SEM Top 10: Tame Your Affiliates

Catalogers must continually generate new buyers to keep their house file healthy. They’re always keen to discover hot new channels for acquisition and to uncover tricks for wringing more new buyers from established channels. During the past five years, online affiliate programs have become increasingly popular among catalogers. Many of these catalogers also run search marketing campaigns.

Managed wisely, search and affiliates can coexist peacefully. When the programs are left unchecked, however, many catalogers find themselves competing against their own affiliates, driving up their overall marketing costs, increasing their use of discount offers, decreasing their average margin, and possibly harming their brand.

Here are some tips on taming your affiliate programs:

* Use selective addition, not selective deletion, to manage your affiliate list. Because an affiliate program requires strict guidelines that are consistently enforced, you will likely find it more efficient to let the right affiliates in one at a time, rather than ousting affiliates after they have done harm to your marketing results or your brand.

The top 5% of your affiliates will generate 95% of your sales. Evaluate the economics of choosing to ignore all the smaller affiliates: You may find they take too much work for their paltry return.

* Don’t let your affiliates bid on your brand name. Google currently permits only one advertiser per keyword per domain. When the keyword is your brand name and the domain is your site, you, not your affiliates, need to win that placement.

Some retailers hypothesize that it’s sufficient to be number one in organic results for their brand name. In fact, there’s proven incremental value in being visible in both paid- and unpaid-search results. Allowing your affiliates to advertise against you on your brand can increase your cost without increasing your sales. Don’t let them. Midsize retailers have reported saving more than $50,000 by implementing this simple change.

* Examine the core economics of your affiliate program. When an order results from a paid-search ad placed by one of your affiliates, you could end up paying three intermediaries: the search engine, the affiliate network, and the individual affiliate. For the marketer doing paid search without affiliates, at least one middleman is removed.

In the case of a cataloger running its paid search inhouse, there is only one entity to be paid: the search engine serving the advertising. In the case of a cataloger running its paid search via a search marketing agency, there are two entities collecting fees: the search engine for the advertising, and the agency for managing the campaigns.

Fewer middlemen usually mean greater profit. Study your numbers. Understand what value is being added by each link in the affiliate chain and the expense of generating that value.

* Make sure your affiliates are providing incremental sources of new business. Your affiliates should be helping you tap new veins of customer acquisition. Ideal sources include churches, synagogues, PTAs, clubs, schools, and professional and community organizations. It’s counterproductive for affiliates to simply be competing against you for the same pool of online customers.

* Insist on transparency. Avoid the “black box.” The methods your affiliates use to attract new customers should be completely transparent to you. Where are the affiliates advertising your site? What do those pages look like? Are the affiliates using your offers correctly? Is their presentation of your company brand appropriate? Allowing affiliates to advertise on inappropriate sites can lead to embarrassment or worse.

* Reduce reliance on discount programs. Many affiliates will drive traffic to your site with ads offering discounts and coupons. Retailers who allow their affiliates to market this way should revisit this decision for at least two reasons:

1) When an affiliate offers coupons in response to searches on your competitive terms or, worse, your brand name, you often sacrifice margin on orders you would have received without the discounting. It’s unlikely that you would pay someone to hand out discount coupons in the lobby of your retail store. Likewise, allowing your affiliates to distribute coupons on paid search rarely makes economic sense.

2) If discounting is part of your overall marketing strategy, then you can probably execute it more effectively by doing it yourself. Affiliates realize that many people begin their online shopping with a search on the phrase “[your brand name] coupon.” Working with an inhouse team or paid-search provider, you can craft your own discount ad copy and destination pages. You can then test the effect of these campaigns against a range of other approaches within your advertising program. And you can do so without paying a commission on a discounted sale.

Giving up margin hurts. When you must do so, decide where this tactic makes the most sense. For example, rather than offering online discounts to new customers as a result of a loosely managed affiliate program, you may choose to invest in a reactivation program.

The bottom line? Know what your affiliates are actually doing for you, how they’re doing it, and what you’re paying them for. With this knowledge, you can do more of what is really working, and less of what isn’t.

Alan Rimm-Kaufman is founder and Lawrence Becker is vice president, marketing and business development for The Rimm-Kaufman Group (www.rimmkaufman.com), an online-marketing consultancy based in Charlottesville, VA.

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