COVID-19: Where Does Affiliate Marketing Fall in the New World Order?

Junction Live host and VP of Marketing at CJ Affiliate, Nicole Ron, is joined by Kelly Merkel, CJ's VP of Publisher Development, and Paul Tibbitt, CJ's SVP of Business Development to discuss a topic that's on everybody's mind: COVID-19. They talk about the effects of the pandemic on the global economy and affiliate industry, recent shifts in the market (Amazon), and the strategies advertisers and publishers can employ to remain flexible during this time.

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Transcript

INTRO: Junction Live: taking thought leadership off the page and into the studio with some of the sharpest minds in affiliate marketing.

NICOLE RON: Hello and welcome to this episode of Junction Live. I'm your host Nicole Ron, Vice President of Marketing and Business Systems here at CJ. For those of you listening, I hope this finds you well and in your favorite athleisure wear. Today we're going to address a topic that's on everybody's mind: COVID-19. We'll talk about the impact that the pandemic is having on the global economy and our industry, how the affiliate channel is uniquely situated to help consumers, brands, and publishers during this unprecedented time, and how the channel's performance-based model offers a safe haven for marketing spend during a time of disruption and uncertainty.

I'm excited to be joined today by my colleagues, Kelly Merkel, Vice President of Publisher Development, and Paul Tibbitt, Sr. Vice President of Business Development. The three of us have had a lot of conversations around this topic, and the two of you recently jointly authored a Junction post that we did on this topic, so I'm excited to talk to you a little bit more about that and get deeper into some of the things that you mentioned.

So let's start with you, Kelly. Can you tell us a little bit more about yourself and some of the background that you bring?

KELLY MERKEL: Yeah. Thanks, Nicole. I'm really excited to talk about this today, too. In my role, as Nicole said, I'm the Vice President of Publisher Development. And my responsibility really falls with all of our global publisher partnerships, and so my responsibility is helping to develop strategies and develop relationships for our publishers to tap into within the network. So we're always looking for new growth, new kinds of publisher distribution, and I think that fits very well into today's topic.

NICOLE RON: Great. Thanks, Kelly. Paul, onto you.

PAUL TIBBITT: Sure. Hi, everybody. I'm in my fifth year at CJ. I've been the commercial leader here since I started, so that puts me at the head of teams that interact with our advertisers on a daily basis. So when I'm not with my team and out with our advertisers, I work out of our Westborough office—when we're at the office. Currently sharing my home office with my two dogs and occasionally one of my sons.

NICOLE RON: Very cool, thanks! One other housekeeping note, given that we're all working from home right now, please excuse us if we have any surprise guests join us. I know, Paul, your dog Winnie likes to chime in occasionally, and my Daughter Lilly likes to speak up as well, so apologies for that. And if we experience any brief technical difficulties, again—limitations of working from home—we’re doing the best that we can.

So let's start by talking about what we've seen happen economically during this pandemic. With the implementation of company work from home policies, the plethora of government restrictions around travel, and stay-at-home orders, we've certainly seen consumer needs shift pretty dramatically in a few short weeks. And as we've seen in our network data, which we publish on a weekly basis on our COVID-19 Network & Consumer Trends Report, some sectors such as travel and finance have seen some fairly steep declines, while others such as retail and home services have actually seen growth.

Paul, can you take a moment to talk a bit about this shift in consumer behavior and how Affiliate really fits into this dynamic environment right now?

PAUL TIBBITT: Sure. Happy to. It's been a topic of discussion with almost everybody I talk to these days. In fact, I was catching up with a family member, my sister, and she was kind of asking me—she’s in the business world as well, and of course we were chatting over Zoom, and eventually we get around to the economy and our jobs and so forth. And so she asked me how—this was early in all of this—and she was sort of asking me how the pandemic was going to affect my company and my job, etc. Of course, being in affiliate, they don't really fully understand what I do. But they do know it has something to do with online advertising. So the way I explained it to her is I said, look, we're in ecommerce, so we're better positioned to weather this storm than some companies and industries. And since we're performance-based, we're a safe place for clients to continue to drive business because they only pay when an activity happens that benefits them, so it doesn't require big up-front commitment. So as companies become cash-strapped or very conservative on knowing what's going to happen in the future, my opinion when I was talking with her was that we would be one of the last places people would be pulling back from, and we would provide a good place to continue to see some activity. And so I believed everything I said. And we kind of hung up and we finished chatting, and I believed everything I said at a theoretical level. But I really hadn't gotten to run the numbers myself. And I had this model kind of in my head that would help kind of prove to me what the numbers could actually look like. And so like most people, I go to Excel and I kind of put in the different levers. And ultimately what it comes down to is how well the shift of spending from in store to online counteracts the overall drop in revenue from the industries that we work with that are hurting pretty badly, as you mentioned, Nicole.

So in other words, is affiliates' much larger sliver of a smaller pie, bigger than affiliates' typically smaller sliver of a much larger pie? And so what you need to do is account for the dramatic effect of closing of all non-essential business and social distancing has. And knowing that before this started, ecommerce was roughly 15% of consumer spending and 85% was done in brick and mortar. Of course that has shifted dramatically, and that's the biggest impact that all this has had, is that for almost every category, especially in retail, everything is online now. So that 15% that used to be ecommerce is almost 100%. And in fact is 100% for a lot of our advertisers in a lot of categories. Of course, there's still groceries and pharmacy, etc. You can account for that in your model and see how the shift to ecommerce means that only in the most dire circumstances of decline should we not see affiliates grow in many categories.

So I shared my model and ideas with the rest of our leadership team. And of course, our marketing team did me one better—they created that report that monitors activity on the network and compares it week over week and year over year by vertical and category to keep us all informed about what's really happening. So it takes it out of the model world and into reality. And while some partners and categories, as Nicole mentioned, are in a really tough spot that's completely out of their control, like travel, we've seen more days of year over year growth versus decline since all of this started. And some categories are up pretty significantly. So this kind of proves my hypothesis to my sister, so good sibling rivalry—I wasn't wrong, I don't have to tell my sister I was wrong—that being in affiliate is that safe haven. It's a place that continues to drive action when every place else is either too risky or impossible right now. So it makes me really proud of our industry, of CJ’ers, our clients who in a really tough environment, picked themselves up by the bootstraps and got to work, finding a way to adapt to this new world and so couple of examples that come to mind—I wish I could share their name but we didn't ask their permission so I just have to kind of talk you through what they're doing. But we've got a major apparel brand, for example. It's 100% affiliate at the moment. All of their stores are closed and all their efforts are now in affiliate. And they understand certain things like consumers are being really careful with discretionary spending right now. So they've pushed holiday-type offers, they've increased their participation in cash-back events, and they're using variable commission to give that extra boost to categories that are struggling a bit right now. So they're kind of one representing many there, tackling it that way. We've got another advertiser we work with in the home and business services category that's now also 100% digital. They're using one of their brands to push to the other brand that can fulfill right now. So that's one kind of tactic they're taking. Part of their business has shut down completely because it does require some in-person interaction. So they've adjusted their branding to the times and their offers to the times, kind of pushed the things that they can do to sort of drive revenue where they can. And we're working with partners like Revlifter to drive to DMAs and target areas where their stores are closed. And they can target messaging, etc. to increase cashback aggressively to those that have completely changed their shopping behavior.

So just to kind of wrap-up my kind of long answer to your question, I would say, to all of our advertisers, you have to push forward where you can as hard as you can right now because several studies have proven there's a single-digit level of people who are bothered by advertising right now through the crisis. So if you're doing it right and you're adapting to their behaviors and you promote effectively and aggressively, you'll be the ones that kind of get through this as strongly as you can and come out in the best position to deliver after the crisis has subsided.

NICOLE RON: Awesome. Thanks, Paul. I appreciate that. I know that we've talked a lot about how advertisers are thinking about this shift from the offline world into digital and how affiliate can play a really strong role in delivering on that.

Kelly, can you talk to me about how publishers are responding and adapting to this ever-shifting consumer demand that seems to change on a daily basis at this point?

KELLY MERKEL: Yeah, I think our publishers have honestly, really well positioned themselves because the approach that we're seeing right now is a consumer-driven approach. They're really letting their shoppers and their users tell them what they need and what they want, and then adjusting based on that. But publishers have really always done that. They've always really curated their audience and curated the experience and made sure that what they're presenting to their consumers, that's always the number one most important thing to them, regardless of what kind of publisher you're talking about, right? That's true for an influencer as much as it's true for a cashback site. And so the publishers have been able to really pivot on that and be adaptive and make the changes that they need to make based on the immediate shift in consumer need that we saw when everything started to shut down. They really have been adjusting their homepages, their emails, any other kind of search messaging or things like that that they're doing to focus on those essentials, focus on what products people need at home—looking at office supplies, at-home workout, or at-home workout gear, those kinds of things. And you can see that when you go on site now to a lot of our large partners, the way that they've really pivoted to be able to be very consumer focused.

And to Paul's point about sensitivities around marketing and advertising, I think that's a really smart thing that publishers have done to not look insensitive and to ensure that they are still there to provide a service for their users. Because those people are coming—this is a site that they are used to going to—it's a review site that they're comfortable with, it's an influencer whose opinion they really trust. So they're still going to those sources. And honestly, more now than ever. Because there's so much uncertainty. So they can turn to something that says, "Here's really the best deal that you can get." Or, "Here is a product that I can recommend to you." That's the type of relationship that these publishers have been trying to cultivate with their consumers for years. And it's really—you're really seeing that, especially now.

NICOLE RON: Yeah, that makes sense. And I think that aligns too, with a lot of the data that we've seen come through our weekly reporting. Especially early on. It looked like consumers were clicking around extensively. And it took a day or two for that confidence or decision to kind of catch up from a transaction level perspective. And so, to your point, I think publishers have done a really incredible job adjusting what they traditionally focus on during this time, to focus on the things that people are looking at in high demand. Whether that's to set up a new workspace, or buying new athleisure wear, like I've been doing so that I can live in my leggings 24/7. I think that these publishers have responded well, and we've seen that across the board. And that consumer demand for these publishers has dramatically increased during that time as well. So that makes sense.

NICOLE RON: So, on a similar note, but also relevant, and kind of in contrast to what, Paul, you said around the value of the channel and how this is such a safe haven. We've seen folks like Amazon pull back dramatically from the affiliate space, or slash commissions. And I'm curious, how should our clients be approaching that, and what role do we play or our brands play or our publishers play in that—this new world order that's kind of coming about?

PAUL TIBBITT: Yeah, it's a great question. I think that the obvious answer is advertisers need to follow the consumers lead as well, right? So they need to focus on products and categories that they're responding well to right now. Early on, it was athleisure and home office categories, homeschooling, home entertainment, etc. But again, it's not one single category. And just about any advertiser that I can think of has something that consumers need, even in this changed world. So those categories will continue doing well. But I think they also need to anticipate what's coming, right? So when we started this, we were still sort of at the tail end of winter coming into spring. Seasons are shifting, people are starting to emerge in their needs in a different way. So I think they need to anticipate what's likely to happen next and get ahead of it, whether it’s because what they're trying to promote has a seasonal aspect to it—people are kind of coming out of the homeschooling and will be heading into vacation time. And vacation time will look a lot different this year than it ever has.

So what are they going to do to get ahead of it and think about what's coming around the corner? So I think following the consumer's lead is critical. You've got a lot of cases where larger players in the space are struggling to keep up with the demand. You saw that with Amazon. I can personally speak to it when it comes to grocery delivery from them. So, established brands have to quickly adapt their processes to meet these demands. It's been a month now and you're already seeing some of the partners that we work with that specialize in delivery of prepared meals, etc. sort of had to take stock quickly and adapt to the new world order. But are now kind of re-emerging, and their affiliate program is starting to drive well for them again. Consumers are looking for alternatives. So now is a great time for publishers to diversify and promote direct-to-consumer and other brands who offer similar services. Again, can't help but mention Amazon here. They choked on demand for groceries and it's an opportunity where people like me ended up switching my dollars, right? And more of that money is now up for grabs. I was one of those guys clicking around, to your point, and the advertisers who caught my attention and were out and pushing on our affiliates were the ones that got my money. So you can follow the demand and look at where the opportunities are based on some of the large guys either pulling out or pulling back or not being able to deliver and filling that void.

NICOLE RON: That makes sense. I think too, part of what I want to talk about is what types of offers are resonating or how should people be thinking about how they structure incentivizing consumers to elect to work with a given brand. And I think part of that is just new world order, "How do we operate under these circumstances and continue to adapt recognizing that consumers have a lot of uncertainty in their own personal lives around job security?" or, "Where should I be spending our money?" And so they're thinking a little bit more deeply about the purchases that they're making in addition to the purchasing behavior being different. But also, I think layering in this Amazon angle, it brings an interesting opportunity for brands to reclaim some of what they've used Amazon for to promote in the past and bring that in-house whether that's by structuring their offers in a certain way or focusing on certain products or activities, or getting better about shipping times—there's opportunity here that's kind of budding within the affiliate space.

So Paul and/or Kelly, if you can talk to me a little bit more about more of the tactics of how people need to think about what types of offers or levers are important to get consumers to consider their brand during that time, I think that'd be super helpful.

KELLY MERKEL: Yeah. I can start here, and I think I want to go back a little bit to what Paul was talking about before regarding some of the impact we've seen from honestly, not just Amazon, but a lot of major retailers pulling back on their affiliate programs in the last month or so. And he said something about diversifying revenue that struck me because I think that this is a real opportunity—it’s a potentially short-term problem that we can help bring long-term solutions to our clients for—both publishers and advertisers, right? Because as you start thinking about really where your revenue needs to be diversified, we can step in, and help bring some of these new players to the table that we were talking about, some of these advertisers that maybe had lost some of their market share to Amazon or that are offering similar products. We can help from a discovery standpoint. We've really been talking a lot to our publishers about identifying replacement products. What major categories were you promoting? How can we help bring advertisers to the table that will fill those needs?

And beyond that, also thinking about it from an attribute standpoint. One of the reasons that Amazon is so sticky is because it's so easy to purchase from them. Two clicks and something's on its way to my house—sometimes one—depending on how slick the interface is that day. But I'm also thinking about how we bring advertiser opportunities to the table where there's a loyalty element that we can tout, whether it's cash back or whether it's that advertiser's own loyalty program. Are we looking at shipping? How quick is the shipping? How easy is the interface to be used? So it's kind of thinking beyond it from a product standpoint and then also thinking about it from an attribute standpoint—what those consumers value.

But when we're looking at how we are giving recommendations around the best way for publishers to work with their advertisers right now, and some of the unique attributes that they themselves can bring to the table—we've already talked a little bit about how publishers are restructuring their homepage and their email offers and media to be really consumer-focused—it really all comes down to the way that they're communicating that to their users. Something I've been hearing a lot from my publishers recently too is, they're really interested in promoting advertisers that are also maybe doing something that is more charity-focused. Or that have been really vocal about what's going on in the economy around the world. Maybe it's a healthcare company or something like that, that's helping to give back. They're really looking for those opportunities to be able to further support those industries that need our help. So that's something interesting too that we've been looking at. And even kind of thinking from the other side, we've seen some loyalty publishers that have started supplementing more cashback with their own commissions that they're earning to again—that consumer experience and really helping to establish even more loyalty with that publisher.

NICOLE RON: Got it. And maybe Paul you can mention—because you talked about this shift in loyal consumers, so to speak, kind of in some cases where the brand can't keep up with demand, there's a shift. Or at least an interest in researching additional opportunities. And so, are there things that people need to be looking at from a new customer acquisition perspective as well as a loyalty perspective here? To ensure that those that are strong are retaining the people they've got, and those that are new are putting their best foot forward?

PAUL TIBBITT: I think both are incredibly important as we go through this period, right? Because again, those that maybe couldn't get folks attention in the past—because just remember, a lot of this all goes back to just how much activity and how many consumers are buying online, either for the first time in some categories or at huge volumes and frequency versus their normal patterns. So all that additional audience is now available. And when you have some of the major large players not able to keep up with demand, and you've got all this activity, all these new shoppers—introductory offers are huge right now, right? So look at how you can get people's attention. Strong incentives work right now. Think holiday style. There's 23 million people in the US out of work at the moment. People are very price sensitive. So think about what kind of offers you can drive to get that first-time buyer to consider you right now.

Again, Amazon is blowing it when some of the advertisers are doing it much better. Then take care of your loyal customers as well. Because understand that the same thing could be happening in the other direction. While you're attracting new—you need to expand your market share—but not lose sight of the fact that your loyal consumers will notice how you treat them through this period. So, introduce new through introductory offers. Get people introduced to your online store if you were heavily focused on offline previously. But pay attention to what you can do to your loyal customers in their time of need as well. So, if we're thinking about, again, just some specific tactics, introductory offers, strong incentives, introducing people to your online store. Everything's being delivered, so adding faster be delivery. Supplement where Amazon has pulled back, right, because non-essentials are much slower now on Amazon. So you can compete in new and different ways that maybe you hadn't been able to before. Curbside pickup, where people are still able to fulfill on curbside pickup (and a number of you can). Or people are buying online and picking up in-store. I think people have the time to do that now in ways that they hadn't before. It also gets them out of the house. I know I've done it a few times just to get out of here. Or I'll order something online that can be delivered, but I can get it faster by going curbside.

So again, I think those are the things that you've got to look at through this period: how do you attract new, but also how do you make sure that you're showing loyalty to people who've been with you?

NICOLE RON: Makes sense, yeah. Kelly, do you have any other kind of practical advice that you think you want to share with the publisher base, with advertisers working with publishers during this time?

KELLY MERKEL: Yeah, I think that this is just really an opportunity to establish collaboration and really use those relationships to their best because you may be in a situation where an advertiser doesn't have the level of budget that they had last year, but because of the partnership that you have, there may be more creative ways when we think about funding or creative ways that we're putting together media plans. And continuing to keep the relationship going is going to be really important. So thinking about those partnerships that you have had long-term and what kind of flexibility can be built into some of those agreements? I think one other thing that we haven't really talked about too much before, either, is this is also a really great time for mobile-focused publishers, or publishers that have a mobile app, or that have that mobile presence because people are spending more time than ever on their phones. When they're home, they're putzing around, checking links, checking sites, reading articles, reading the news. There's a lot more opportunity there to engage from a mobile perspective that, that can be a little bit more forward, I think. We've seen over the last couple of years—when we're looking at our network, something like 50 percent of our traffic is mobile now. So the audience is there, and it's only growing. So this is another chance to kind of jump on those kinds of opportunities, and really engage with those consumers where they're living right now.

NICOLE RON: Yep, that makes total and complete sense. And I think, to the points that you're saying kind of in summary, it's a really important time for us to remain vigilant and adaptive. And that doesn't mean that we stop talking to consumers. In fact, kind of validating what you both are saying, in a consumer study that was recently done by CJ, Epsilon, and Conversant, that actually reached out to consumers and asked them about their thoughts around advertising in today's day and age, especially in light of COVID-19; nearly 70 percent of those US consumers said that they still felt it was appropriate for brands to be advertising during a global pandemic. So I think our takeaway is, don't stop marketing. We just need to make sure that what we're marketing is relevant and that it's empathetic. I think on the flip side of that coin, more than 50 percent of US consumers felt that they had received a marketing message in the past two weeks that felt poorly timed or didn't meet their needs. So as a marketer myself and overseeing the marketing team, we've definitely had to take a step back and review the campaigns that were in the works prior to the pandemic to make sure that tone, the recommendations that we were making, things that we had planned around how to handle promotions or holidays or peak seasons that have traditionally performed certain ways, or even done to imagery, that we're reevaluating that and making sure that we're doing it in a way that's sensitive to where we are today. So I think those are all really important takeaways in terms of how we continue to align with consumer need and demand during this time.

So this has been a really challenging time for all of us, both on the business front and for many of us on a personal front as we continue to adapt to this new norm. So my last question for both of you is more of a personal one. And that is, what's the most positive or inspiring thing that you've seen come out of this situation so far?

KELLY MERKEL: Yeah, I think, personally, for me, it has been the opportunity to reconnect with my family and my friends. Before, I was doing a lot of travelling and a lot of late hours, and I wasn't spending as much time keeping in touch with those people that are really important to me. I've lived all over the country and the world. My friends are all over the place, so it can be difficult to see them on a regular basis when there's not a global pandemic, but being to have those regular check-ins with people that I don't get to see very often and haven't been able to talk to as much as I want to has been really, truly keeping me healthy mentally the last couple weeks.

NICOLE RON: Wine too, right? [laughter]

KELLY MERKEL: I mean, look, the wine doesn't hurt, right? Yeah [laughter].

NICOLE RON: Right. Paul?

PAUL TIBBITT: I've been blown away by the way CJ'ers have adapted to this new way of working and how hard everybody is working right now. It's sort of unbelievable given all the changes and needs that our advertisers and publishers have in this moment, as you can imagine. And then trying to do that from a work environment that is very different than what they're used to, and the distractions of home and the needs of family etc., and the way that they're kind of buckled down and gotten to work for our clients has blown me away. I think the hours that people are working right now, and again, the adaptability to kind of take what is an unbelievably unprecedented situation and still produce the productivity that they have—it is amazing. So I'm really proud of that. I think I'm kind of blown away by how hard people are working and making it work. And alcohol definitely helps [laughter].

NICOLE RON: Yep. I truly feel the same way. I think the most inspiring thing that I saw was a handwritten poster on the door of a closed business recently, and it said, "And then the whole world walked inside and shut their doors and said, 'We'll stop it all. We'll stop everything to protect our weaker ones, our sicker ones, our older ones,' and nothing in the history of mankind has felt more like love than this." I think, to your point, it's just such an incredible—

KELLY MERKEL: You’re gonna make me cry!

NICOLE RON: I know. I know. I'm trying not to, too! But I think it's true. It's a point in humanity where we're all having to take a step back and evaluate what makes sense and band together more than ever in a way that's truly global. So I think that, as difficult as it is, it's also inspiring just to see how humanity kind of steps up and pulls it together. So on that light note [laughter], thank you so much, Kelly and Paul. I truly appreciate it. It's always a pleasure to get to talk to you both, especially about something that we're all very passionate about. And in this historically unprecedented point in time, we anticipate that this market will continue to adapt and be ever-changing. And it's our job as marketers to continue to meet those needs essentially. And that said, the affiliate space is an industry that's closely aligned with those needs. So I think that we're designed to adapt quickly and make these changes to ultimately stay with demand. So from everybody here at CJ, we are wishing all of you and your family health and wellness. And as always, we're here to support you and your business needs. And thanks again, and until next time. Appreciate it. Bye!

OUTRO: If you enjoyed this episode and are curious to know more about this topic and many others, check us out at junction.cj.com or find CJ Affiliate on Facebook, LinkedIn, Twitter, or Instagram