Proving incrementality has been at the forefront of affiliate marketing discourse for over a decade. Is this a case of an industry chasing its proverbial tail?

AM 2.0 #8 Are We Ever Going to Catch Our Tail?

I’m not sure if we’ll ever catch our tail, but finding one of ten coupon partners is incremental feels like a client win… doesn’t it?

Hey y’all 👋

In the previous issue, I discussed opportunities for more vertical integration in affiliate marketing strategies, offering ideas for self-generating traffic and owning content distribution. 

In today’s issue, all eyes are on incrementality 👀

The question I’m posing is, is it incrementally worth investing time in the study of incrementality in affiliate marketing?

Like, if we didn’t have to include it in a sales pitch to ease brands’ anxiety…

What is Incrementality?

At its core, incrementality is about value generation.

Do my affiliate marketing efforts produce more or less value for a brand?

If my efforts yield more value, then that is incremental.

If they yield less value, that is not incremental.

This usually means profit in the short or long term.

What Counts as Incremental Value?

Trying to “quantify” incrementality is challenging because it means different things depending on who you ask.

Rakuten’s ebook on incrementality offers key questions to answer to better “define” incrementality.

Does anyone else’s head hurt? Just mine?

Essentially, incrementality has a “flexible” definition that can refer to generating more new customers, a higher AOV, reactivating customers, or profit, among other things.

The only concrete observations that can be made about quantifying incrementality would be something like:

• It generally refers to more profit being made in the short-term or long-term

• A brand can define incrementality in a way that suits them

• Standard metrics used to measure incrementality are gross revenue, net revenue, AOV, new customers, and conversion rate

Why is Incrementality Important?

Value Added

Incrementality is important because brands want affiliate marketing to add value to their marketing efforts from a channel, program, partner, and campaign perspective.

This means that all levels of an affiliate program, from a channel to an individual campaign perspective, should be incremental and bring added value to a brand’s marketing mix.

Value Detracted

Brands are looking to avoid value detraction, which would mean cannibalization of profits.

Cannibalization would occur when brands pay affiliates commissions on non-incremental sales, which would have happened without the affiliate’s involvement.

Incrementality isn’t Fundamental to Affiliate Marketing

Here’s the kicker.

If, by definition, all forms of affiliate marketing were incremental, there wouldn't be a need to study incrementality.

However, because some affiliate marketing activities result in cannibalization and non-incremental sales, it is important to distinguish between incremental and non-incremental sales.

This point will be expanded on later.

Challenges to Measurement

With such a “flexible” definition, it makes sense that measurement could also be challenging.

A few obstacles to measuring incrementality are:

• Difficulties in creating a control group for holdout testing

  • Getting affiliates to “shut off” their traffic and lose sales

• Attribution Complexity

  • Last click versus multi-touch

  • Understanding various affiliate touchpoints for a transaction (to measure incremental influence)

• Conversion windows

  • May not capture all of an affiliate’s traffic or sales

• Device-switching and cross-browser activity

  • Consumer purchases may not be tracked cross-browser and cross-device

• Overlapping marketing efforts

  • Understanding influence independent of paid search, social, email, and other marketing channels is difficult

Incrementality Studies and Resources

The study of incrementality has been a core focus of the affiliate industry for over a decade, with affiliate networks like CJ, Rakuten, and Impact leading the charge.

Commission Junction

CJU19 (Sept 2018)

At CJU19, when I was just a fledgling affiliate marketer, Commission Junction unveiled the results of an incrementality study conducted in September 2018.

CJ performed a holdout test with over 20 million shoppers, where the “test group” made an affiliate click, but the control group did not.

According to the study, affiliate consumers had:

• 29% higher AOV

• 46% improvement in conversion rate

According to CJ, these results were the most definitive “proof” of the affiliate channel's incrementality.

Let’s dig a little deeper.

One has to commend the good people at CJ for putting in the time and resources to put together a study like this.

CJ was the first to conduct a study at this scale to help validate the affiliate industry.

Bravo 👏🏼

However, this study seems to have been conducted by corporate leadership or a data science team rather than expert-level affiliate marketers. 

What This Study Doesn’t Tell Us

Affiliates, Who?

Any affiliate manager or agency rep should know that affiliates come in all shapes, sizes, and possible levels of incrementality.

There’s a huge difference between a cashback partner, an email retargeting partner, a mom Facebook group, and Forbes.

They can represent all different points in the “funnel” when using that terminology.

Yet, they all still count as “affiliates.”

This study doesn’t reveal the affiliate program's individual affiliates, partner types, or partner mix.

This can distort things quite a bit.

What if there were exclusive cashback or coupon offers the “test group” saw that the control group didn't?

Are cashback and coupon shoppers more likely to convert than shoppers who don’t use coupon or cashback sites?

You get the point.

Funnel Location

We don’t know where the affiliates sat in the marketing funnel because that wasn’t disclosed.

In a scenario with many lower-funnel partners (coupons, cashback, retargeting), it would make sense that the test group converted better than the control group (people who had visited the site) because those consumers were much further down the funnel and closer to purchase.

A coupon affiliate click and a website visit are distant points in most consumer purchase journeys.

How Affiliate Affects Net New Consumers

I believe most brands engage with affiliate marketing to acquire incremental net new customers they couldn’t previously access.

In the CJ study, consumers in the control and test groups had either visited the brand website or engaged with an affiliate click, which signals purchase intent.

Because the population was made of consumers post-website visit or post-affiliate-click, it’s tough to tell how affiliate influences net new users.

That information is not available in the results.

Incrementality Study Takeaways

This study lacks key details, not least of which is the information about the affiliate partners involved.

Based on the info provided, I do not see this study as conclusive proof of incrementality.

I also think it misses the point for most brands. Does affiliate marketing help brands acquire new customers that couldn’t have been acquired through other channels?

Chasing Incrementality’s Tail

There is inconsequential evidence that the affiliate channel is “incremental,” at least in the way most brands want it to be.

I might add that because the definition of incrementality is always flexible (AOV, CVR, revenue, profit?) and because the composition of affiliate programs changes (loyalty, coupon, blog, subnetwork, tech, etc.), it’s almost impossible to create a unifying measure or standard of incrementality. 

In some ways, incrementality doesn’t mean much at all, at least in a broadly defined sense.

So then, why has it been so central to affiliate marketing thought for so long?

The Existential Search for Meaning

The core question behind the study and the need to prove incrementality is:

The study of Incrementality is an existential search for meaning in the affiliate marketing industry.

Or at least the traditional model of affiliate marketing practice.

However, the industry would only question its incremental value if it provided and cannibalized value.

We don’t need to study if babies are born or not.

Babies are born.

End of.

The Coupon Conundrum

Let’s take, for instance, coupon partners.

In my experience, most brands are anti-coupon affiliates, but some aren’t.

Also, who knows, specific coupon partners could bring incremental value to a brand or affiliate program.

One would suspect most do not because where coupon partners sit in a buyer’s journey - right at the last freaking second.

Let’s say some coupon partners are incremental and some aren’t.

You have ten active coupon partners in an affiliate program.

If 50% are incremental and 50% aren’t, that’s five active incremental coupon partners. 🎉

That’s also 50% who aren’t… 😭

A few questions:

• How long did it take you to identify your five incremental coupon partners?

• How many transactions and over what period were these non-incremental coupon partners active?

• How regularly do you run incrementality tests?

• How much actual revenue lift did these incremental coupon partners bring?

One would suspect that running incrementality tests regularly on a subset of affiliate partners is infrequent in a busy working environment.

How many incrementality studies has the entire “industry” published over the last twenty years?

Two?

Full Funnel Risk

In general, the closer an affiliate touchpoint is to the time of purchase, the higher the risk that the sale will represent cannibalization.

This is primarily because consumers likely already have purchase intent further down the funnel and are likelier to have interacted with several other marketing channels by then.

Therefore, your affiliates who operate down the funnel in the form of coupons, retargeting, and cashback have the highest chance of cannibalization.

Again, that doesn’t mean they aren’t incremental; they have the highest chance of not being incremental.

Any program with a “full-funnel” approach to affiliate marketing opens itself up to cannibalization.

When you operate “full-funnel,” you hop on the incrementality merry-go-round.

Eliminate the Lower Funnel

If lower-funnel affiliate partners represent the highest chance of cannibalization, eliminating the lower funnel gives a program a better chance of incrementality.

Even if there are incremental partners in the lower funnel, for every incremental partner, there are one or two that aren’t.

By the time you identify the incremental partners, you’ve likely already cannibalized.

Isolating Mid-funnel

With my (Imagine Marketing) clients, we focus almost exclusively on mid-funnel partners (SEO & SEM).

We think from mid-funnel ——> out.

Our approach to business development, product categories, etc, is based on mid-funnel market research.

We ask, “Is there a fair amount of consideration for these products?”

If so, the mid-funnel should be “hot.”

It should be an active mid-funnel with lots of research, third-party presence, and affiliates.

Those are the brands (clients) best suited toward affiliate marketing.

At least, in my opinion.

Closing Thoughts

The jury is still out on the incrementality of the affiliate practice, especially with a full-funnel approach.

Though previous incrementality studies have been well-intentioned, key information was not provided, such as which affiliate partners or partner types the study included.

Additionally, incrementality has such a fluid definition that it’s almost impossible to define.

Since the clarity on incrementality is hard to determine in the lower funnel, it might be best to avoid it altogether.

That is my recommendation ✌🏻