14 November 2022

Marketing in a recession: benefits of affiliates and partnerships

As industries around the world grapple with a down economy, marketers are looking for cost-effective strategies that maximize return on investment and minimize risk.

Rising interest rates and inflation, dampened economic activity, and trade uncertainty – economies worldwide face the prospect of a tough fourth quarter of 2022. As a result, marketers are increasingly looking for cost-effective strategies that maximize return on investment and minimize risk.

Since its emergence in the early 21st century, affiliate and partnership marketing has proved a fertile source of commercial return and growth; its value in the current recessionary environment could be greater than ever, according to Maura Smith, CMO at Partnerize.

Catalyst to decision-making

“Recent events have served as a catalyst for companies to expedite their decision-making,” says Smith.

“Affiliate marketing gives marketers a means to access their target audience through the power of partnerships. The channel offers the necessary combination of scale and automation, delivering a strong 12-to-1 return on ad spend. That level of return is hard to turn down,” she adds.

A recent report from the Performance Marketing Association and PwC estimates the affiliate marketing channel is now worth over $9 billion a year thanks to its combination of diversification, compensation, influence and conversion.

As a sector, affiliate and partnership marketing began to mature in the 2010s, as dynamic commissioning and compensation models became more sophisticated, enabling more flexibility and accurate partner incentives.

Ahead of the pandemic, in 2018, publishers began to diversify their marketing options and content producers began to receive more tangible benefit through affiliate marketing, as coupon and cash-back offers became less of a dominating force.

Greater budget scrutiny

Under the restrictions of the pandemic, affiliate marketing has only accelerated, according to Smith.

“Of the various benefits, I’d say cost-effectiveness is number one,” she says.

“There’s greater scrutiny of ad budgets today, so it’s important to lean into outcome-based channels as a vehicle to reach your target audience and convert prospects into buyers.”

Affiliates have their own audience demographic and followers, which can aid in reaching a company’s desired target audience for a product or service. The channel also serves as a means to boost retention, avoid customer loss and remain competitive at a time when customer loyalty is waning,”, Smith argues.

A whole-brand strategy

Affiliate marketing tools bring greater sophistication than in years past, says Smith. “Software providers, who tend to have more sophisticated tooling than legacy affiliate networks, enable brands and marketers to distribute ad spend more efficiently, rather than paying blindly at the conversion level. The advanced tooling equips marketers with the ability to establish a dynamic, commercial strategy, aligned to value.”

Such tooling, or dynamic commissioning, enables the attribution of various commission rates by basket size, device, SKU, or any other conversion attribute. In complex sectors, such as travel, this can be hugely beneficial in deploying ad spend at the margin level, says Smith.

For all its many positives, marketers need to remain realistic of the limits of affiliate and partnership marketing, she cautions.

“Some people look at the sector and see a bright shiny object. They think you can just turn it on, and it will generate returns overnight. That is not the reality. You need to be an established organization with brand awareness and allocate the proper resources to the channel. If you’re starting out, affiliate marketing is not the be-all and end-all.”

Maturity and readiness

Smith lists the attributes that companies should have before pursuing an affiliate marketing strategy.

“First, your brand should have a level of familiarity and recall with your target audience. Second, your organization should already have a digital strategy: if you are not already spending in channels like paid search or social, I would caution against entering the affiliate channel. These are some of the indicators that signal maturity and readiness,” she explains.

“Organization size is also a factor. eCommerce revenue should already be established and minimally be in the tens of millions on an annualized basis. Otherwise, too small of a company size in revenue, may create false performance assumptions and you could end up dissatisfied, because you haven’t seen the returns.”

With consistent growth in affiliate marketing as a factor over several years, Smith believes that its future is secure and poised for exponential growth.

She forecasts that brand-to-brand partnerships will proliferate, with like-minded – but not competitive – businesses collaborating to benefit from cross-selling to one another’s customer bases.

The seeds of this are already evident, Smith says, with a mechanism to introduce suitable brands to one another likely to emerge and tremendous opportunities to scale up.

Lifecycle management

What Smith and her company Partnerize offer, is software to help manage the entire lifecycle of affiliate and partnership marketing, from relationship establishment, to tracking, facilitating and payment, to brand safety.

“We offer brands a single destination to manage the entirety of the partnership’s lifecycle,” she underlines.

To serve the expanding market, Partnerize aims to help marketers turn their partnerships into profit centers, by enabling them to achieve scale through automation and outcome-based payment models, a necessary combination critical to marketers’ survival in today’s macro-economic environment.

“It is incumbent on us and others in the category to continue to drive innovation necessary for channel growth,” says Smith.

As economic conditions continue to deteriorate, companies must rethink where to deploy their marketing dollars for the best outcome.

For Smith and Partnerize, affiliate and partnership marketing are an ever-more important part of the mix.