The outdated business structure and fraternal rivalries between online and offline counterparts prevent retailers from maximizing the potential of effective digital marketing initiatives, such as affiliate marketing, to drive store sales. Smart retailers will cut down walls and recognize the opportunity for effective, secure and profitable offline affiliate solutions, writes Jonathan Treiber, CEO and co-founder of RevTrax
Affiliate marketing is huge. With billions spent every year, it’s a ROI beast that traders pay in dollars. Since the dawn of online shopping, brands have turned to affiliated partners to drive traffic and e-commerce sales.
Last year alone, US shoppers spent $ 334 billion on online purchases and 16% of those sales were from affiliates. In 2017, US retailers spent $ 5.3 billion on affiliate marketing and this figure is expected to reach 6.8 billion by 2020.
Incredible as it seems, these figures represent only online sales – with a much larger cake left to retailers: store sales. Last year buyers spent $ 2.9 trillion in stores without any affiliate marketing.
So, why do not marketers apply their affiliate strategies to drive store sales?
This is symptomatic of a larger problem that affects many brands: a refusal to look at their problems in a holistic way. Too many retailers still have e-commerce silo and brick and mortar efforts, dictated by the separate P & L property. Why should a party spend its marketing budget to finance the other’s first line, even if it works for the same company? Crazy, right?
The reality is that this internal competition will drive many retailers out of the market because they focus on the wrong thing. Protecting and increasing sales anywhere in the organization is the top priority, and this is getting lost.
So what is the solution? Blast legacy structures, focus on the customer and create a marketing and shopping experience online / offline without interruptions that customers want.
A great way to start is to start combining the different components of the marketing channel. At this time, marketers simply can not connect a completely digital marketing channel like Affiliate to drive store sales. This seems crazy in this day and age, given everything we know about digital marketing and measurement. Connecting the points between online behaviors and offline shopping should not be that difficult.
In fact, the major retail brands have already begun to expand the traditional “online” affiliate program in the offline space.
For years, brands have collaborated with analytics companies to demonstrate the digital connection to in-store sales – using various methods (such as DLX, NCS, etc.). But often these solutions take months and can not be applied quickly. The key to optimizing the campaign is incentive technology.
With traceable 1: 1 offers, brands can actually link online data, like affiliates, to actual purchases in store. When offers are reimbursed in-store (or online), all digital engagements, encoded in customized offer codes, are linked to the purchase. These traceable offers form the connective tissue between digital marketing programs that often operate in silos.
Leading retailers are starting to give free rein to this approach in their affiliate marketing, driving offline sales and creating a trail of valuable first-party data.
The potential for optimization and customization makes this even more compelling. The feedback loop of in-store sales data will help to create investment efficiencies. Marketers can now take advantage of more data points than ever before to optimize campaigns for the right segments and improve transaction-level incrementality. Smarter offers and integrations with DMP and marketing clouds will allow retail brands to confidently customize bids among the public: new, existing, lapsed and loyal.
Affiliates also win with this approach. More usable information linked to much larger in-store sales data can probably help to quell ongoing discussions between advertisers and affiliates. Traditional online affiliates earn more, as brands encourage them to expand store sales. The potential for “offline affiliation” expands the opportunity for everyone involved.
But what about the biggest elephant in the room? Fraud.
Security and control of offers have been a concern for retailers for a long time. Every year hundreds of millions of dollars are lost for fraud. Retailers fear that their coupons will become viral and affiliates fear that their links will be copied or used improperly. Just last year, Toys’R Us failed their digital offerings through a security issue.
But solving fraud in affiliate marketing is not only possible, it’s easy. Single-use and self-destructing codes and other innovative security solutions can prevent digital promotions from being copied or misused, mitigating the risk of fraud for brands. In addition, digital offers can also be linked to the SKU level and published in real time. These solutions provide resellers with much greater control over campaigns than before, allowing brands to incentivize customers with relevant offers.
So, do we have any evidence that this really works? An important fashion retailer has adopted this “offline affiliate” approach and has seen an increase in digital engagement and in-store sales, using the following approach:
- The dynamically generated offers, optimized for any device, were automatically delivered to customers as mobile barcodes or print-at-home coupons, redeemable at the store.
- Solid monitoring provided detailed reports on the performance of affiliates and deeper insights on customers
- Secure and single-use links ensured that offers could not be replicated or over-exploited beyond the initial and approved affiliate sites.
- The synchronization of online behavior and in-store sales data with DMP and the brand’s Marketing Cloud has created a feedback loop that allows continuous customization and optimization.
- The offers attached to the SKU level gave them complete control of their campaign.
The results of these offline affiliate strategies have been impressive. In just 12 months they saw …
- $ 20 million in incremental sales
- 40% increase in the acquisition of new customers
- + $ 15 incremental revenue in store per transaction
- 2x size of the affiliate program
These numbers barely touch the surface of what is possible, but illustrate the massive opportunity for retailers to embrace “offline affiliations” – another way in which incentive technology provides the connective tissue between often silenced digital marketing tactics. Now it is up to smart marketers to release their potential.