Special Report: Affiliate Marketing - Battle of the brands

Mobile phone operators such as Vodafone and Orange now rely on affiliate marketing to convert consumers, who are spoilt for choice in the sector, into customers.

For most people, buying a new mobile phone ultimately comes down to price, but consumers also consider the type of handset and whether they want to be on a contract or pay-as-you-go. It's little surprise then that brands in this sector are among the UK's biggest-spending affiliate marketers, relying heavily on the channel to acquire new customers.

According to Lorenzo Wood, president at LBi, those in the market for a new mobile phone are price-savvy and internet-literate, meaning they will look around for the best deal. Through affiliate marketing, mobile phone operators can tap into a series of websites, ranging from comparison sites and blogs to shopping directories and incentive portals.

Andrew Chung, head of the affiliate division at Twentysix, says such sites are willing to push traffic to brands for free and charge them only when a resulting sale has been made. "This, coupled with the excellent margins on cost and the return on investment, is why mobile operators invest so heavily in the affiliate channel," he says. "The cost per new customer is very competitive and targeted compared with the other online marketing channels used by phone brands."

Dan Redfearn, head of the affiliate marketing council at the IAB, says mobile phone companies have been particularly adept at managing different affiliate channels and creating bespoke approaches that match their particular strengths.

"Working closely with large cashback and voucher publishers can increase sales traffic volumes and create a real buzz around offers," he says. "Mobile companies are also skilled at using smaller affiliates such as content, comparison and search specialists to fully optimise campaigns."

To assess the robustness of mobile phone manufacturers' affiliate marketing, Revolution commissioned Alison Guise, general manager, Europe, at affiliate marketing provider Commission Junction. She evaluated, with help from publisher savoo.co.uk, the strategies of Orange and Vodafone, promoted through the Buy.at network and TradeDoubler respectively.

Both brands were rated against ten criteria, including evidence of deeplinking (linking to a specific page or product on the brand's site other than the homepage), affiliate tools and level of communication.

Vodafone emerged as the clear winner, proving impressive in areas such as commission structure, being the only mobile phone provider in the UK that pays on a completed customer application form rather than activated account. It also scored highly when it came to innovation and interaction with the industry. Gary Evans, online marketing manager at Vodafone, says affiliate marketing is a useful way to offer services to people Vodafone would otherwise struggle to reach.

"We pay by results so affiliates need to target their audience effectively," he says. "As we deal with a greater number of affiliates, it is important to ensure that what we offer remains consistent and that content is checked."

Simon Burgess, managing director of TradeDoubler UK, says it is essential to ensure deals are kept timely through data feeds. "The relationship between a brand and an affiliate is unsustainable and unprofitable without a reasonable level of briefing from the advertisers and a constant stream of quality offers," he says. "This commitment is crucial in a market as congested and competitive as mobile handsets."

Promoting voucher codes to generate sales is a technique that has gained popularity in affiliate marketing in the past year, and was another area in which Vodafone scored highly. "Mobile operators need to understand how tactical voucher codes can aid conversion when used on the right products and services," says Burgess.

Orange, meanwhile, which works with i-level on its affiliate marketing strategy, fared less well in areas such as communication, commission structure and affiliate incentives. It rated higher on its use of affiliate tools and its creative work.

The brand's affiliate manager, Stuart Kilroy, says affiliate websites have the power to educate customers and aid the buying process. The biggest challenge when using the medium is understanding the value affiliates can bring.

"It's not a one-size-fits-all approach, affiliates all do a different job; tailoring our approach to each affiliate type creates value," he says. "Our aim is to increase the value driven by affiliates so they play a larger part in the whole customer journey."

There is, however, room for improvement for both brands when it comes to communication. Twentysix's Chung says it is important to have deeper reporting that goes beyond standard sales tracking and looks into aspects such as cancellation rates from individual affiliates and the lifetime value each affiliate brings.

"Using this understanding of the quality of traffic coming from affiliates, brands can better apportion their commission to gain higher-quality sales," he says.

According to LBi's Wood, mobile operators face the challenge of their traffic converting to sales for a competitor brand.

"If one operator is remunerating more heavily than another, the affiliate may promote it harder, meaning a customer originally looking for a specific network provider may switch to a more tempting deal presented on the same affiliate site," he says.

By investing in affiliate marketing, mobile phone operators are able to trial new campaigns with few budget constraints and bring promotions to market more quickly than is possible via other channels. The growth of smartphones, however, may prompt consumers to focus more on product selection than mobile network, begging the question of whether operators can compete in this space. For now, though, purchases are driven largely by price, meaning that cashback and voucher code affiliates will play a major role in shaping affiliate marketing strategies for the foreseeable future.

AFFILIATE MARKETING PERFORMANCE

Vodafone

CREATIVE: The standard creative options are available, including deeplinking. The provision of voucher codes is very useful.
7/10

INTERACTION WITH THE INDUSTRY: It's great to be able to promote voucher codes to generate sales as customers are looking for that little extra over the standard deals available on the merchant's site.
8/10

BALANCE OF BUSINESS MODELS:Vodafone's model is fine for the voucher industry.
6/10

AFFILIATE TOOLS: Deeplinking is invaluable, along with voucher codes.
7/10

LEVELS OF COMMUNICATION: Given that most commissions track in real time, communication is not as necessary. A monthly breakdown of any sales denied and the reason would be useful, however.
6/10

COMMISSION STRUCTURE: Vodafone is the only mobile phone provider in the UK that pays on completed application, not connections. The sales-denied ratio is less than that of its competitors.
9/10

AFFILIATE INCENTIVES: The incentive to promote based on payment terms is clear.
6/10

INNOVATION: Voucher code provision and payment terms differentiate Vodafone from its competitors.
8/10

AFFILIATE SERVICE, SUCH AS RESPONSE TIMES:Communication from affiliate network on the merchant is limited.
5/10

OPENNESS:The terms and conditions are clear and real-time tracking of commission is particularly useful.
9/10

OVERALL TOTAL (analysis provided by Alison Guise, general manager, Europe, Commission Junction)
71/100

Orange

CREATIVE: There are a number of standard creative options, and deeplinking is possible.
6/10

INTERACTION WITH THE INDUSTRY: Could do with more offers to promote vouchers. The landing pages don't convert nearly as much as the codes.
4/10

BALANCE OF BUSINESS MODELS: Orange's model is also fine for the voucher industry.
6/10

AFFILIATE TOOLS: No problem with finding deals to promote via deep links.
7/10

LEVELS OF COMMUNICATION: Given that commissions are approved in-house, a monthly report detailing what was confirmed/denied/still pending, would be useful.
3/10

COMMISSION STRUCTURE: The delay and rate of denial of commission because of disapproved connections is frustrating - a lower, guaranteed commission would be much more useful.
3/10

AFFILIATE INCENTIVES:There is more incentive to work harder for Vodafone, which, unlike Orange, tracks commissions in real time.
3/10

INNOVATION:Orange does nothing particularly innovative compared to its competitors.
2/10

AFFILIATE SERVICE, SUCH AS RESPONSE TIMES: Service from the affiliate network is fine, but the delay in approving commissions on the retailer's side is frustrating.
6/10

OPENNESS: Terms and conditions are fairly clear on the programme details page, with transparent commission rates.
6/10

OVERALL TOTAL (analysis provided by Alison Guise, general manager, Europe, Commission Junction)
46/100

Summary Vodafone

Overall, Vodafone's affiliate marketing strategy emerged as more robust in its format and ability to increase customer acquisition. It has taken a more innovative approach through the provision of voucher codes to increase sales and provides deeplinking creative for affiliates. It also has a much more desirable commission structure, most of which can be tracked in real time. Additionally, the number of sales declined with Vodafone is much lower than those of its competitors, so it is clearly the more attractive option to promote. There is, however, room for improvement. When it comes to merchant and publisher communications, a monthly breakdown of sales declined and the reasons for declining these sales would be useful.

Summary Orange

Orange covers the basics well. Affiliate terms and conditions, for example, are fairly clear on the programme details page, with transparent commission rates and a useful introduction. However, the brand's affiliate marketing strategy could benefit from more voucher-based offers as landing-page deals traditionally do not convert nearly as well as voucher codes. There is room for improvement too on the communication front, given that the merchant approves commission in-house - a monthly report detailing what was confirmed, declined or still pending and the reason for any declined sale would be useful. Compared with Vodafone, there is little evidence of innovation when it comes to the affiliate channel, and Orange could certainly make gains here.

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