Why Publishers Need to Move Beyond Affiliate Marketing with Grocery and CPG Brands
Joey Petracca is the Co-Founder and COO here at Chicory, the contextual commerce advertising platform.
Affiliate marketing was widely adopted after it was first introduced, offering both brands and creators the opportunity to generate non-traditional revenue streams. In an affiliate marketing model, a company compensates third-party publishers (the affiliates) to generate traffic to the company’s products. The proliferation of social media networks, bloggers and influencers quickly turned this marketing model into a billion-dollar industry.
While affiliate marketing has proven to be a compelling alternative to traditional advertising in certain industries, it is not serving the CPG and grocery space — a fact that will become increasingly evident as digital grocery evolves. In grocery, the companies providing incentives are mostly grocery retailers, and the affiliates are mostly food, recipe and lifestyle blogs. As this relationship stands now, affiliate marketing is impeding the acceleration of grocery commerce. The small margins for retailers, low incentives for publishers and lack of involvement from brands create a self-limiting loop.
Below I detail the specific flaws of affiliate marketing, covering how the model currently impacts publishers, retailers and brands. Understanding these details will help our industry rethink its approach to digital advertising, moving toward strategies that better leverage the power of relevant content.
Low Incentives
Under the affiliate model, the commission fee is supposed to incentivize affiliates to find ways to promote the company. While the commission fees vary from retailer to retailer, they are all fairly modest, ranging anywhere between .5% to 10% per sale. Notice the term “sale.” Publishers don’t generally get compensated for views or impressions — just sales or new customers. This incentivization model does not fully capture the omnichannel shopper’s path to purchase or the power publishers have to influence it.
In the grocery industry, food blogs, websites and digital recipes are key to creating high-intent moments. According to Chicory’s Annual Recipe Usage Report, 71% use digital recipes in order to find meal inspiration. Further, shoppable recipes receive 11.8x higher engagement than the average shoppable display. This means that whether the eventual sale is made online or in-person, publishers’ content likely helped make it happen. Publishers, therefore, should be earning more given how important their role is in the buyer’s journey.
Small Margins
Retailers tend to have lower profit margins than in other sectors, ranging from .5 to 4.5%. With low-profit margins, they are limited in their ability to properly compensate publishers, leading to an incentive-less cycle. CPG brands typically have higher margins for affiliate marketing than grocery retailers, but they aren’t currently involved in the affiliate relationships.
While this benefits brands in the short term, it doesn’t help them in the long run. The lack of incentive among publishers and retailers to accelerate their marketing efforts negatively impacts brands, who could be attaining far greater reach otherwise.
Limited Scale & Power
Retailers also struggle to scale their affiliate programs in order to increase sales. While a retailer can form a direct relationship with a large publisher, it’s unlikely that they can recreate their affiliate model with the thousands of smaller food bloggers and influencers. As a result, they end up missing out on potentially millions of brand impressions and potential new customers.
For perspective, Mediavine, one of the most popular display ad networks for bloggers, represents over 9,000 sites. To be represented by Mediavine, a site must be enjoying 50,000 sessions a month. This means that these smaller publishers are collectively responsible for 450 million sessions a month — 450 million sessions that retailers and brands could be capitalizing on.
Affiliate advertising requires a substantial lift on all sides, as retailers are burdened with seeking out affiliates, and affiliates are burdened with making their sites shoppable. The tedious nature of this dynamic takes away from the power of contextual marketing.
Moving Beyond Affiliate Marketing with Contextual Commerce Advertising Technology
The CPG industry needs to move forward with an advertising model that allows for a positive network effect between retailers, publishers and brands. In this model, publishers would earn more for their high-intent content, retailers would be relieved of undue costs and brands would benefit from a larger reach. Getting there requires the wide adoption of contextual commerce advertising technology.
Contextual commerce advertising technology allows shoppers to move from inspiration to checkout in just a few clicks. Publishers who host the technology on their sites earn money for driving items to cart or featuring specific retailers. In turn, brands and retailers paying for the functionality are featured in higher-quality content on a larger scale, allowing them to focus on both the quantity and quality of new customers earned.
Chicory makes this advertising model a reality, ensuring that everyone in the CPG/grocery industry is being fairly compensated for their impact on the omnichannel shopper’s path to purchase. That’s why our team offers several products to help publishers monetize recipe content, including a new product launching this spring. The new technology will empower publishers, retailers and brands alike to maximize the power of content to drive more items to cart, and scale. Reach out at hello@chicory.co to learn more.