By Tom Gerace tgerace@befree.com March 13, 1998.
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There's been a lot written in recent weeks on affiliate networks: how to build them, how to overcome the network management hurdles, etc. No one seems to doubt that they are a great way to sell; Forrester Research reported that product links embedded into affiliate site content are twice as likely to result in a sale as a banner advertisement (Forrester's "Syndicated Selling" report, dated December, 1997).
Moreover, Forrester found that affiliate network links cost a fraction (1/10th) what banner ads did, when banners are purchased on a CPM model.
With those numbers, and the fundamental fact that affiliate network selling directly aligns marketing costs with sales results, it's clear that affiliate networks are here to stay. The questions remain: what does a retailer have to do to build these networks, make them profitable, and keep their affiliates as partners long term. This last question is critical, as many large retailers in bookselling, music, travel and other areas are beginning to compete heavily for affiliate relationships. This competition for affiliate sites is certain to grow as affiliate networks continue to prove themselves as a means for selling.
We've helped a number of on-line sellers build and operate networks, either to dominate their space online or to catch-up with an earlier competitor. In our experience, we've found a number of things are critical to building lasting, profitable relationships with affiliate sites. I thought it might be helpful to share a few of them:
- Get affiliates on-line quick!
You need to have tools that automate the sign-up, approval, and activation process. Your affiliates sign up for your network because they are ready to sell for you. Delay that process by a week, and they'll be selling for the competition.
- Affiliates must be able to select individual items from a retailer's catalog and link to POS directly.
The "grandfather" of affiliate networks, Amazon.com, recognized that niche sites knew more about individual items in their product line than they (as a retailer) ever could. A focused site (say, gardening.com), could make better recommendations about individual gardening titles than any retailer could. A general news site creates similar value by linking individual articles or news sections to related titles.
The reason affiliate networks sell more effectively is because products are sold in context (it's the best targeting for the dollar on-line). I am more likely to buy an umbrella if I am looking at a weather report that shows rain (and I see a quick link for "Get ready for the weather with an umbrella from the RainStore"), than I am when I am reading a news story on Intel (and see an unrelated banner advertising rain gear). Affiliates who place links to product in context sell far better than those that create "outlets" or "mini-malls" -- and much more effectively than those rotating banner ads. And affiliates who sell better also make more -- and stay around longer.
- Affiliates must make money on every sale they drive.
Amazon's program paid sites commission only on books they recommended. If a customer went to an affiliate site (again, gardening.com), clicked on a link to Amazon (say, for the book Seeds), and didn't by Seeds, but bought five other titles, the affiliate got no credit for the sale.
BarnesandNoble.com recognized that this was a source of dissatisfaction among affiliates and agreed to pay commission on every title purchased by a customer coming from an affiliate site. This is critical: if you are going to build long-term relationships with hundreds of content sites, you have to give them credit for the value they bring. That value is commission on every sale their links generate.
- Affiliates must have access to detailed daily reporting
Your affiliates are heavily incented to alter their site to sell more effectively. To do so, they need a variety of reports that show them (1) what selling methods are most effective and (2) which products are selling, which aren't, and which items in inventory might do better?
Make sure your affiliates have the tools they need to sell better for you by providing detailed, up-to-date reports.
- Pay early, pay often, and pay correctly.
Your affiliates will appreciate quarterly payments that arrive on time. Many of your best affiliates will probably be small sites that depend on your check to cover expenses. They need accurate, timely payments. For large networks, that means tracking and reporting on hundreds of thousands of transactions. It means cutting thousands of checks every quarter. Make sure your back-end accounting systems and your CFO can handle the load our outsource the project (keeping internal oversight).
Delayed/inaccurate payments are the quickest way to generate mass affiliate migration.
Hope this is helpful and that you all manage to build profitable, lasting affiliate relationships. I'd welcome comments, questions or thoughts any time.
Best,
Tom Gerace, president
Be Free, Inc.
617.497.5630
About Be Free, Inc. (Nasdaq: BFRE)
The Be Free marketing platform allows online businesses to attract, convert and retain customers easily and cost-effectively. The company provides a uniform system for tracking, managing, measuring and analyzing all of a business's online marketing programs. These services are hosted, allowing a business to deploy its marketing programs rapidly, without placing time intensive and expensive demands on its own technical resources.
With Be Free's industry-leading BFASTsm services, businesses manage and track strategic partners and affiliates - compensating these selling partners based on their performance. Be Free's BSELECTsm service allows a business to convert visitors to loyal customers by recommending relevant products or content in real time. For more information about Be Free and its products and services, visit http://www.befree.com.
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