to only five sales of $100 each?
  • Option B: Offer a marketing partner $10 per completed sale, leading to ten sales of $100 each?

You dont need an MBA to know you should choose Option B. Its a marketers dream to invest budget in a channel where the outcomes are set in advance and payment comes due only after those outcomes are delivered. Plus, getting 10 sales is better than getting five, even if youre paying a 10 percent commission on them.

Unfortunately, many marketers find themselves stuck with Option A on a frequent basis. Theyre feeling pressuresometimes from leadership, sometimes from investors, sometimes just from observing what other brandsto invest in a high-reach channel such as paid search, paid social or programmatic display. These channels are the fastest, most popular way to deploy significant marketing budget, and the massive potential reach is enticing, especially for brands flush with cash and hoping to become the next big thing.

The problem is that ROI in these channels is steadily decreasing. The reason for those diminished returns is simple supply and demand.

As increasingly more brands invest in the Triopoly of advertising goliathsFacebook, Amazon and Googlethe demand for these services has begun to exceed supply. This can be illustrated effectively with two simple statistics:

In other words, brands are flooding the marketplace in input-based channels such as paid search and paid social, prices are rising sharply as a result, but brands arent seeing their customer acquisition return rise at the same rate. The result is were approaching a tipping point where these channels are no longer working at the market prices, and brands will be looking to diversify their marketing portfolios and get more dependable ROI, and better profit margins.

To return to the question posed earlier, marketers are tired of Option A, and they want to choose Option B. Theres a channel that allows brands of all sizes to make that choice. That channel is partnerships.

How Partnership Marketing Boosts Brands

Partnership marketing isnt new, and has existed in several forms over the years, most effectively as affiliate marketing. It is a high-growth channel where brands leverage trusting, transparent relationships with marketing partners and only pay for the outcomes they receive.

In contrast to channels such as paid search and paid social, where brands pay for impressions or clicks that dont necessarily lead to customer acquisition, partnership marketing allows brands to pay for what works, based on their definition of success.

In other words, rather than investing up front and hoping for the best, partnership marketing lets you pay an agreed-upon percentage or fee, billed only after youve secured the desired outcome, be it sales, leads, customers, or some other result. And because your partners get paid according to those same metrics, it is in their best interests to deliver the right outcomes. The incentives of brands and partners are aligned.

Partnership marketing is highly effective. Under the correct conditions and when managed properly, it offers three key differentiating advantages:

  • Partnership marketing is profitableby definition. Companies only pay partners a percentage of each sale or qualified lead, so a company can set their pricing up front to ensure their profit margin goals are met in the channel.
  • Partnership marketing is scalable, in terms of both investment and technology. Thanks to major advances in partnership automation technology, a company can use a partnership marketing platform to manage hundreds or thousands of marketing partnerships easily, allowing brands to build their partnership programs in a scalable, trackable way. Partnership marketing also maintains cost-efficiency as it scalesif you love paying 10 percent for $10 of revenue, the same should be true of paying 10 percent for $1,000 of revenue.
  • Finally, partnership marketing is sustainable. Brands do not have to repeatedly bid more to maintain their advantage, and partners have reasons to stay and double down with the brands who treat them well and pay them fairly. This creates a sense of mutual loyalty that pairs well with the aligned incentives.

The difference between partnership marketing and traditional marketing channels becomes clear when closely examined. Many aspects of traditional digital marketing can feel like putting on a blindfold and playing a high-stakes game of darts, whereas partnership marketing involves finding a partner who can hit the dartboard for you and who asks for their cut of the prize money only after they help you win. Brands can exchange guesswork for verifiable results, and marketing partners are incentivized to deliver those results.

Partnership marketing also enables brands to skip to the bottom of the marketing funnel, ignoring the noise and distractions at the topand avoiding the channels that are effective at getting customers into the top of your funnel, but dont help you move customers through it.

To illustrate this, consider an offline business example. Imagine that the owner of a boat rental shop decides to incentivize the local resort concierge for referrals. If the boat rental shop offers the concierge a small feesay, $10for every prospective customer they send over, the concierge will try to send every guest who stops by their desk, regardless of how interested the guest is in renting a boat.

In contrast, lets say the rental shop owner offers a higher success feesay, 10 percent of all bookingsas a commission for each sale the concierge generates. The concierge will likely be far more discerning when referring guests to the rental shop. Theyll ask the right questions and send only the most qualified possible leads, as the concierge gets paid only if their referrals actually rent. The concierge gets paid more per qualified lead, the shop gets fewer, but better qualified, referrals and pays only for confirmed customers, and everyone is better off.

This example demonstrates how partnership marketing better directs potential customers to the bottom of the marketing funnel. This model puts the focus on the right objectives and incentivessales, leads, or other tangible outcomes.

If youre getting the feeling that youre putting too much marketing budget into channels that dont workor paying drastically higher prices without any growth in your own revenuepartnership marketing is an obvious channel to explore. It will help your business get out of the environment where platforms charge auction-style prices for results that dont necessarily grow your bottom line, and leverage a model where you only pay for the outcomes you want, and where your marketing partner is as determined to make sales as you are.

To learn more about partnership marketing, check out Moving To Outcomes: Why Partnerships Are The Future of Marketing, which releases March 22 and is available for preorder now.

Written by Matthew Wool.

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