How Affiliate Marketing Can Future-Proof Your Retail Business

As inflation soars and supply chains experience ongoing disruption, it's almost inevitable that retailers are increasingly scrutinizing their marketing budgets. It can be tempting for companies to shrink marketing spend when faced with economic downturn, as they focus on short-term profit and sales channels instead. But you know the old saying, “Those who don’t learn from history are doomed to repeat it.”

After the Great Depression, The Harvard Business Review researched how companies fared during and after the historic recession, tracking ad spending compared with company revenues from 1920-1924. The findings showed the businesses that reduced marketing budgets in exchange for short-term profits saw no benefit long term. The study also found companies that maintained marketing spend through the downturn grew revenues exponentially faster than those that did not.

Looking at the current U.S. financial landscape, companies are now becoming more risk averse and tightening budgets across departments. This is increasingly the reality for businesses of all sizes, from brick-and-mortar retailers to corporate behemoths. So how can retailers successfully fuel return on investment and keep innovating during an economic downturn? There’s no one-size-fits-all solution, but there are proven sales and marketing tactics that deliver strong return on ad spend and growth even in a volatile economy.

Enter affiliate marketing, sometimes referred to as performance partnerships. Affiliate marketing is a performance-based model, meaning you only pay for the results you want — whether that’s a sale or a lead. Offering retailers a 12:1 ROI, this performance-based model is incredibly cost effective during an economic crisis.

Pay-for-Performance Model Maximizes Budget

Many Fortune 500 companies are able to spend their way through a challenging market, while the majority of smaller retailers are not. One of the major benefits of a pay-for-performance model is that it’s controllable and scalable for companies of all sizes.

Businesses with reduced marketing budgets can experiment with their marketing mix in a cost-efficient environment, optimizing sales tactics like promotions, referral programs and membership perks. The ability to A/B test creative and identify the most effective ads means that no dollar is wasted.

Simply put, the approach maximizes marketing budgets and drives sustainable growth.

Connects You to Customers at All Stages of the Purchase Funnel

During the pandemic, brick-and-mortar foot traffic all but came to a halt while e-commerce soared. According to IBM's U.S. Retail Index, the pandemic accelerated the growth of digital by five years.

This leap in online shopping emphasized the huge range of digital touchpoints customers can interact with brands in. With affiliate marketing, retailers can partner with a variety of digital revenue drivers across the pre-purchase phase through to the post-purchase phase — from coupon and cashback sites to on-site optimization technology and artificial intelligence chatbot algorithms — to scale marketing efforts to drive more online sales and revenue.

Customer Experience at the Forefront

The Consumer Price Index (CPI) is at a two-decade high with a 9.1 percent year-over-year increase. While economists speculate inflation is near its peak, shoppers are still very mindful of their budgets. The pandemic, paired with record-breaking inflation, has fundamentally changed consumer shopping behaviors and mindsets.

With affiliate marketing, consumers can engage with what they're interested in. That’s because affiliate marketing goes beyond traditional display advertising to promote your business across different mass media houses, influencer channels, cashback portals and coupon sites, meeting your customers where they shop.

The bottom line: affiliate marketing opens up a new revenue stream within your existing marketing budget, inflation or no inflation. Recession or no recession. The performance-based model maximizes every dollar spent at a 12:1 ROI and engages prospective customers on their terms, which is increasingly important in turbulent times.

Alexandra Forsch is president of leading affiliate marketing platform Awin.