Whatever your view, this age-old debate no longer has to take place. Now there is a way to market your company and its services more having to spend a penny upfront. Crucially, the process only requires you to pay when you have generated some tangible and trackable results. It’s called affiliate marketing.
What is affiliate marketing?
Affiliate marketing is a pretty ghastly term but for the growing number of businesses that are turning to it, this relatively new online marketing channel is a godsend.
So how could it benefit your brokerage? There’s a misconception that affiliate marketing is complicated. In reality it’s simply a form of online advertising that is performance-based rather than paid for upfront.
So instead of paying an agency to manage your marketing budget and crossing your fingers that adverts convert into orders, you simply agree to pay an affiliate a certain amount of money every time visitors it sends to your website perform pre-agreed actions. These actions could be anything from requests for information to completing application forms or closing deals.
It works like this. Hypothetical mortgage broker F2 Mortgages agrees with an affiliate marketing agency that each time an application form is completed on its website by a visitor sent from an affiliate website, it will pay a fee of £5.
The affiliate agency then invests money in driving traffic towards the F2 website, for example by placing keyword adverts on Google. The agency is effectively gambling on the fact that it will generate enough applications to recoup its initial outlay and make a small margin on top.
The benefit of this model is that clients are able to determine the actions and fees paid to their affiliate when actions take place. It is trackable, transparent and in our example, F2 only pays for results.
Cost per action
The cost per action, or CPA, primarily depends on the action involved – specifically the degree of certainty that that it will result in a sale.
But CPA is also affected by a number of other factors including the quality of clients’ websites and the strength of their brands.
Let’s stick with F2 and consider three scenarios.
Example one – an affiliate programme for F2 is structured on a CPA basis whereby an action is deemed to be a sale. Only once a mortgage agreement has been signed and a deal done will F2 pay the affiliate for the lead it generated.
Example two – an affiliate programme for F2 is structured on a CPA basis whereby an action is deemed to be when a visitor fills in an online application form. Only once the online application form has been completed will F2 pay the affiliate for the lead it generated.
Example three – an affiliate programme for F2 is structured such that an action is deemed to be when a visitor fills in a ‘request to call’ form. Only once this form has been completed will F2 pay the affiliate for the lead.
In example one, where an action is deemed to be a sale, the CPA paid by F2 would be the highest of the three examples as all risk is shouldered by the affiliate. After all, there is every chance a sale could fall by the wayside during the process and the affiliate will get paid nothing despite having sent the traffic – and potential new clients – to F2’s website.
Example one is also more expensive because so-called dotted line deals such as phone calls, meetings and other types of post-application activities are harder for the affiliate to track than clicking on F2’s website and registering the completion of an online form.
In example two, the CPA paid by F2 for the completion of an online application form would be less as it is not certain that this action by prospective clients will result in sales.
In other words, because F2 is taking on a degree of risk and the affiliate is getting paid irrespective of whether a mortgage deal takes place, the affiliate gets paid less.
In example three, the CPA will be lower still as there is even less certainty that this action will result in sales than the completion of online application forms, which is more detailed and shows a greater degree of commitment on behalf of prospective clients.
In simple terms, the amount F2 pays for actions is closely tied to the level of risk it is prepared to take on. The less risk it is exposed to, the more it will pay and vice versa.
Other drivers of cost
But it is not just the definition of what constitutes an action that determines its cost.
How much brokers pay an affiliate for pre-agreed actions will also be influenced by the quality and usability of their websites, the historic conversion rate of enquiries and the strength of their brands.
The weaker these factors are, the more money the affiliate marketing agency will have to invest in generating traffic to prompt the desired actions.
Conversely, strongly branded websites that already receive robust levels of traffic, require little integration and support and make the application process effortless should benefit from lower CPAs.
But in both cases – and this is the important bit – brokers only pay for results. In a market as treacherous as the present one, that’s priceless.