The past few years has seen the performance marketing channel mature considerably. Earlier this year The Internet Advertising Bureau released figures in conjunction with PWC showcasing the value of the channel.
It was estimated that performance marketing generated £8bn in sales revenue and accounted for 7-9% of digital marketing spend in 2012.
As retailers increase budgets across the channel, it is only natural it will receive greater scrutiny. Whereas once marketing managers were satisfied with the sheer volume of sales to justify the value of the channel, this is no longer the case. With the increasing volume of data now available to retailers, it is possible to analyse the value of the channel in far greater detail.
Retailers will have varying KPIs to satisfy and these will shape the metrics they use when assessing the value of the performance marketing industry. Some of the most common uses of data across the channel are investigated in this post.
The role in the customer journey
By understanding the channels a consumer has interacted with before transacting, retailers are able to effectively allocate their spend. Performance marketing has always been premised on the ‘last click wins’ model and as a result, publishers operating within the channel have been effective at ensuring they are the final click before the transaction takes place. While publishers rewarded for their ability to convert customers, their role as initiators and influencers upon a sale should not be ignored.
Data allows retailers to understand the complexities of customer journeys and highlights publishers that are adding value beyond simply being the final click in the path to conversion. For example, publishers with content focusing on specific brands or products may receive a significant volume of traffic, while the consumer, who at this stage is in the research phase of their purchasing decision, may not convert. By understanding a publisher’s contribution earlier in the sales funnel, retailers can look at additional ways to work with them. If a publisher is involved in a number of customer journeys where they ultimately convert through another channel/publisher, it is evident they are adding value to the customer journey. These publishers are not being remunerated for their involvement on a last click wins model so may reduce their promotion of the retailer across their site. However, if retailers recognise the value these publishers are providing beyond simply being last click, they are able to look at alternative payment models to ensure they are being rewarded for their efforts. Tenancy deals or increasing the commission to reward value beyond the sales generated, could encourage these publishers to increase their promotion – safe in the knowledge they will not miss out on a significant volume of commission if they are not the ultimate converter of the sale.
To understand the true value of a click, additional metrics need to be considered. How many pages were visited and how long a consumer stayed on the retailer’s site following the click through could help to determine the value of the click. Additionally if the consumer added products to their basket this could be considered as adding value beyond the conversion taking place. More advanced retailers are starting to pay attention to this data when analysing the performance of their publisher base, and rewarding them accordingly.
New Customer Acquisition vs. Retention
Retailers face the dual challenge of trying to recruit new customers while also trying to ensure existing ones are retained. It is not uncommon for retailers to look towards the performance marketing channel as a cost effective one for targeting new customers. By providing publishers with the correct tools (exclusive offers for new customers for example), they can be extremely effective at driving new customer acquisition. Data can help retailers understand which partners are converting new customers, so new customer acquisition can be focused on these publishers.
Delivering Long Term, Profitable Customers
While acquiring new customers may be one priority for retailers they also want to drive profitable customers that will stay with the brand for a long time. Data is readily available to uncover the publishers generating profitable customers in the long term. This insight allows the retailer to work closely with their most profitable partners to develop strategies, ensuring these highly desirable customers continue to be recruited.
Assessing Publishers on an Individual Basis
While some publishers may look extremely similar on the surface (two voucher code sites for example), they are likely to have different users and appeal to different demographics. It is extremely important that retailers use the data to assess publishers on their individual merits rather than simply categorising them depending on their primary promotional method. Despite appearing almost identical on the surface, two publishers within the same ‘type’ could deliver completely contrasting customers in terms of their value.
With performance marketing competing for a greater share of online budgets, data is going to become an even more important currency. With the sheer volume of data available, it is important publishers are able to demonstrate the additional value they are able to add beyond simply being the last click.
By getting to grips with the data, retailers are in a better position to understand the individuals adding value and driving the most profitable customers. By working with them on an individual basis, their performance marketing campaigns are likely to go from strength to strength.
Matt Swan, Client Strategist, Affiliate Window