Channel Overview

Performance Marketing Channel Overview

While most marketers are literate on the general dynamics of each channel, let’s get in depth on the fit, advantages & disadvantages, trends, and best practices for each of them.

We’re going to cover the following:

Referral Channels

Directed High Intent Channels

Discovery Channels

Referral Channels

Affiliates and Incentivized Referral Programs are typically lower effort to set-up and manage and lower financial / cash risk, but typically lower impact.

Affiliate

Summary: Well-suited for high margin products and e-commerce businesses that can benefit from an army of third party marketers pitching your product.Channel Dynamics: Tension between “productive” affiliates that appear effective, but are in fact delivering little incremental value and may be harmful to your brand.  Examples:

  • Coupon sites in general
  • SlickDeals and Zappos
Fit: Ecommerce, categories with lots of category-specific blogs and content sites.

 

Advantages

  • Relatively easy to stand up, but it takes time to get going if you want quality. Similar to BD, you likely will not see significant impact for at least 6 months.  
  • Access to an army of entrepreneurs marketing your business.
  • Learn from 3rd party efforts and replicate internally what works.
  • Usually positive ROI from the start since performance based and company sets the CPA so no surprises.
  • Can create significant brand halo effect if content is leveraged – combines performance marketing with PR, influencer, etc.
  • Available technologies allow you to vary what you promote to partners based on an array of factors: quality, new vs. returning, full price vs. coupon, order value, type of affiliate, etc.
  • When done right, programs often mature into one of the lowest CPA acquisition channels.

 

Disadvantages

  • Requires strong margins to share with partners.
  • Networks and affiliates vary greatly in quality. Be wary of shady affiliate gaming where paying for low quality customers is common. Requires constant policing of your brand.
  • Need to “sell” your offer to affiliates so they pick it up.
  • Affiliates optimize for short term revenue. Be careful how you structure the deals (especially the action that triggers a payout).
  • This channel carries risk since you are licensing your brand to a lot of partners. If you don’t pay attention, you can get burned.

Trends

  • The affiliate supply chain is becoming more specialized, especially as management tools can be separate from the distribution network.
  • Technologies and management services are bifurcating, and smart brands are moving away from “one stop shopping.” This makes things more complicated, but leads to better results.
  • Mid- and long-tail influencers are moving into affiliate programs, as are magazines, media companies, organizations like AARP, etc.
  • Technologies like “Skimlinks” are automating the creation of any and all links into affiliate links, including links that are typically thought of as “earned media.”

Best Practices

  • High quality affiliate management firms like Acceleration Partners now protect your brand, reduce/eliminate gaming and execute affiliate recruitment on your behalf.
  • Work only with transparent networks that provide full visibility into the affiliates and metrics (e.g. Commission Junction and ShareASale).
  • The best programs will require internal resourcing and support. This does not require a FTE, but does need to be monitored. When programs are outsourced and left on an island they can lose connection to the brand.
  • You should leverage the affiliate channel after you have a good idea of what creative (and messaging) works or does not work.
  • Robust and successful affiliate programs typically get 5-10% of total revenue or acquisition within 6-12 months.

Channel Metrics

  • Revenue per affiliate
  • Affiliate concentration percentage
  • Return On Ad Spend
  • Return on full investment in program

Refer-A-Friend

Summary: Great source of leads from your best ambassadors and advocates: existing customersChannel Dynamics: Tension between driving impact from the program via highly visible CTAs on the site and cluttering the overall site experienceFit: Typically consumer products and services that users love and lend themselves to sharing.

 

Advantages

  • Easy to setup via existing platforms such as FriendBuy, Extole, Social Annex, Talkable, etc.
  • Referrals from friends are trusted and convert well.
  • Often delivers the highest LTV of any marketing channel, particularly in the early years.  
  • Effective programs can scale quickly.

Disadvantages

  • Need an installed, passionate user base.
  • More complex sharing mechanics and rewards require product and/or development support.
  • Not all products are “sexy/sharable” (enterprise, consumer utility products).
  • Performance slows dramatically after a few years (early, very committed customers have no one left to share with, and newer, less invested customers are far less likely to share).
  • Fraud/misuse/abuse is common. (Fraud management is one of the main benefits of 3rd party platforms).

Trends

  • This channel has become popular, but consumers are wary of high dollar offers from companies where they have little loyalty.
  • Companies increasingly focus on product virality, which is free.

Best Practices

  • Check social channels for early interest in your product.
  • Identify your best customers and see if they will share it for free or little reward.

Channel Metrics

  • Number of users who share
  • Conversion rates
  • LTV for new users
  • Total shares

Directed High-Intent Channels: Paid Search and SEO

These are relatively mature marketing channels (almost 2 decades old) that are intensely competitive but scale immensely. Google is dominant force in US and western Europe, and it is Google alone that serves as a heightened microcosm of the competitive dynamics in your space.

Directed High-intent Channels are suited to situations when your offering addresses a want or need that the consumer knows they have. SEO/PPC are less effective for discovery of new services, products and concepts.

Paid Search

Summary: Enormous scale and measurability for products and services people know about and are searching for.Channel Dynamics: Balance between complexity and intense competition on one hand and massive scale and high conversion rates on the other.

Google rewards relevancy and high-quality experiences (and penalizes the absence of these).

Fit: Known product/category (directed search).

  • Works for head term focused businesses (selling branded products) and long-tail businesses (searches string together multiple keywords). Example: Zappos exists to “harvest the intent” that branded manufacturers generate.
  • Much more scale when product margin is substantial.

Advantages

  • Massive scale.
  • Unmatched for capturing specific intent at bottom of the funnel.
  • Usually steady flow of interest (“fishing in a stream” vs. “fishing in a pond” where demand gets exhausted).
  • Well-suited for testing messaging and landing experiences.
  • Mature ecosystem (tools, platforms, vendors).
  • Continued innovation on ad products from Google.

Disadvantages

  • Expensive and competitive. There needs to be room in the market for the product and the product should be known.
  • Difficult to target specific demographics and sub-segments of the market:
    • Example: One Kings Lane could not bid on generic terms like “coffee table” that weren’t specific to their target audience, but could bid on “cashmere throws.”
    • Landscape changes frequently (typically to benefit Google).
    • Google has started surfacing their own content (e.g. travel aggregator).
    • User transition to mobile means fewer immediate purchases as SEM is typically not great for app installs.

Trends

  • Google continues to favor paid over SEO.
  • Google continues to shift to mobile.
  • Google has a virtual monopoly (Google has 64%, Bing 21%, other engines make up remaining 15%).
  • Structurally designed to increase competition and drive up Cost Per Clicks (“CPCs”).

Best Practices

  • Know and maintain your quality score: match between search term, copy and landing page (landing pages should also be relevant and load in a timely manner).
  • “Sculpt” your campaign: know searches well, develop negative keyword lists to limit non-relevant clicks.
  • Pay close attention to bidding and budget strategy.
  • Obsessive monitoring: things can change quickly, e.g.,“runaway keywords”.
  • Utilize robust, free analytics to optimize at granular level.
  • Seasonality allows for a reduction in spend that allows for maintenance of top-line metrics (CPCs, Cost per Conversion, etc.).

Channel Metrics

  • KPIs
    • CPC
    • CTR
    • ROAS
    • CPA
    • Other
      • Quality Score
      • Position

SEO

Summary: Requires a complex combination of technology, backend tactics and a thoughtful content strategy. When done well, it can become the pillar of your growth strategy.Channel Dynamics

  • Trying to “game” Google will fail as a long-term strategy.
  • Focus on deeply understanding the guidelines that Google shares and create genuinely outstanding customer content and experiences.
  • Three foundational areas of focus:
    • Build your pages and site structure to be optimized for Google crawlers from a technical perspective
    • Develop a unique content strategy that enables the development of a very large volume of high quality original content.
    • Secure as many backlinks as possible from reputable and important third parties (Google puts a premium on .gov and .edu domains) via outreach, social activity and other 3rd party engagement
Fit

  • The more breadth and range (of product or content), the more effective.
  • Good for low margin businesses that don’t support paid clicks (Etsy, Thumbtack – low margin, but great breadth/range).

Advantages

  • Enormous potential scale.
  • Meaningful upfront investment, but low incremental cost when done well and scaling.

Disadvantages

  • Intensely competitive.
  • Brand impression or recall of SEO visit can often be weak.
  • SEO results can take a substantial amount of time.
  • Lacks fine controls offered by other channels.
  • Requires large cross-departmental effort (tech and content teams needs to be highly aligned).
  • Google algorithms change frequently and unpredictably, which can have a great impact on your results.
  • Violating their policies can result in decreased rankings, which are very difficult (impossible) to correct quickly.

Trends

  • Google increasingly crowding out organic for paid (particularly on mobile).
  • Google favoring own content presentation vs 3rd party sites.

Best Practices

  • High degree of executive sponsorship required (need tech resources, org commitment – and lots of patience as the results take time).
  • Before making a major investment, investigate your category to understand the competitive dynamics (many categories like travel have already been “won” by a small number of brands – minimal chance for newer players to break through).
  • Before making a major investment, you need to have some line of of sight to a potential “winning” content/landing page strategy (unique and original at very high degrees of scale).
  • Success usually involves third parties to provide and/or produce the content: consumer created/supplied, skilled freelancers, offshore created.
  • Needs active management.
  • Consider hosting marketing and other content pages on an SEO-optimized publishing platform.

Channel Metrics

  • Quality and quantity of inbound links
  • Domain authority
  • Quality and quantity of indexed pages
  • Organic impressions
  • SERP position
  • Queries

Discovery Channels: Paid Social, Other Social, Display, Performance Content & Email

Paid Social

Summary: Paid social is mostly Facebook, which has been called “the most advanced advertising system ever created” due to its unprecedented targeting and unmatched visibility into cross-device behavior.Channel Dynamics: Highly competitive and increasingly crowded, winning on Facebook requires staying ahead of the innovation curve.Fit

  • Most consumer businesses.
  • Discovery of novel solutions/new consumer services. Example: MileIQ

 

Advantages

  • Unparalleled targeting.
  • Scale.
  • Global reach (minus China).
  • An innovation machine, which makes it a good bet for both today and tomorrow.
  • Targeting, tracking and reporting cross-device.
  • Well-built for testing and rewards ongoing experimentation.
  • Outstanding for driving app installs.
  • Data-rich like SEM and a visual canvas for storytelling.

Disadvantages

  • Limited intent signal (compared to search).
  • Not as good for immediate purchases (better for leads, trials and low-consideration purchases).
  • CPCs continue to rise as marketers with increasing spend invest further.
  • More unpredictable than Paid Search (Facebook’s algorithm fights “stale” so you always have to evolve your tactics).
  • Increasing favoring of video will cause creative costs to rise.
  • Nature of demand is like fishing in a pond.
    • Ultimately, aggressive fishing will cause “catch” to decline (temporarily).
    • “Bait” also needs to be regularly refreshed to keep the fish interested.
    • You have to be regularly seeking out new “ponds.”

Trends

  • Highly visual and increasingly favoring video.
  • Vast majority of FB impressions are on mobile (80%+).

Best Practices

  • Decide on acquisition vs retargeting/staying top of mind.
  • Define audience in a way that lets you find them via Facebook’s targeting (examples: Zip codes as proxy for affluence).
  • Leverage “lookalike” audiences that match your best customers.
  • Given targeting, you can quickly tap out a segment, thus will need to continually find “new ponds” to go after.
  • Define and prioritize your creative strategy.
    • Options:
      • Classic static ads with CTA
      • Video
      • Promoted content as “soft sell” to drive engagement and/or lead gen
      • Refreshed creative.

Channel Metrics

  • Cross-device behavior and purchases
  • Ad relevancy
  • Engagement measures:
    • Shares
    • Comments
    • Likes

Other Paid Social

Mostly Twitter, Pinterest, Snapchat, etc.

  • Even collectively, scale is still significantly smaller than Facebook.
  • Tools and overall platform sophistication lag substantially behind Facebook.
  • Worth exploring, particularly if one of these has a strong fit with your target audience (ad platforms/options are improving), but should usually be secondary to Facebook.

Display

Summary: Channels include social, web and in-app and, which have been revived by retargeting approaches but remains notoriously ineffective for direct acquisition (with limited exceptions). Inventory accessed in two main ways:

  • DSP or Ad Network (like Google Display Network)
  • Directly from highly relevant publishers.
Channel Dynamics

  • Retargeting typically “works” in terms of cost-effectiveness, but be mindful of customers feeling “stalked” by excessive impressions.
  • Critical to measure incrementality so you are not double-counting conversions with other supporting channels.
Fit

  • Display retargeting works for both low and high consideration, as it serves as a reminder for uncertain or distracted consumers.
  • Display for acquisition is typically much more challenging but can work as a performance channel for leads (email capture) and low consideration purchases.

Advantages

  • Inexpensive inventory to drive purchases.
  • Builds on other investments in site traffic.
  • Scale can be meaningful: high single digit percentage of revenue is common for retargeting, but there’s always a ceiling since retargeting traffic is a direct function of overall site traffic.

Disadvantages

  • Beware excessive impression frequency complaints from consumers.
  • Difficult to work for direct acquisition because of insufficient intent signal.
  • Exceptions:
    • Lead capture followed by email nurture to drive purchase later
    • Low consideration purchases can also work.

Trends

  • Vendor consolidation in re-targeting industry.
  • Aggressive use becoming less effective.
  • New forms: gmail sponsored promotions.

Best Practices

  • Never credit “view-through” conversions without first running a hold-out study to understand incrementality (and be skeptical of vendor pitches on the value of “view through” conversions).
  • Longer tail with large catalogs work when you can deliver personalized recommendations in the ad unit.
  • Lead capture/driving “shallow” and low consideration conversions.
  • 3rd-party vendors vs in-house:
    • Vendors are sophisticated and can get you up and running quickly but also charge a significant premium.
    • Self-serve tools from GDN and Facebook are well-designed and much cheaper than 3rd-party vendors but require significant expertise.

Channel Metrics

  • KPIs
    • Impressions
    • CPC
    • Cost Per Conversion
    • ROI/ROAS

Other

  • Lift from exposed vs control
  • Relationship to searches for your brand on SEM (PPC a position often increase with active display campaigns).

Performance Content Marketing

Summary: Rapidly growing, increasingly important for both B2C and B2B businesses as purchasers are more informed than ever and want to make smarter, fact based purchasing decisions (“Content is the new creative”).Channel Dynamics: Increasingly important new channel with meaningful scale to drive high quality, and fairly inexpensive, engagement and traffic, but monetizing that traffic can be challenging and attribution subtle.Fit

  • Mass-market impulse purchases (apparel).
  • Consumer – works particularly well with highly visual products and services.
  • New concepts / categories that need explanation and education. For instance:
    • Home delivery of pre-prepared meal kits
    • Online interior design
  • Retargeting for high consideration and high value purchases.

Advantages

  • Ad units work on mobile.
  • Content provides credibility and differentiation in a noisy ad/media world.
  • Powerful vehicle for brand storytelling.
  • Effective across the lifecycle (acquiring, engaging).
  • Highly engaging content can result in inexpensive traffic and positive ROI.

Disadvantages

  • Lots of iteration needed to make work for direct response.
  • Takes investment and management to create, need brand and messaging foundation.
  • If content is low quality or off-message, can hurt brand and be ineffective.
  • Results take time.

Trends

  • Rapidly evolving space with vendors innovating constantly.
  • Consumers increasingly respond less to interruption marketing, and more to engaging and educational content (that happens to tell a brand story).
  • Distribution network algorithms can change frequently (e.g. news recently de-emphasized in Facebook).

Best Practices

  • Needs to be high quality and aligned with brand/messaging.
  • “Highly targeted” distribution greatly increases likelihood of the channel working.
  • Non-obnoxious lead gen (e.g. email capture) on landing pages.

Channel Metrics

  • Need low CPCs in paid because value per visit is low (top of funnel).
  • Ratio of CPCs to economic value attributable to visit.

Email

Summary: While not at the cutting-edge of new approaches to marketing, the scale of email can be substantial and the economics can be very compelling.Channel Dynamics: Focus should be on establishing a long-term relationship with your audience:

  • How can your email be helpful and useful to your customers.
  • Regular tips to improve the slice of life associated with your category is almost always a good approach.
  • Triggers and alerts, done with a genuine desire to be helpful, can also create real impact.
  • Broad goal is to stay top-of-mind with your audience.
  • Occasional/strategic offers are okay but they should not be the primary focus.

 

Vendors

  • Beware those that have been acquired by the behemoths. Service levels tend to be poor and technology is often outdated.
  • Fortunately, there are many independent email technology providers out there that do a good job.
  • No solution is perfect so define the critical must-haves and select vendor based on those.
  • Maybe frame up 4 tiers of ESP solutions
    • Heavy Duty
      • Need: Extremely large send volumes (+10M file size), delivery time precision essential, very high degrees of personalization
      • Example: ExactTarget
  • Mid-Tier
    • Need: Moderate large volumes (+1M file size), delivery time precision somewhat important, some degrees of personalization
    • Example: SilverPop
  • Lower Tier
    • Need: Relatively low send volumes (less than 1M file size), delivery time precision not essential, little to no personalization
    • Example: Mailchimp