New customer acquisition is a key metric for many merchants and the affiliate channel has demonstrated its ability to drive new customers at low costs.
With more online retailers interrogating the data that is available to them, affiliate networks are able to highlight the volume of new customers they are capable of delivering through their affiliate partners.
The increased reach that is offered through affiliates opens up merchants to a consumer base who they may not have been able to target through other online avenues.
With the continued growth of cashback and voucher code sites along with specialist niche sites, the affiliate channel provides the perfect platform to extend brands to new purchasers. Affiliate sites are becoming brands in their own right, often being the first port of call for consumers to carry out their online shopping.
There has been a long running debate as to how successful different affiliate types are at driving incremental sales within the sector. One outdated myth is that a merchant can establish a loyal customer base and pay commissions to affiliates on sales that they would have generated anyway. This is especially common with regards to perceptions around loyalty and voucher code sites.
This article examines three merchants who operate in different sectors, and delves into the ability of the affiliates to drive new customer acquisition.
The first retailer operates in the clothing and apparel market and generates a significant number of sales per month through the use of affiliates. In a highly competitive market, acquiring new customers as well as establishing a carefully thought out retention strategy is key to increasing sales.
In order to target new customers, they rely on their extensive affiliate base, and engage with a variety of affiliate types, extending their reach to consumers that they may not have previously had access to.
Looking at the stats for the first half of 2010, this merchant saw an average of 19.61% new customers delivered through affiliates. When analysing the data, the key volume drivers were voucher code, cashback and true content sites, each of which had a strong percentage of new customer acquisition.
The full breakdown of new customer delivery through the various affiliate types are as follows:
From this information, it is evident that all types of affiliates are able to contribute to new customer acquisition, contrary to a popular notion that certain types only convert previous customers looking for discounts.
A well executed strategy for this merchant has seen them engage with new consumers whilst maintaining established relationships with existing ones. This has allowed them to come in with a low cost of new customer acquisition through the channel.
The second merchant to be examined operates in the telecoms market where new customer acquisition is a key factor only paying commissions for new customers (those buyers that have not purchased within the previous 12 months).
A successful affiliate strategy has seen 47% of all sales delivered through affiliate partners in 2009/2010 attributed to new customers.
In a switchers’ market such as this, a well thought out cashback strategy can help increase market share at the expense of competitors and this has seen incentive sites play a key role in acquiring new customers. This highlights the importance of this affiliate type within the mix with 22% of all new customer sales being driven through incentive sites.
By working closely with individual affiliates and tweaking their promotion of the campaign, this merchant has benefitted from a great number of new customers through the affiliate channel.
The final merchant works in the health and beauty sector. In order to reward affiliates for delivering to their KPIs, they have a commission structure that pays higher amounts for sales generated by new customers.
Within the campaign they are broken down further into product categories, with the highest proportion of new customers being driven on the following categories:
- Electrical Beauty 65%
- Photo 60%
- Fragrance 58%
A full breakdown of new vs. existing customers for the campaign is as follows:
When breaking down the category with the greatest percentage of new customers, it is again evident that all methods of promotion attribute to delivering first time purchasers.
The greatest volume drivers for Electrical Beauty follow the trend that we see with the first merchant with cashback, voucher code and true content sites proving the strongest performers. New customer numbers are impressive through each of these, as highlighted below.
Targeting promotions to deliver new customers
Setting objectives to target new customers through the affiliate channel is all well and good, but it is imperative that the promotional strategy is geared towards new customer acquisition. Affiliates can provide a strong sales force, but it is difficult to convert new customers without the merchant targeting their promotions to this audience.
Any offers displayed on creative should be targeted towards new customers, such as x% discount for new customers, or free x when you sign up as a new customer. The message also needs to be consistent. When a consumer clicks on a link, the landing page should reflect the offer that they have interacted with.
The sharing of information with affiliates helps them to tweak their promotion of a campaign. If there is a particular message that converts new customers across other channels, affiliates can replicate this across their promotion.
For example, if a particularly strong offer on a product/service is delivering a large volume of new customers through other online media, why not share this knowledge with affiliates? Similarly, if there are affiliates conducting PPC activity, sharing knowledge of search terms that successfully recruit new customers will be beneficial to all parties.
The importance of new customer acquisition can also be represented in the commission structure that is on offer. It is possible to pay out higher commission for new customers to encourage affiliates to try and extend their reach.
It is also worthwhile to pay affiliates for existing customer sales. Affiliates are still contributing to the revenue generated through existing buyers so still deserve recognition. The danger of not paying for existing customer sales is that affiliates may not wish to promote the retailer, limiting the potential of reaching new customers.
When working with incentive sites, it is also possible to amend the cashback amounts as well as terms and conditions to deliver new customers. If executed efficiently, new customers can be attracted from competitors based on the amount of cashback that they are able to receive. This is particularly pertinent in sectors where there is limited brand loyalty and minimal product differentiation.
Clearly this article merely touches the surface of how to implement a more targeted affiliate strategy. There are a number of additional variables, most notably that all affiliates are different; simply because Cashback or voucher code stats generally produce one conclusion does not mean that all of these sites will act the same.
However, what this article hopefully makes clear is that as online matures, advertisers will need to provide additional data to their networks and affiliates if they are to derive the most value from their affiliate campaign.