By Alex Mifsud, CEO of EntroPay.
Affiliate marketing is now one of the most popular marketing channels in the online sector, and has grown into a billion pound industry. Research conducted by Econsultancy in 2009 estimates that UK sales from affiliate marketing were worth £3.82bn in 2008, a 22 percent increase from 2007.
In fact, it is often promoted as one of the most direct performance-driven marketing techniques available today. But the rapid growth of this industry has made life more complicated for those affiliate managers and networks that are now operating on a global scale.
The digital nature of affiliate marketing means that anyone around the world can effectively become an affiliate regardless of location. Affiliate managers, therefore, need to be sensitive to the twin worlds of territory-based affiliates and the instant and borderless nature of the Internet and the applications it enables.
In order to manage an effective global affiliate marketing scheme, and maintain momentum, marketers must address key issues such as payments and communication in order to keep global affiliates motivated and fully achieve the competitive advantage they are proactively seeking.
Addressing issues such as language and currency barriers can also build the relationship between the brand and the affiliate and ultimately lead to increased sales.
The cost of commissions
One effect of the increasingly global nature of affiliate marketing faced by brands and affiliate networks is the high banking and administrative costs across different countries. Organisations can end up spending thousands of pounds making global payments which, apart from being costly, are often slow to process.
This was also reflected in our survey results, as 32 percent of merchants were not happy with the costs associated with their payments processes. The cost associated with payments can often be as high as £25 per transaction – both in terms of processing costs and administrative effort needed to make the payment across regional borders.
This represents an enormous cost to merchants or to the affiliates who often have to cover the cost. To put this into context, according to the 2009 Affiliate Marketing Buyer’s Guide, an estimated £227m was paid out last year in commission and fees to affiliates and networks, up from £186m in 2007.
The industry is clearly aware of the challenge that internationalisation presents. According to our research conducted at the A4U Expo 2009 and ad:tech 2009, 26 percent of respondents felt that developing an industry standard for making and receiving payments will be a significant challenge in 2010, a 10 percent increase from the 2008 results. This concern was particularly acute for intermediaries, such as affiliate networks and agencies, who deal with multiple merchants and provide various payment options to affiliates.
By adopting a standard global payment process means merchants and affiliate networks can increase the speed of payments particularly across borders. Payments should also be issued in a variety of currencies to allow affiliates to claim their funds in whatever currency suits them best, which would additionally reduce foreign exchange fees for merchants.
Technology aids communication
Communication, which is often linked to the payment process, is an important part of building the relationship between the brand and the affiliate. For example, communicating more effectively with affiliates about their commissions can help to increase loyalty and maintain a positive brand association.
Brands and networks can streamline their processes to manage global affiliates by integrating payment processes with their affiliate management software. This allows brands to manage their accounts, see who needs to be paid and send payments all in one process, thereby increasing the speed and ease in which payments are made.
Performance marketing software has evolved so that brands can manage and analyse their affiliate marketing programmes, whilst simultaneously providing an interface for affiliates to monitor their commission payments.
This use of advanced technology not only allows brands to more effectively manage their affiliate programmes, but also helps to improve affiliate loyalty and experience through clear and open communication. In addition, operational and transactional email marketing messages can be sent to affiliates informing them of a recent payment with links to check their account.
These messages can be branded with the merchant’s logo to ensure that the positive feeling of ‘being paid’ is directly associated to the merchant, helping to instil brand loyalty.
It’s clear that affiliate marketing has become an established marketing channel in the online sector. Over the course of 2010 as the industry develops and grows, marketers must now focus getting the most out of their affiliate marketing campaigns.
This will involve nurturing the relationships they hold with their affiliates, regardless of size or location, and this includes paying affiliates securely, reliably and on time. There are a number of challenges that organisations must face in order to develop such a global standard; successfully addressing these issues will result in an improved working relationship between affiliate and merchant.
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