Customer Acquisition Through Online Partnerships: Affiliate Marketing for SME’s

Online partnerships involve a smart collaboration of two or more organisations with the intent to develop a mid-term or long-term digital marketing program designed to meet each of their respective business goals (Kunitzky, 2009). Panico (2016) states interoranisational resource linkages can be an important source of competitive advantage, and on the basis of complementarities that might lead to value creation. This strategy is likened to a strategic alliance within the digital ecosystem. Singh (2016) believes digital partnerships are increasingly becoming commonplace because they are essential to create innovative or complementary products and services, and extend these offerings to reach broader audiences and markets.

According to Accenture’s digital collaboration index (2015), greater digital collaboration between G20 large companies and entrepreneurs could result in an additional £1.06 trillion in global economic output. One of these successful global digital partnerships include Apple and Nike. Nike CEO Mark Parker announced the relationship by stating “Nike is working with Apple on new software and experiences.” This includes new products such as Apple Watch Nike+.

Chaffey et al. (2009) identify online partnerships as part of a digital-communication tool for customer acquisition. He distinguishes different elements within online partnerships, such as: affiliate marketing, sponsorship, co-branding, link building and widget building. The remaining focus of this research will include affiliate marketing because it is growing in stature and highly regarded by key advertisers from large blue chip companies to SME’s (Tims, 2011). Smartinsights (2016) define affiliate marketing as the ultimate form of marketing communications since it’s a “pay-per-performance marketing” i.e. it’s a commission-based arrangement.

Chaffey (2016) states affiliate marketing partnerships within small businesses should include partnerships with other local businesses who aren’t in direct competition, or newspapers or local event guides. He further states, it’s really about thinking the type of content people are looking for and where it overlaps. A successful small business affiliate includes London on the Inside. They promote experiences, events, shopping, eating and drinking in London. This could be an interesting affiliate for local brands in London and follows Chaffey’s advice for small business affiliation strategy.

Singh (2016) identifies 7 steps when considering potential partnership opportunities:

  1. Always lead with customer experience
  2. Be open-minded and get creative
  3. Set a clear strategy
  4. Don’t be afraid to fail test
  5. Look beyond your own back yard
  6. Cultivating a digital culture starts at the top
  7. Build a model for partnership that works for you

The benefits of this type of online partnership includes:

Affiliate marketing is especially beneficial to small businesses because they may struggle to maintain online partnerships which include multiple elements because of the investment and resources required to maintain relationships (Duke, 2016). Also, a successful affiliate-advertiser partnership has a potential win-win situation for both parties involved (Duffy, 2005) because the merchant or business selling products only pays when they make the sale or get a lead (smartinsights, 2016).

However, the drawbacks include:

A lack of knowledge because this is a fairly recent phenomenon and has no distinct offline parallel (Slack, 2013). Slack further explains that paid/display advertising is taking over from print advertising and how SEO spend compares to shop front real estate, but, affiliate marketing has no real direct offline comparison. Additionally, there is a shortage of academic studies and research surrounding the topic preventing practitioners learning the discipline. Unlike other areas of digital marketing research there is no template or recogniseable framework to support development of affiliate marketing in practice.

The learnings include:

Affiliate marketing is a technique used in customer acquisition strategies.

  • Affiliate marketing includes a commission based arrangement. This can be extremely positive for small businesses because of the win-win arrangement with affiliates.
  • Important to select the correct affiliates to prevent damaging your brand.
  • There is a limited number of academic research within this digital marketing practice. It was difficult to identify helpful frameworks to support practitioners develop a correct approach to affiliate marketing.

As a result of a lack of academic research on this topic it is vital to gain insight from other individuals within the industry including affiliates blogs:

http://www.a4uforum.co.uk/

https://www.smartpassiveincome.com/

References

Panico, C. (2016) Strategic interaction in alliances. Strategic management journal.

Kunitzky, R. (2009) ‘What is partnership marketing?’ searchenginepeople, 29th October 2009 [Online]  <http://www.searchenginepeople.com/blog/what-is-partnership-marketing.html> [Accessed 14 April 2017]

Singh, N. (2016) ‘The rise of digital partnerships: fad or way forward?’ The Telegraph, 5th April 2016 [Online] <http://www.telegraph.co.uk/business/digital-leaders/horizons/2016-digital-partnerships/> [Accessed 13 April 2017]

Accenture (2015) Harnessing the Power of Entrepreneurs to Open Innovation. Turkey: Accenture

Chaffey, D., Ellis-Chadwick, F., Johnston, K., & Mayer. (2009) Internet Marketing: Strategy, development and practice. Harlow: Pearson.

Gurman, M. (2015) ‘Nike CEO discusses future of Apple partnership, exiting wearables, & Apple Watch’ 9TO5Mac, 8th May 2015 [Online] <https://9to5mac.com/2015/05/08/nike-ceo-discusses-future-of-apple-partnership-apple-watch-exiting-wearables-video/> [Accessed 15 April 2017]

Tims, A. (2011) ‘Affiliate marketing: hard but lucrative’ The Guardian, 21st May 2011 [Online] <https://www.theguardian.com/money/2011/may/21/affiliate-marketing-lucrative> [Accessed 13 April 2017]

Allen, R. (2016) ‘Affiliate marketing can be good for retailers, but ‘partner marketing’ is effective across all industry types’ Smartinsights, 2nd September 2016 [Online] <http://www.smartinsights.com/affiliate-marketing/affiliate-marketing-strategy/dave-chaffey-talks-affiliate-marketing-grant-leboff/> [Accessed 10 April 2017]

Smartinsights (2016) ‘Affiliate marketing’ Smartinsights, 2016 [Online] <http://www.smartinsights.com/affiliate-marketing/> [Accessed 11 April 2017]

Duke, M. (2017) ‘Strategic partnerships & scalling – the magic formula’ The path forward, 2017 [Online] <https://thepathforward.io/strategic-partnerships-scaling-the-magic-formula/> [Accessed 12 April 2017]

Duffy, D.L., 2005. Affiliate marketing and its impact on e-commerce. Journal of Consumer Marketing22(3), pp.161-163.

Slack, A. (2013) ‘Affiliate marketing? It’s time for brands to learn the facts’ The Guardian, 25th September 2013 [Online] <https://www.theguardian.com/media-network/media-network-blog/2013/sep/25/affiliate-marketing-brands-learn-facts> [Accessed 13 April 2017]

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