When someone you trust tells you something is good, you try it.

That’s a referral, and it might be the oldest form of marketing.

But trust is dynamic, so people who indiscriminately promote things can lose it. That’s what makes scaling referrals such a challenge. How do you get the depth of a passionate personal recommendation with the breadth of a mass ad campaign?

By adding more nodes—even small ones—to the network. Tapping into multiple niche influencers instead of a few generic ones.

Discovering and managing these relationships is a challenge, but one that companies can’t hide from.

Referrals aren’t going away

In the software selling world, referrals haven’t been as prominent as direct approaches or other partner channels. But that’s changing fast.

Ecosystem analyst Jay McBain predicts that by the end of the decade, 70-80% of partnerships will be affiliate. He sees a decline in transactional, resell-based partnerships and the rise of non-transactional, referral-based partnerships. The proliferation of affiliates, affinity partners, advocates, ambassadors, and influencers started in B2C businesses, and is now moving into the B2B SaaS world.

And it makes sense.

Ads and algorithms and cold emails are getting weaker. People are making buying decisions based on info from their communities and searching their watering holes to discover new solutions. As we say here at PartnerHacker, trust is the new data. Referrals are all about trust.

An oligopoly is born

As the internet grew in commercial power, referrals got digital. The massive reach and explosion in new kinds of influencers and content creators opened new possibilities for myriad niche referral partners.

But finding and negotiating with so many parties was tough. Affiliate networks emerged. They owned all the relationships, and brands would pay them to get their offerings to the right people.

Affiliate networks grew, but so did problems and complaints from companies working with them. Putting money into an affiliate network was like putting it into a black box. Some results came back, but you didn’t know why, how, where, or from whom. There was no transparency in the way affiliate networks were managing their partners. There was no data except top-line numbers. Brands couldn’t choose which affiliates they wanted to work with or customize offerings because they had no list or direct contact with any of them.

This information asymmetry also led to attribution fraud. You couldn’t trust affiliate networks when they told you your campaigns were working.

Affiliate networks often punished brands for growth. Networks’ flat take rate meant that their client success teams were incentivized to grow the programs regardless of the quality of partners. So networks got paid out more even if the value they drove didn’t increase. For example, a toolbar that swoops in and offers a discount just as the consumer is about to check out – the affiliate publisher would capture the last click for a transaction that would have happened anyway and the brand ends up eroding its margins to boot.

The industry became heavily concentrated in a few large networks, and the quality of referrals declined further. Things devolved into spammy coupon sites and annoying popups. The very trust that makes referrals work was eroding.

Democratization via SaaS to save the day

In the early 2000s, self-serve software began replacing services one by one. Affiliate networks were ripe for disruption.

In 2008, impact.com was founded to empower brands to take control of their affiliate partnerships. No more going to monopolistic intermediaries. Millions of influencers and brands could connect directly.

Their partnership management platform allows companies to find and recruit affiliates, influencers, and other referral partners with the same automation they’d use for marketing to customers. It provides granular control and tracking, detailed data, automatic payouts, repeatable contracts, and pre-approved budgets.

And unlike the affiliate networks of old, the incentives are aligned. Pricing rewards growth.

B2C revolutionized

After a few years in the trenches, big brands began to leave the affiliate networks and join impact.com. They started landing whales like Cabela’s, Target, Airbnb, Williams Sonoma, Uber, Kohl’s, Home Depot, eBay, Walmart, Capital One, and American Express.

The direct-to-consumer revolution also helped fuel the growth of partner management platforms like impact.com, as many growth-oriented small businesses and midmarket companies chose to forego affiliate networks and set up their partnership programs directly.

From affiliate to partner

Affiliate management changed, but so did the nature of the affiliates themselves.

Jaime Singson, Senior Director of Product and Content Marketing at impact.com, said they began noticing interesting trends.

Customers began to leverage the platform to manage entities that didn’t look like affiliates. Several apparel companies were tracking and rewarding their influencers on the platform. Live event companies like TicketMaster were using the platform to track their affiliation with mobile apps like Spotify, which didn’t fit into our preconceived notion of an affiliate. Some retailers began forming relationships with editorial and commerce teams of big media companies like the New York Times and CNN. None of these looked like the traditional affiliates. At the time, we called them non-traditional affiliates.

These types of relationships became so prevalent that it no longer made sense to call them non-traditional.

Our customers started using the term partnerships. The term made sense, especially in contrast to advertising.

In advertising, the brand pays a publisher for eyeballs, regardless of whether the ad campaign has had an impact. The incentives in most advertising campaigns are misaligned; one side can lose while the other gets paid regardless of the result.

Partnerships align these incentives, create a continuous feedback loop, and lead to innovative and deeper relationships between the parties.

Such a wide range of partnerships makes a uniform offering tough. But there are similarities. Whether a partnership consists of traditional affiliates, social influencers, ambassadors, commerce content with large media houses, app-to-app technical integrations, or brand-to-brand partnerships, they all follow a basic life cycle:

Discover + Recruit → Contract + Pay → Track → Engage → Protect + Monitor → Optimize

impact.com oriented their platform around this Partnership Life Cycle to serve this emergent and diverse array of partner types.

The new B2B buyer journey

With the dominance of the cloud, B2B buyers have started to resemble B2C buyers.

According to Forrester’s, 68% of business buyers prefer to do research on their own into a new technology solution. They’re using Google, industry forums, and peer networks to do their research before ever talking to a salesperson. Many prefer not to talk to salespeople at all during the buying process.

At the same time, influencers are branching out beyond B2C referrals. They are hungry for B2B opportunities with higher sale prices and the chance for deeper partnerships. Affiliate codes, discounts, and coupons by themselves with no value-added content or deep trust are starting to feel a bit thin and overworn.

B2B companies that go beyond links and engage in co-creation, co-marketing, and work with content specialists on an ongoing basis will develop better trust and better long-term results. They’ll be able to surround the buyer in their communities and watering holes at all stages of the journey.

From buyer journey to customer journey

Non-transactional partnerships have traditionally focused on acquisition goals, and we see that evolving. There is tremendous opportunity for referral partners to leverage long standing relationships with their audience to assist with retention and upsell efforts. – Jaime Singson

Marketing automation and tighter bonds with Customer Success have improved companies’ ability to engage and retain customers. But it’s not just what you do and say with your customers that keeps them, they are still influenced by trusted individuals, communities, and other companies even after the sale.

The ability to discover all of the partner touches, both before and after purchase, and the impact each has on customer success and retention is the proverbial $20 bill on the sidewalk.

Partner management platforms seek to demystify the impact of influence along this journey. Jaime thinks partnerships are going to become the third revenue rail along with sales and marketing.

Today, a company can predictably measure what a $1.00 investment in sales or marketing means in terms of revenue generated. Bringing that predictability into the partnerships channel is a huge opportunity for the industry.

Many companies have a single person running partnerships, or a very small team, but their ability to manage hundreds of partners gives them reach and leverage that sales and marketing struggle to match.

The future is in partnerships

I asked Jaime what trends he would bet on for the future.

Our joint research with Forrester in 2019 showed that partnerships drove an average of 28% share of revenue for companies with highly-mature partnerships programs. YoY partnership revenue growth rates were 50% for some of our most mature clients. In the next decade or so, we can see the channel driving an average of 40-50% of company revenue – and even more for the most successful organizations.

This bodes well for partner leaders.

A pleasant development has been the number of partnerships organizations that report directly to the CEO, and not to the CRO or CMO. With the arms race towards building the most robust and sprawling partnership ecosystem for their vertical, we predict that more partnership leaders will take their place at the executive table.

Grow your partner program

We’re proud to partner with impact.com to provide access to a massive market of affiliates across the buyer and customer lifecycle.

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