How Affiliate Techniques Apply to Digital Integration
In an episode of New Modern Family (S8.3) Wikipedia gives the following summary:
“’Luke decides to run against Manny for class president. Claire becomes his manager while Jay and Gloria help Manny. Now that Haley wants to create her own company, Phil introduces her to an eccentric marketing expert, while Cameron decides to house his star football player without consulting Mitchell”
It missed the point totally in the Phil/Hayley storyline. Phil Dunphy a (Real) Estate Agent can’t sell a house because someone died in it. He decries his daughter Hayley for setting up her own social media company working on commission and tries to introduce her to an old school sales promotion ‘expert’.
To prove a point she gets her friends to share across their social media network the ‘weird house for sale’ and gets lots of visitors using a ‘flash mob’ principle with ‘rich’ people making money online using a variety of models viewing the house.
Ultimately Phil gets a ‘Goth’ interested, Haley whispers her Dad’s very wealthy. Phil potentially gets the sale and Hayley then explains her business model based on commission.
This New Modern family episode is a great snapshot of old world and new world marketing. Phil Dunphy trying to sell a house as an (Real) Estate Agent would in the ‘offline’ world and Haley Dunphy using digital techniques to get better result.
Affiliate marketing vs traditional sales models are the same. Affiliate marketing used effectively is commission based selling using digital techniques. The key is the gross margin in the product being sold. Provided the digital marketer can sell the products by buying relevant traffic for less than the gross margin available a profit is made. A £100 product at 50% Gross Margin leaves £50 per product budget for the digital marketer to sell to break even. The more effective his marketing the more money he or she makes.
In the online world this is all transparent because the website provides analytics and conversion data. The affiliate marketer, by identifying products with enough margin and an audience who wants to purchase that product, makes lots of money online.
Translating this process into the ‘offline’ world is harder than you might think. Large corporate businesses have complex sales models. They don’t know the source of leads. Small businesses simply don’t measure where leads and sales come from. Having worked for hundreds of clients over the last few years I would say 90% don’t measure where their business comes from.
It’s the first thing we implement when working with a client. We are basically replicating the affiliate marketing model by back fitting data. We identify the value of leads the value of sales and the source of those sales and apply a gross margin figure.
That gives us a budget to work with online. Over time clients realise that if a £10,000 spend generates £100,000 in sales at a 50% gross margin this delivers a 5 to 1 return on investment.
The client is then able to continue to invest until capacity or critical mass are reached safe in the knowledge a profit is being made.