DTC brands are increasingly looking to affiliate marketing to expand their business.
This week, the Performance Marketing Association (PMA) released a New study Which showed that investment in affiliate marketing reached $9.1 billion in 2021 – an increase of 47% over the previous report in 2018.
Building Affiliate Marketing Strategies Nothing new for digital-native brands. many online retailers, Like Sweetwater Tool Shopthey set up internal departments for editorial management and creators who promote their affiliate links and help generate sales. However, the growth is particularly reflected in direct-to-consumer brands, many of which are trying to diversify digital advertising budgets in the wake of iOS14 privacy changes and the impending death of third-party cookies. In contrast, some DTC brands – as well as the PR agencies they work with – dedicate more resources specifically to affiliate marketing.
Affiliate marketing refers to any tactics in which a third party – such as a publisher or influencer – shares links to a brand’s products and thus gets a share of each sale. Historically, affiliate marketing has had a bad reputation for targeting largely customers looking for promotional codes and coupons, and who were not likely to have a high lifetime value. However, this perception has changed in the past decade with the emergence of more and more reputable review sites such as Wirecutter owned by the New York Times. But today’s affiliate marketing programs tend to include multiple channels. This includes discount and coupon websites, along with what are considered “high-ranking publications” like The Strategist and Buzzfeed Reviews outlets, and finally, affiliate deals with content creators and influencers.
Increasing focus on influencers
One brand that has been able to build a strong stream of revenue from affiliate marketing is DTC jewelry brand Dorsey, which began focusing on the channel last summer.
Meg Strachan, Dorsey’s founder and CEO, told Modern Retail magazine that “from a creative perspective, people don’t respond to the same kind of hyperproductive creativity that turned customers around five years ago.” Instead, today’s editorial gift guides, reviews, and influencer recommendations resonate more with young digital shoppers than with over-prepared Instagram posts.
“We see our ad partners generate up to 35% of all sales,” she said. “This does not replace spending on paid media, but it is clear that over the next few years affiliate advertisers will replace a significant amount of revenue that has historically been driven by Facebook and Instagram ads.”
Today, commission-related sales represent approximately 25% of Dorsey’s annual revenue. “I think of affiliates less as a way to gain cheap customers, and more as a way to target strong communities of potential customers who might like our product,” Strachan said.
In the past, affiliate marketing usually referred to agencies promoting media editors on products for inclusion in listings and reviews. These days, creating an affiliate marketing program also entails working with a large number of social media creators – including major and junior influencers. For example, Dorsey’s current partnership strategy mostly entails working long term with influencers who have strong, niche Instagram or TikTok followers. “We have found that affiliate advertisers with more than 500,000 followers do not convert customers,” Strachan said. These creators typically showcase a talented Dorsey product in their content, highlighting the brand’s lab-grown gems through their videos and posts. “We really tend to partner with small influencers and medium-sized followers.”
Chili crisp brand Fly by Jing is also growing its affiliate marketing program.
Justin Chan, director of growth at Fly by Jing, told Modern Retail that the brand began rolling out affiliate links last August, focusing primarily on online publications covering food and lifestyle.
Fly by Jing, which works with performance marketing agency Dreamday PR, uses a mix of coupons and loyalty partners — such as Honey, Refermate and Capital One. “In terms of top-tier publisher performance, we see significant traffic and sales from Wirecutter, Apartment Therapy, and Strategist,” Chan said.
Of course, affiliate links do particularly well when the company releases a new product or collaboration that gets a lot of press coverage, Chan said. A recent example is the collaboration Fly by Jing x Fishwife, which has received 23 pieces of affiliate press, including The New York Times and Business Insider. “We saw a 300% spike that week, and we ran out of collaboration within three days,” Chan said.
Over the past year, Fly By Jing’s affiliate program has grown 121% month over month, driving its monthly revenue from affiliates to around $22,000. “We are currently exploring more ways to expand our partnership program, through initiatives such as credit card partnerships,” Chan said.
Press for press
Since affiliate marketing often includes promoting news websites that also have an e-commerce arm, such as CNN or the New York Times, more PR firms are also building affiliate marketing operations to better work with emerging retail companies.
Dreamday PR, who works with a number of brands in performance marketing, has seen an increase in business as more brands request the launch of the program. Dreamday Lauren Kleinman has attributed this growth to the increasing difficulty of growing the e-commerce business. Dreamday’s current marketing clients include Athelether brand, Girlfriend Collective, shaving brand Oui the People, and Fly by Jing mentioned above, among others.
“One of our most successful brands is Girlfriend Collective,” Kleinman said. “Since January, we’ve helped them generate over $1 million in affiliate revenue and over 300,000 clicks,” Kleinman said. Similarly, since January, People Oui’s affiliate marketing program has generated $86,000 in revenue, with average monthly growth of 37%.
“Affiliate links have a bigger impact on some brands than others,” Kleinman said. Significantly, if a brand’s web traffic is already strong, there is more awareness and opportunity for conversion. “It can be difficult for small emerging brands that don’t have a lot of awareness yet,” Kleinman added.
However, Kleinman noted that there are downsides to the channel in that it’s not as straightforward as paid advertising on platforms like Facebook and Instagram. “You don’t get X sales for X dollars,” she said. Much of its success still depends on media trends and relationships between agencies, editors, and creators now. “But we’ve seen our demand go up in the last year, and that’s part of a bigger trend in PR.”
In turn, other PR agencies also benefit from customer demand for affiliate marketing.
Jennifer Bett Communications, which represents brands like Parachute and Magic Spoon, launched an affiliate division in April to meet customer demand. Founder Jennifer Pete-Meyer said the service is an extension of the press coverage the agency is trying to secure for its brands.
“Through this department, we advise our clients and carry out work with media interested in commercial stories,” Meyer said. “Being a pay-for-performance model, affiliate marketing allows us to strategically partner with specific outlets to leverage and increase affiliate revenue.”
As more players from PR agencies enter news sites in the affiliate game, brands are constantly re-evaluating their strategies in the field. For example, DTC cleaning company, with an essentials subsidiary, has built its business primarily through affiliate marketing since its launch in 2017.
In its early days, CEO Tim Murphy said the company worked with lifestyle bloggers who tested and reviewed Branch Basics’ cleaning products. Today, the company is focused on working with health and wellness experts to promote the brand’s range of non-toxic products, which they pride themselves on being gentle on the skin.
The slow and steady tactic is paying off, Murphy said, especially as other digital advertising methods are becoming more expensive. Murphy said that affiliate channels now account for 33% of branch essentials spending and have a 3X ROAS.
The company plans to increase its affiliate marketing budget this year, including a larger investment in small and medium-sized influencers. “This year, we are allocating more budget to affiliate marketing because it is our top performing channel,” Murphy said.