Affiliating with Success

Boy, has affiliate marketing come a long way since the mid-1990s, when and pioneered the practice of paying third parties commissions for online leads and sales.

MarketingSherpa estimates that $6.5 billion will be paid out to affiliates in 2007. In a recent survey by the research firm, the average business-to-consumer marketer using affiliates said they accounted for 8.7% of the company’s revenue, and the average business-to-business marketer using affiliates said they generated 10.2%.

What’s more, some merchants claim as much as 20% of their revenue comes from affiliates. Then again, some deem their affiliate programs complete failures.

According to experts, the difference between affiliate marketing programs that perform and those that don’t is the amount of attention the merchants pay to them and the planning that goes into them.

Prelaunch considerations

Before launching an affiliate program, you should set goals and parameters in line with the rest of your marketing, says Chris Henger, vice president, affiliate marketing for Performics, the performance-based marketing division of DoubleClick.

“For example, some multichannel merchants are very brand sensitive, and they don’t discount,” Henger says. “If that’s your overall marketing objective — you don’t discount offline; you don’t discount online; you don’t discount in catalogs; you don’t discount in print advertising — well then, that’s going to change the way you look at your affiliate marketing program.”

In fact, a crucial thing to keep in mind about affiliate marketing is that it is an offer-driven channel. “The consumer population that responds to offers in Sunday circulars and [free-standing inserts] is very similar to the consumer population that responds to the affiliate marketing channel,” says Henger. “It’s a similar behavior. It’s someone who’s willing to spend their time researching for information, deals, or benefits.”

Some of those online seekers who come to your site via an affiliate may in fact already be customers of yours but are remaking your acquaintance, so to speak, after seeing a link on the affiliate Website. “In the catalog world, marketers prospect to people who aren’t on their house file,” says Henger. “That medium is very much a broadcast, push model. On the Web, the consumer is coming online, searching and seeking and browsing, looking for you. You can’t decide that on [loyalty program Website] Upromise, your links will appear only to people who aren’t already customers.”

Speaking of Upromise, loyalty sites create another dilemma for multichannel merchants considering affiliate programs. These sites have user bases whose loyalty to the sites can transcend any loyalty they feel to individual brands.

“Your decision as a multichannel merchant is whether to work with [loyalty sites] and accept that the consumer may be loyal to the loyalty site,” says Henger. “Twenty years ago, maybe just airlines had loyalty programs. Now you’ve got loyalty programs for charities, for college 529 funds, for mileage programs, for cash back. They are a large class of the Web publishers that play in the affiliate channel.”

Another prospect-related issue is how long after the first visit should an affiliate get credit for sales from customers who initially came through the affiliate’s site. Shawn Collins, founder of the Affiliate Summit trade show, author, and long-time affiliate marketing consultant, recommends setting a 30-day return-visit policy during which the affiliate gets credit for any sales from that customer.

That’s just a rule of thumb, though. You need to conduct competitive research to ensure that the offers and commissions you’re willing to extend to potential affiliates are reasonable.

“One of the biggest mistakes I see companies make is they roll out affiliate programs that aren’t competitive,” says Collins. “If you’re offering 5% commissions when your competitors are all offering 10% or 15% percent, they aren’t even going to look at you.”

In any case, an effective affiliate program is a hands-on endeavor. “A lot of companies start affiliate programs and put them on autopilot, not realizing they really require work to scale up,” says Collins. He recommends that there be at least one employee who can dedicate at least half of his workweek to the affiliate marketing program.

And though experienced affiliate managers are difficult to find, a lot of experience isn’t necessary. “It’s not rocket science,” Collins says. “It’s mostly about relationships and being able to pick up the phone and motivate people.”

Big and small, old and new

As with most other things marketing, with affiliate marketing the proverbial 80-20 rule comes into play — although in affiliate marketing it’s said to be more like a 90-10 rule. Generally speaking, 10% of a merchant’s affiliates will generate 90% of its affiliate-related sales. So the trick is to keep the top 10% happy while figuring out which affiliates to motivate within the other 90% and how much time to spend with both segments — all while trying to recruit new affiliates.

Don’t make the mistake of ignoring your smaller affiliates. “If you’re relying on five or 10 affiliates, and three of them walk away, that can really debilitate your program,” Collins says. “In an ideal scenario, you’d like to have several hundred who are sending you a few transactions a month. That way it’s not devastating if a big player leaves you.”

Henger recommends spending 80% of the time on known producers, 10% cultivating midtier affiliates, and the remaining 10% looking for new affiliates.

Collins adds that merchants will often start an affiliate program with a few key partners and then declare that the channel a failure when one or two of the partners stop generating sales. “But it’s really because they didn’t recruit and continue to activate additional affiliates,” Collins says.

So where do you find new affiliates? Collins recommends starting by searching online to see who is promoting the competition. For example, a men’s apparel merchant may start by searching Google and Yahoo! under generic terms such as “pants” to see who ranks highly in the sponsored results. He also recommends checking to see who is aggressively marketing the competition and then consider trying to steal them.

And here is where good old direct response tactics come into play: Once you identify potential affiliates, Collins recommends sending them a postcard extolling the virtues of your affiliate program and following up with a phone call.

“A lot of people in affiliate marketing are in their 20s and 30s, and they’re so focused on the Internet that they cringe at the idea of doing anything offline,” says Collins. “So I started [contacting them offline], and it’s been wildly successful because no one else is doing it.”

The experts also recommend manually approving new affiliates to make sure embarrassing or illegal sites are barred at the door. “The Internet is full of ways to check up on people,” says Quinn Jalli, chief privacy officer for Datran Media, a pay-for-performance marketing services firm. A simple Web search on a company can be extremely revealing: “If nothing comes up, that should be the catalyst for some follow-up questions,” Jalli says.

Henger advises looking for affiliates whose businesses are related in some way with yours, so that their visitors receive a benefit from coming to your site, and vice versa. For example, a running-enthusiast site with a loyal following would make a good affiliate for an athletic shoe merchant. “One of the litmus tests is ‘What does the consumer get by going to this site?’” Henger says.

An affiliate that doesn’t offer an obvious related benefit isn’t necessarily bad, but an affiliate that inexplicably drives a lot of traffic should cause warning bells to go off, Henger says. “If you don’t understand their business model and they drive a lot of traffic, you’ve got to start wondering how they’re doing that.”

Jalli recommends questioning affiliates on how they intend to market the offer. For example, can the offer appear in a pop-up ad? Can the ad appear in newsletters? If so, what kinds of newsletters are and are not acceptable?

“If the affiliate distributes your creative through a multichannel approach, you’d better understand each channel,” Jalli says. “If people won’t answer questions about how they’re getting the word out, you should walk away, especially in this era of liability.”

Collins also recommends being extremely selective in deciding which, if any, affiliates to allow to send e-mail on your behalf. Under the Can-Spam Act, marketers can be held responsible for affiliates that send illegal spam. If you do opt to allow affiliates to send e-mail on your behalf, use a suppression service such as UnsubCentral to make sure the mailings don’t reach people who have said they don’t want to hear from you via e-mail.

To ensure that your branding message is transmitted only via vehicles that you approve of, you should include a prior-approval clause in your affiliate contracts. This states that you will not pay the affiliate for any customers obtained using a medium that you did not previously approve.

“Money talks,” Jalli says, “and if they’re not going to get paid for it, they’re not going to do it.”