Why more DTC brands are investing in affiliate marketing

Pair Eyewear, which sells customizable eyeglasses direct-to-consumer, entered this year with a plan to diversify its marketing channels. But rather than opting to enter the metaverse, or create a campaign with AI, the brand decided on something a little less sexy: affiliate marketing. The tactic—in which a publisher or creator is paid on a per-sale basis for promoting a brand or its products—has become an attractive option for a range of DTC brands as they look to combat rising costs of other forms of advertising, especially paid social media, which had long been a favored channel for DTC brands. View this post on Instagram A post shared by Maria Lynn (@maria_lynn_92) Ad Age Leading National Advertisers 2023 Ad spending, rankings and analysis for the biggest marketers and brands Enter here Pair has “really turned up the volume” on its affiliate marketing efforts, said Grant Goldman, Pair’s VP of marketing, noting its spending on the channel tripled from the first quarter of 2022 to the same period in 2023. “We wanted it to be an area that we can lean into more as a source of relief for customer acquisition costs—and it certainly has contributed to lowering our overall customer acquisition cost,” he said. Rising digital ad costs for DTCs stem partly from companies such as Google and Apple increasing their privacy efforts in recent years, as well as more competition in the DTC sector. Acquiring customers via paid ads on Facebook and Instagram has become much more difficult and expensive than it was 10 years ago in the DTC sector’s early days, according to Melissa Duren Conner, partner at PR agency Jennifer Bett Communications. JBC recently started an affiliate arm of its firm, which Conner helms. “We’ve heard this from almost every brand I work with, it is [currently] just unbelievably expensive to acquire customers with paid marketing,” Conner said in an interview. Affiliate marketing, she countered, allows DTC brands (the only type of brand JBC works with, per Conner) to acquire customers at “a much lower cost.” There are two main forms of affiliate marketing for DTCs: One involves using so-called brand ambassadors, essentially creators who get paid on a per-sale basis for promotional posts. The other version involves working with publications that link to a brand or product as part of editorial copy, with publishers gaining a certain percentage of every sale made via that link. Affiliate advocates say the tactics allow for DTCs to easily prove ROI, which has become more important as the category matures and places a greater emphasis on profitability. Read more: Influencer marketing embraces affiliate tactics Using ambassadors DTC wine company Boxt pays ambassadors $20 (in cash or Boxt Wine discounts) for every person they refer. The brand’s affiliate investment has more than doubled in the past year, according to Sarah Puil, Boxt’s founder and CEO, who declined to share exact spending figures. “There's a lot more people in it now because we’ve been more aggressive in bringing people on to that program,” said Puil. Graza, a DTC olive oil company, has also poured more money into affiliate marketing, said Kendall Dickieson, Graza’s head of social. Dickieson started running the program about a year ago, and since then, Graza has significantly increased its number of ambassadors. “It’s grown a lot,” Dickieson said in an interview, although she did not provide exact figures. Graza ambassadors typically earn 10% of every sale in cash, she said, although during certain parts of the year that percentage increases. Dickieson, who also has her own consultancy business, said she probably would have told DTC brands five years ago to put more budget into paid Facebook or Instagram advertising rather than to invest in an affiliate program. But now that the return on ad spend has decreased so much on those platforms, she’s more likely to suggest affiliate marketing. Publishing realities Publishers are seizing on affiliate marketing to make up for lost traditional ad revenue. “You have major media houses who’ve lost revenue in traditional digital ad buys having to shift to affiliate marketing,” said Blagica Bottigliero, who was most recently the director of affiliate marketing at JEB Commerce and has worked with brands such as Cotopaxi and Dr. Squatch. Bottigliero cited Condé Nast and Meredith publications, as well as offshoots of other outlets specifically created for affiliate marketing, such as New York Times-owned Wirecutter and the Wall Street Journal’s Buy Side. Articles with affiliate links often include a disclosure line that says something like “every product on this page was chosen by an editor. We may earn commission on some of the items you choose to buy,” to make it clear that the publication is earning money off these placements. For DTC brands, paying publishers via affiliate marketing can help secure coverage in coveted publications—coverage that can be make-or-break for new entrants in competitive categories. Vivek Agarwal, founder of DTC swim company Ookioh, said that three years ago, if he wanted an Ookioh suit in a magazine spread, he could contact a fashion editor, and that was it. But now Ookioh must now add affiliate marketing to the mix—and offer a solid commission percentage to stand out. “Almost all the fashion editors love our stuff. But it's the affiliate managers and the commerce managers who are behind the scenes, and they only look at numbers—so you have to sort of make your value proposition better for them to consider you,” Agarwal said. And as more of his competitors use editorial affiliate marketing, he said he has had to boost commissions paid to the publishers to get placements: The brand increased its commission rate from 10% of each sale made through affiliate links to 15% of each sale, leading to an overall increase in its affiliate spend. Of course, depending on the publication, the details of these commissions and what it takes to make a list vary. Betches, for instance, has been growing its affiliate efforts recently; and David Spiegel, chief revenue officer at Betches Media, confirmed that it’s becoming increasingly competitive as more DTC brands enter the space, and more media companies double down on the strategy. For DTC brands, he said, affiliate marketing became more appealing after Apple cracked down on privacy and DTC companies needed to diversify concrete sales channels. At the same time, due to the recent economic downturn, publishers were trying to diversify their revenue. “It has become a much more competitive marketplace,” Spiegel said. Subscribe to Ad Age Sign up now for the latest industry news and analysis Click here

Why more DTC brands are investing in affiliate marketing

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