Affiliate Marketing in a Recession or Economic Downturn

[00:00:49] Jamie Birch: Hey, everyone. Welcome to the Profitable Performance Marketing podcast. I am your host, Jamie Birch, and CEO and Founder of JEBCommerce, the award-winning affiliate management agency.

We are actually celebrating 18 years in business. Probably by the time you’re listening to this, that this goes live, we are actually in our 19th year. We started in October in 2004. I’m recording this in August, the last day in August. So 18 years running this agency, I tell you what. I’ve learned a ton. Boy, we’ve been through a lot. That’s kind of what we’re going to talk about.

Today, we’re going to talk about the affiliate channel and how it performs, why it should be an important element of your marketing channel during economic downturns or crisis and those types of things. Before we get started, though, I want to share with you a resource that we have available. So we have a course on […] the affiliate marketing strategies to survive and thrive in the current climate. It is an e-book that you can download. Just go to jebcommerce.com/strategies, and that is our e-book on surviving and thriving in the current climate.

Now, I recorded this or I created that document, that resource for you, in the first year of the pandemic. But a lot of those concepts we talked about are tried and true and really relate to anytime there is fluctuation and uncertainty in the economy. So go to jebcommerce.com/strategies, and you will find that resource there for you.

I took some notes today. I was thinking about this. We had some conversations with our staff and some clients of … is affiliate marketing – Is it more important? Is it important? How does it relate to this economic time? Are we entering a downturn? Who really knows? I’ll tell you what. We have that argument here amongst our staff. Our director of affiliate marketing is in the know. We’re not having one sort of camp.

When we go out and we do some shopping or go out to eat, all the restaurants are packed and busy. The shopping malls seem to be really packed. So there are some signs that maybe we’re not going into a downturn, but we also have two quarters of negative economic growth in this country, and that is kind of the definition of a recession. So are we in a downturn? Are we not? I don’t really know. I know, there’s a lot of layoffs happening, and it’s going beyond the tech sector right now, seeing a lot of the same things we saw in the beginning of the pandemic on LinkedIn and also other recessions that I’ve been through.

But I’ve learned a lot through those recessions. I’ve gone through at least two. We had the Great Recession. We had 9/11. That created some economic turbulence. We had the pandemic that we’ve managed to get through and just a multitude of other events that have impacted our world, has impacted consumer behavior, and has impacted affiliate marketing, and can adapt. So let’s talk some basics.

As I said, we’ve had two quarters of negative growth. Many people think that’s just the beginning. So let’s assume they’re right. Why is your affiliate marketing channel important? So I have a couple of different reasons. One is security. Now, in turbulence, for anything, let alone just business, but anytime there’s turbulence, people are looking for strong footing and security. Affiliate marketing can provide that, in that you only incur the cost after you incur the revenue.

So a lot of brands will shift their budget. One of the really cool things about affiliate marketing is those affiliates are doing everything every brand is doing to gain traction, display, email, search. Affiliates are often involved, have their own affiliates as well. So they’re doing everything out there to gain traction as well. So you get access to all those areas.

So if you have limited budget, or your company is experiencing layoffs, or they’re reorganizing to just kind of weather an upcoming storm, you may see that your budgets are dwindling and changing. So what do you do there with that security that the affiliate program provides? Because the very nature of it is a user comes through an affiliate link, they make a purchase, you realize the revenue, and then you realize the cost.

Because you realize that revenue first, you are ensured that your cost is directly tied to an order, and you have the revenue. Instead of other channels, where you may have a good idea of how many of those dollars spent will bring dollars back home, you don’t really know for sure. Changing economic climates, changing consumer behavior, it’s one thing we really saw happen quite often during the pandemic is consumer behavior change multiple times in multiple different ways.

Because you’re only paying for sales that actually happen, you’re able to be really pinpoint and laser-targeted with your spend, and a lot of people shift their budgets. A lot of brands shift their budgets from those channels, where they may have a good idea of what the ROI they’re going to get or the ROAS they’re going to achieve to the affiliate channel, where they know the ROAS and the ROI, the return they’re going to get. So there’s a security in the channel, and that sale happens, and then the cost is incurred. That’s one security.

Flexibility is the second thing that’s most important and why the affiliate channel is really, really important to a health – Helping a brand weather storms. Your affiliates, they’re constantly stretching, innovating, flexing, and pivoting to reach new markets and acquire new customers. You literally have thousands of shots of getting it right and finding new markets and adjusting. These affiliates, you have all these partners out there. They are directly working with not only your audience and your ideal consumer, but so many others. So they get to see what the market is doing.

These innovators, these entrepreneurs, they’re out there doing everything they can to continue to, one, feed their family, grow their business, find those audiences, that target market that you’re looking for. That provides a lot of ability for you to adjust, for you to learn from them, and to continue to chase that consumer behavior with the right product at the right time. So flexibility is a really big reason why the affiliate marketing channel is important during a recession and economic downturn.

The next is investment flexibility. So many of us saw, many of you saw companies that did really well during the pandemic, huge increase in their demand. Honestly, they kind of planned like that was going to continue forever. Like they almost didn’t even think about what happened when things opened up. Things got back to relative normal. People started getting back to the gym and being able to go back into the office. Because they didn’t take that into account, they really are suffering pain because of that growth and not planning for it.

But affiliates allow you to ebb and flow with demand. It’s the very nature of what it does because that cost increases at the time of the revenue increases. When consumer behavior shifts, your costs also shift. So you’re able to remain nimble with your cost structure. Like I said in flexibility and security, you’re able to pinpoint your budget and move more readily.

One thing that not a lot of people talk about is float. So we talked about security, flexibility, investment flexibility, and float. So not a lot of people really talk about this. But in times of crisis, and this doesn’t matter if you’re a five-person company, a one-person company, or a 10,000-person company, cash flow is king. It always is king, and this is an area people don’t talk about. The cash flow, it’s a major thing in a downturn. If you can contain or continue to have a positive cash flow, that can allow you to weather the storm, build your runway, extend your runway because you have positive cash flow.

So how does float help that? Well, the general nature of how affiliate marketing works, you have an affiliate partner. They send you traffic. That consumer makes a decision to purchase. They purchase. You receive the revenue. You incur a cost to that. Most affiliate networks, those sales and the costs associated with those sales build up for the month. At the end of the month, you receive an invoice, and then you have 30 days to pay.

In some instances, you may have 60 to 90 days between when you had that, when that cost occurred, and when the cost is due. So that float can really help people in their cash flow, and that’s something a lot of people don’t talk about. But you don’t really have that in the other channels because you’re pre-loading the budget. So if your search spend got cut dramatically, well, you may want to augment that with an affiliate that specializes in search. You can utilize the float, extend your budget, and ensure that you’re getting a positive return, which security is so big during times of tumult.

So we got security, flexibility, investment flexibility, float. Now, profit and margin. It’s super easy to know what’s working in your program, and adjust for profit and margin on the fly, and promote products that consumers are adjusting to. That speed is really helpful to continue to stay profitable.

The other thing is move and liquidate inventory quickly. That’s one thing affiliates really do well. So there’s a lot going on in retail where we can’t get product. There’s also a lot of product right now. As the Fed increases, the interest rate and layoffs are occurring. You’re also seeing inventory not move as quickly. So how do you do that? Well, one of the great areas of affiliate marketing during times like this is the discount and coupon websites. Most of the other players also have these outlet or clearance sections of their website.

As consumers shift, and they get really tight with their spending and more control over their budget because of uncertainty, and maybe their rent has gone up or any other costs have gone up. I mean inflation, that’s the other thing we haven’t really talked about. We got this recession. We have layoffs. Now, we have inflation. Interest rates are going up. There’s a lot of stuff that can scare all of us right now.

Consumers switch their behavior. We’ve got a really good article on our website. I’ll include a link on the importance of coupon sites during a time of economic stress, but they really can help you move and liquidate that inventory quickly without incurring the cost of a clearance sales or completely losing all the margin by selling it to someone else. You can still get the same margin that you would before and liquidating it through the affiliate channel.

Other things to think about, scale and speed. You can still grow your new customer acquisition, your revenue, and do it quickly with the affiliate program. As things change and consumer behavior changes, and economic climate changes, it seems to me that one of the things I often say is during the pandemic. Well, what part of the pandemic?

Because the first three months were way different than the last six months, and the middle year was much different than the end or the beginning. There’s a lot of things changing very, very quickly, and maybe you feel the way that I feel is like there’s always arrows coming at you, and it’s always new. The last two years have been crazy with all the change. So it allows you to move quickly. Reach those customers quickly.

We also have media publications. Media pubs are coming into the market more and more every day. So we’re able to work with them in ways that we haven’t before. Maybe the only way you have the opportunity to work with them before is display fees upfront. Any of those upfront fees get real difficult to spend and costs to incur when we’re uncertain of what’s going on. You have search affiliates that you can utilize, display affiliates, cart abandonment affiliates. All those type of affiliates, they can do things that you may be doing now, but you’re doing them on a more paid basis. You’re paying that upfront. Affiliates can do that on a commission.

So there are a lot of really good reasons why you should be investing in your affiliate channel, maybe even moving some budget to the affiliate channel, and maybe you’re thinking […] “I don’t have an affiliate program. But should I have one?” You probably should. So security, flexibility, investment, float, profit, liquidation of inventory, scale and speed, and all the different types of affiliates, those are many of the reasons why affiliate marketing should be a pillar of what you’re doing to prepare for the next year and for economic downturn.

Again, if you want to explore some strategies, how to thrive right now, you can go to jebcommerce.com/strategies, and that brings you up to an e-book. You can also go to our YouTube channel. There are a ton of videos that are relevant to this topic at hand. So go to YouTube. Search for JEBCommerce. You’ll find a bunch there. But that strategy document, that PDF will be real helpful for you.

Now, if you find that you need a little more than that to help get you through these times, I would love to help, and there’s a couple of different ways that I can help you. You can email me at gethelp@jebcommerce.com, and I’ll answer every question that you have. You can also put time on my calendar. Go to calendly.com/jamiebirch and put 15 minutes, 30 minutes, even an hour. I set aside time just for our listeners. I’ve done this since the beginning of the pandemic for anyone who needs any help, even if it’s career [advice]. If you’re recently furloughed or laid off and you want some advice, definitely, gethelp@jebcommerce.com or calendly.com/jamiebirch. Set up time with me.

We also have a service that’s available, where we audit your entire program and provide you with an executable plan and strategy for the next 12 months on how you need to achieve your goals. So if you would like help with that, just email us at gethelp@jebcommerce.com and put “Audit” in the subject line.

Now, I thank you for listening. If you found this valuable, please share it on all your socials. If you know of someone who would really benefit from this particular topic, send it on to them and help us get the word out. Provide us with a five-star review on Spotify, Stitcher, Apple Podcasts or the podcast player of your choice. That goes a long way to help us get the word out about this podcast.

We are wrapping up season two of the Profitable Performance Marketing podcast and are looking for guests to publish in January of 2023. So if you’d like to be a guest, I’d love to have you on here. Let us know. Just email us at gethelp@jebcommerce.com and put “Guest” in the subject line. We’ll get back to you. We are striving for 50% of our guests to be from the BIPOC community and marginalized classes. So if you fit that and you think, “Man, no one wants to interview me,” I want to interview you. Let me know. If you know someone from these communities that we should interview, please let us know. We want to elevate and amplify their voice and give them a platform that we have here, and talk about what it’s like for them and affiliate marketing and digital marketing. So we would love to hear from you.

Thank you for joining me and making it this far in the podcast. If you have any ideas for who we should have on, please let us know. But thank you again. These are uncertain times, but there’s a lot of great things we can do together to make sure we get through it together. Thank you.

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