Monday, April 26, 2010

Why Social Media and affiliate marketing pose a marketing dilemma

Today’s seemingly insatiable appetite for social networking has not gone unnoticed by marketers.
In the UK, 65% of companies use Facebook as part of their marketing strategy, while Twitter marketing has jumped from just 3% of companies in 2008 to 49% in 2009.

This trend has also had a dramatic impact on the affiliate marketing industry. The rapid increase in the use of blogs and social networks means that effectively anyone can now become an affiliate.

A case in point is Domino’s Pizza. Last month the company announced that it will be testing a new “social affiliate” widget that ties together the worlds of affiliate marketing and social media even closer than before.

Donimo’s widget allows anyone with a personal web space, such as a social network page or blog, to host advertising from brands and to earn commissions from any sales driven from their ads. It will be interesting to observe the results of this trial and to see whether other brands follow suit by integrating their social media and affiliate marketing programmes more closely.

Marketers would love to tap into the millions of social networkers and mobilise them to drive traffic and sales for any brand. However, in practice, this approach is far more complex to manage successfully.

It’s not surprising then that few merchants are maximising the value of this ‘long tail’ of affiliate marketing. The general assumption tends to be that the administrative and cost burden of working with a large number of micro-affiliates outweighs the potential revenue benefits.

However, as in the case of Domino’s, new technologies are challenging this theory and improving brands’ ability to successfully leverage the potential of a booming population of budding micro-affiliates within social networks.

The major challenge associated with tapping into the long tail of affiliate marketing is how to effectively manage micro-affiliates so they remain loyal, promote the brand favourably and continue to drive traffic back to the merchant’s website.

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 micro-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.

The 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 with the merchant, helping to instil brand loyalty.

Another key issue for brands looking to leverage social networks as part of their affiliate marketing programme is the frequency of commission payments.

Social network users are unlikely to remain motivated and aware of their affiliate activity unless they are getting regular reminders in the form of rewards; on the other hand, a payment event is likely to generate word-of-mouth referrals to others in their social network and thereby generate viral distribution.

Speed of payment therefore, especially when targeting micro-affiliates, is a crucial part of increasing brand loyalty and sales.  In order to effectively mobilise the global ‘long tail’ of affiliates, merchants need to adopt an efficient system that allows all affiliates to be paid instantly, regardless of the size of each payment.

We’ve known for a long time that social networks have the power to change the face of affiliate marketing, but until recently the challenges posed by the influx of micro-affiliates had seemed insurmountable to many brands.

It will be fascinating to see the results of this trial from Domino’s and whether other brands start to follow suit integrating their social media and affiliate marketing programmes.

If one brand can successfully address these challenges, then they may truly be able to leverage the collective power of micro-affiliates and achieve competitive advantage.

Whether this will be sustainable or will lead to a barrage of similar initiatives is a whole different question...

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