My Take On The Merchants Survey Report 2007

The report sponsored by buy.at and conducted by e-consultancy isn't for public release yet. But I'm sure I'm allowed to comment on its findings.

As a bit of a background the report's aim was to survey how merchants view affiliate marketing. The survey sample was 700+ with 239 classing themselves as UK merchants. With the affiliate market growing by around 60% a year and 80% of the respondents planning to increase their spending on this channel over the next two years, the industry is certainly one that businesses, both large and small alike, need to take very seriously.

One of the interesting findings is that 95% of the respondents found affiliate marketing to be 'very' or 'quite' cost effective which is more than PPC that came in at 90%, email marketing at 81% and display advertising which only managed 52%.

Another interesting factor is that, when you look at success as defined by volume of sales, it comes in second behind paid search. Affiliate marketing is still in it's pubescent stage and even though paid search post-dates affiliate marketing, it is certainly much easier to get a paid search campaign off the ground as compared to affiliate marketing.

I also agree with the report's finding that networks must continue to innovate and expand their offerings, but my view is that both merchants and affiliates much put more pressure on the networks to do this. If there is no incentive, they will not evolve and improve.

The report also stats that "affiliates must continue to professionalise and invest in their businesses", but I feel this falls short. Affiliates must also increase their education levels on a wide range of topics with business management and communication just two of them.

The report also states that "advertises must continue to allocate the appropriate level of resources to support a successful affiliate programme". But it's not just about the money and the personnel. It's also about creativity and willingness to adapt and learn.

A worrying statistic is that "less than 50% of respondents claim to have good direct communication with at least their top tier affiliates". Achieving this feat is one of the key drivers in affiliate marketing success. It is crucial that merchants have direct, and mutually-beneficial, relationships with their affiliates.

Looking at the numbers, 31% of respondents were UK merchants,13% were agencies, 4% were from a network, 9% were affiliates and the rest had another type of interest in the industry.

A good benchmark for any merchant is that on average, according to the survey, 16% of their sales were generated by affiliate marketing.

The industry is doing well, 67% of the respondents said they were getting more affiliate sales than they were two years ago. It makes you wonder what the other 33% are doing!

And an interesting face to go with this is that 7% were spending less on affiliate marketing. So it many circumstances the merchant is doing more sales but spending less on this marketing channel - interesting.

The budget allocation is commensurate with the level of affiliate sales earned as a whole. Merchants were spending on average around 18% of their online marketing budgets on affiliate marketing, but were generating 16% of sales. When you look at the marketing budgets as a whole, they were spending just 10%.

The following statistic proves that merchants are never happy! 81% which they could get more out of affiliate marketing whilst 16% said they were satisfied - even thought the majority said it was the most effective marketing option. doh!

Another interesting finding also proves that there needs to be a massive educational programme for affiliate managers. I'd advocate an affiliate marketing accreditation. 33% of merchants rated having a lack of internal resource being a barrier to successful affiliate marketing.

Agencies such as RO Eye should be rubbing their hands in glee when they find out that 20% of merchants view the "difficulty in attracting affiliates" as a major barrier to affiliate success.

And the 18% that said "restricted budget" need to ask themselves the question about affiliate marketing being the most cost-effective channel and if they moved some budget from less cost-effective methods wouldn't it positively affect the bottom-line??

And the 19% that said "poorly converting website" need to give me a call!

It's good to see that 21% of merchants say they have a dedicated affiliate manager. But when you add it to the "lack of resource" at 33% being a barrier and that 34% saying they have limited communication with their affiliates then I start to get a bit concerned.

The obvious view is, hire good people to manage your campaigns, have a personal touch with them and get your site converting. True?

This is the bit where networks should take note. 47% of merchants view the network's relationship with affiliates as being extremely important when choosing a network. Having a bad perceived relationship with affiliates will harm your ability to take on new merchants.

Other areas include tracking and analytics at 40% and level of account management at 34%.

There is so much in the report that I can't go into full detail as I'd be here all night. But wait for the report - it's worth it.

My view is that having a successful affiliate relationship is more important than the product or market itself. A successful relationship will allow both businesses to flourish. Affiliates will point out conversion barriers, merchants will develop great content and widgets etc. Networks and agencies have an important role to play in all this. They should be focusing on the next merchant sign-up, but look at the next affiliate sale. They should strive with each party to build the merchant's brand and sales.

And merchant's take note, 47% of merchants view the affiliate / network relationship as extremely important when choosing a network. You've got to add value to our business before the merchant adds to your client list.