The Marketing Channel Retailers Are Reopening Their Budgets For

In addition to changing how consumers work, the COVID-19 crisis is also changing how they shop. Instead of going to brick-and-mortar stores to purchase goods, consumers are focusing their shopping online. In fact, among primarily store-based retailers, the number of online orders in the U.S. and Canada were up 56 percent year-over-year for the two weeks of March 22 through April 4, according to an online tracker from marketing platform Emarsys and analytics platform GoodData.

With more consumers moving online to meet their shopping needs, and with marketing budgets tightening, retailers are re-evaluating how and where they're spending their precious advertising dollars.

Pre-COVID-19, most retailers took a diversified approach to their paid marketing initiatives, which tended to include some combination of paid social, paid search, programmatic, retargeting, display and affiliate marketing. Post-COVID-19, retailers are focusing intently on channels that offer low cost per action (CPA), high return on ad spend (ROAS), and are performance based. A significant reason for this is that brands are offering steep discounts and sales to entice consumers. With more aggressive discounts, performance-based marketing channels can drive incremental revenue more profitably than other channels. As such, the priority for most brands is now on paying for marketing that converts.

For those retailers with an affiliate marketing program, many are finding that this performance-based channel is what’s allowing them to realize low CPA and high ROAS outcomes.

The Shift to Performance

Since this crisis began, many of our retail clients have shared that they’ve turned off upper-funnel marketing channels, including display and Google product listing ads. They’ve shifted more of their marketing budget to their affiliate program and refocused their strategies, campaigns and partnerships on lower-funnel conversions.

Since affiliate marketing has fewer steps to purchase, the model has been highly effective in helping retailers increase their conversion rates and spend more efficiently. Even though traffic might be down, the clicks that are coming in through affiliate programs are converting — in some cases as high as Cyber week. In addition to fewer marketing channels disrupting the consumer purchase path, more consumers are shopping with a mind-set similar to the holiday season: they're searching for the best deal or an incentive (e.g., cash back). Affiliate partners, such as loyalty and coupon sites, are playing a key role in helping brands cost effectively reach consumers who are looking to save as much as possible.

Increasing the Effectiveness of Your Marketing Partnerships

If your brand has an affiliate marketing program and is refocusing its marketing efforts on performance-based, high-converting channels like affiliate, here are key things to keep in mind:

1. Performance-based partnerships are critical. Right now, many brands are changing their promotions frequently. All promotions and promotional changes need to be communicated promptly and clearly to your partners. In addition, it’s important to check in with them frequently and keep the communication lines open.
2. Provide clear messaging to partners. In some of our client’s programs, we’re seeing that more urgent "last chance" messaging as well as “treat yourself” and “self-care” themes are contributing to increased conversion rates.
3. Awareness is still relevant. Even brands that are focusing on bottom-of-funnel conversions are still collaborating with content partners within their affiliate programs to cost effectively attract the attention of consumers looking for new ways to occupy their time at home.
4. Test new partnerships. Many retailers have found that testing affiliate partnerships with new, innovating partners have helped them increase their customer reach. Many of those partners have also waived integration and slotting fees.
5. Pay it forward. Many retail brands have increased their partnerships with loyalty sites to contribute to charitable causes via their affiliate program.

Robert Glazer is the founder and CEO of Acceleration Partners, the premier global partner marketing agency.