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Affiliate marketing: In-house, agency or network?

13th Aug 2015
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Affiliate marketing may be one of the oldest marketing methods but it’s still one of the most established, and shows no signs of slowing alongside the rise of social and mobile. From start-ups to established Fortune 500 firm, most ecommerce businesses are at some stage of the affiliate marketing journey, even if it’s still just research.

And the research is key, because deciding how to set-up and run your affiliate marketing programme isn’t the same for every business. Depending on your size, resource and the level of experience within your marketing department, there are a number of different options available to help you implement the right solution. Perhaps this is your very first foray into affiliate marketing or perhaps you’re bringing it in-house after outsourcing for years, whichever the reason, taking the time to examine all of the options before choosing your programme will help to find the best fit for you.

In-house network

One approach is to do it yourself, and set-up and manage your own affiliate programme. You can do this in two different ways, either by building a bespoke affiliate tracking platform for your business or by buying an off-the-shelf model used by lots of other businesses. Whichever you chose to use, the onus is on you to build and foster relationships with the most appropriate publishers and have enough acumen in the area to negotiate the best rates.

So what are the pros of going it alone? Like with any outsourced activity, choosing to bring it in-house gives you much greater control over your own marketing strategy. You decide who to partner with and how it will fit in with your wider marketing activities. The fails and successes of your programme will also help to provide valuable insight into what resonates with your customers most, which can then be fed back into the business. 

Cost is another major factor behind bringing it in-house. Rather than handing over the keys to a third-party agency and waving goodbye to some of your annual marketing budget on project management and consultancy fees, you can dedicate more money to actual advertising spend, resulting in a higher total return.

Jonathan Reynolds, head of client services at affilinet, adds that it’s those direct relationships that you forge with publishers over time that will also save you money in the long run. “The money saved either goes back to the bottom line, or to greater acquisition costs,” he says, “which means you can reward affiliates better and drive them to deliver better results.”

However, as he righty points out, what you save in third party costs you potentially lose in internal resource and headcount costs:

“It becomes very resource heavy building the longer tail of publishers, and it can actually counteract the savings you make by not being on a network. You become more reliant on individuals and need to recruit people with specialist knowledge about the industry and how it is evolving. Without that, you are really going to struggle.”

So, when considering whether to bring affiliate marketing into the business, it’s important to work out resourcing costs against spend to measure which option is likely to get the best results.

Specialist agency

Taking your affiliate marketing activity to a third party agency is a common approach. Agencies essentially act as your consultants, using their wealth of experience and expertise to find the right programme for you, with the right partners, and take care of everything from the relationships to booking to measurement.

Like in-house, there are a number of pros and cons to this approach, especially if you already worked with an agency to manage all of your other marketing programmes. Dan Cohen, regional director at Tradedoubler, notes that outsourcing your marketing activities to the same agency can help create an integrated approach across all channels, and manage the process more efficiently.

And Reynolds agrees: “Because they [agencies] are often managing different marketing channels fort a client, they will have the bigger picture view of what’s happening in all channels, and have all the data sitting in one place, making reporting on the success of affiliate marketing as part of the wider marketing mix easier.”

But as with any outsourcing, one of the biggest factors to consider is cost, and the impact of this on your annual marketing budget. Outsourcing to an agency also means that you have no insight into how your budget was spent until afterwards and, unless you set up frequent reporting, no ability to alter a campaign while it’s live. And, as is so often the case, you can never be sure when you outsource to an agency that, lacking the expertise themselves, they’ve also outsourced to more specialist agency.

Affiliate networks

Joining an affiliate network instead enables you to have the best of both worlds, acting as the go-between for merchants and publishers. Networks have a wealth of experience and relationships already established with the biggest players in the market and, for that reason, are often able to source you the best deals. Amazon, Rakuten, eBay and TradeDoubler are some of the biggest in the world with the Amazon Associates Program often cited as the very first to launch, back in 1996.

“Networks are where you find the majority of affiliate marketing industry experts; it’s what they do day in. day out,” explains Reynolds. "Publisher and advertiser management teams know the market inside out; with numerous advertisers on their books, they can leverage the volume they are driving through publishers to negotiate preferential deals to the benefit of every advertiser on the network.”

The main downside to choosing to work with an affiliate network is cost. Cohen explains: “They also do all the payments to the affiliates for you, however they do charge fees for all these services, the network will work in the best interests of all of its stakeholders (not just you) & flexibility can be an issue.”

Your choice

So, with the options now laid out before you, how can you establish which option is the most appropriate for your brand?

The option that you choose very much depends on how much you have already invested in your affiliate marketing programme. If you’re looking to launch a programme for the very first time, then you’ll need to properly map out the time, tech and resource needed, and decide whether you can dedicate one employee to the this area of marketing or instead partner with a network or agency.

Whereas Reynolds explains that if you already have an established programme, then you may want to consider bringing it in-house to develop those direct relationship and reduce network costs.

Or, perhaps you might want to do both: “What might be better here though is a hybrid approach, where you work directly with big publishers, but also have a way of growing your programme by leaning on the recruitment capabilities and industry knowledge of a network to grow and develop your affiliate base,” says Reynolds.  

Cohen adds that there are certain scenarios that will only work in an agency environment, like benchmarking your affiliate programme against your competitors.

Whichever you choose, Geno Prussakov, CEO of AM Navigator affiliate management agency and the founder of Affiliate Management Days conference, offer some final words of advice: “When establishing which one to choose, there are five key criteria to keep in mind: experience, expertise, equipment/toolbox, connections, and track record. As you consider the different affiliate programme management options, ask yourself which of the three – in-house, agency, or network – will yield you the most complete bouquet of all five, and then go with the one that will be most beneficial for building up your affiliate programme.”

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