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New Options for Affiliate Marketing

New Options for Affiliate Marketing Rob Key

They may not be quite chanting “igualdad, fraternidad y libertad” in the streets or dumping tea in Boston Harbor, but nonetheless a small rebellion of sorts is brewing in the affiliate marketing world that is transforming the industry’s landscape and offering savvy merchants a broader range of opportunities.

First a quick review. The affiliate marketing industry is in the midst of rapid growth. A Forrester Research 2003 study found more than half of online retailers were using affiliate programs -- and 99 percent of them said the tactic was effective at driving sales. That finding outstrips the approval ratings for email, search marketing and portal deals. In addition, affiliate programs generally can attain between 10 to 30 percent of a brand’s total online transactions over time. According to the 2003 Affstat Report, of active affiliate programs, 18 percent are driving 30 percent or more of total site transactions.

Today, the vast majority of these programs are operated via a small handful of “public” networks that provide access to thousands of affiliates for a commission of sale. Commission Junction claims approximately 70,000 “active publishers” and Linkshare reports approximately ten million “partnerships.”

In return for approximately 2 to 3 percent of sale, not including set up fees, these public networks will provide a merchant access to the network and tracking.

And for the last several years, merchants gladly paid the fees for access. Nine out of the ten leading online retailers work with the “Big Three” -- Commission Junction/BeFree  (combined under Valueclick), Linkshare or Performics

But with the rapid growth of affiliate marketing -- and resultant scrutiny by cost-conscious merchants looking to “optimize” their programs -- together with a new generation of battle-hardened veteran affiliate managers and a proliferation of new affiliate tracking and management technologies, the grip of the Big Three on merchants is loosening. A growing legion of merchants are rethinking their approach to affiliate marketing to cut costs and enable more innovative implementation by evaluating private options. Merchants with private programs include Pegasus Footwear, Calendars.com and Club Mom.

“Frankly, I believe the best approach for merchants embarking on an affiliate marketing program today is much different than even a year ago,” says Beth Kirsch, Affiliate Manager at Audible.com. “In prior years, I’d run a program exclusively through one of the networks. Today, however, I believe the most effective approach is to launch a program with a public network, like Commission Junction, to recruit affiliates that are off your radar screen, but also have a parallel private program to work with those affiliates with whom you already have a relationship.” 

Kirsch, like a growing cadre of affiliate managers with their eye on the bottom line and a desire for more flexibility, is beginning to resist paying out those sometimes hefty commissions to networks for tracking affiliate transactions where the relationship was established outside of the network channel. “I have hundreds of relationships with top affiliates that I’ve developed over the years outside of the affiliate network. I don’t want to have to pay premium commissions simply for tracking that activity,” she says. “Private programs provide greater flexibility and cost savings. A combination of private and public can be the best of both worlds.”

Shawn Collins, author of "Successful Affiliate Marketing for Merchants," co-founder of the Affiliate Summit and a veteran industry observer concurs that the industry is going into a transformational stage that will spell the end of the network domination of the industry. 

“The movement towards independent programs is inevitable as the industry matures,” says Collins who transitioned a large affiliate program from BeFree to a private technology when he was Director of Affiliate Marketing at Club Mom. 

Collins points to a truism of affiliate marketing: Ninety percent of affiliate performance is generally driven by ten percent of affiliates. These limited numbers of “superaffiliates” are pretty well known and can be recruited without the access to a network if the financial incentives are compelling enough.  

The fact that “the usual suspects” are generally already on the radar screens of savvy affiliate managers is only one driving force behind the transformation. Perhaps more importantly, a growing number of merchants are looking to create smaller, more focused and more active affiliate programs that do not include thousands of smaller affiliates. “The days of affiliate programs with several thousands of affiliates are over,” says Collins.

Adds one affiliate manager at a leading hospitality brand: “With greater emphasis on brand protection and vigilance against fraud, we simply cannot afford to have too many affiliates. We need a focused, manageable and highly profitable program.”

The greater openness to independent options is supported by new statistics. According to a recent Affstat report, a statistical study of the affiliate marketing industry, sixteen percent of affiliates prefer to work with independent programs instead of the networks while another 41 percent said they have no preference.

So what should a merchant know before leaping into the world of independent affiliate programs?

Determine the ROI

Do the savings you generate from not paying network commissions outweigh the more aggressive resources you’ll need to dedicate to the program to make it successful? Without a public network, an independent program can mean more work from an affiliate management perspective.  

As one manager for a top performing program said, “When we looked at the volume of sales we were generating and resultant commissions, the ROI was pretty easy to determine.” If volume is not as substantial, merchants may want to stick with the public network route.

Evaluate the independent options

There are a wide range of new independent technologies available, including those from Direct Response and KowaBunga! Technologies. Understanding what might be the best option for your program requires some due diligence and careful thought before pulling the trigger.

Understand the pros and cons

Independent programs can provide significant cost savings, more flexibility and, in some cases, direct linking technologies that can enhance a merchant’s natural optimization program. Merchants need to understand, however that the programs may not be able to scale as rapidly and more intensive and sophisticated affiliate management will likely necessary. Some superaffiliates will also be reluctant to work with an some independents.

Know contractual limitations

If a merchant decides to go the parallel route -- a public and private program -- be sure to understand all the limitations imposed by the public network. While some networks are fine with parallel programs, other networks want “exclusivity” and frown on “independent” programs that they feel do an “end around” their network.

What has become abundantly clear is that merchants evaluating their affiliate marketing programs now have a greater array of options than ever before. Understanding how to orchestrate the right mix of technologies, networks and management can provide them even more opportunities for success.

Rob Key is President & CEO of Converseon, a digital communications company. Converseon manages a range of affiliate programs for leading brands via “public” and “private” technologies.

Failure to communicate

What are you doing? How are projects coming along? Any stumbling blocks I should know about? How are we tracking against our KPIs? How is our key prospect coming along? When was the last time you talked with our biggest account?

Do these questions sound all too familiar? The likely problem is the most common and, fortunately, one of the easiest to change: You have a failure to communicate.

Communication problems tend to fall into two categories. The first category is a lack of communication. Whenever I've been guilty of not communicating, it's typically because I'm buried, or I'm completely immersed in the projects I'm doing to the point where I don't take the time to let my boss know what's going on. The result is typically more time that needs to be spent than if I would have communicated results and project status regularly.

If you're not getting regular communication from the people on your team, take a look at your communication process and make it as simple as possible. Personally, I like to receive a weekly update for the bigger projects and daily updates on the regular core business operations. The key is to remember that your team members are probably working hard, and they likely view taking time away to communicate status as wasted time that could have been spent advancing their projects to completion.

The second communication category where frustrations typically bubble up involves communication frequency, content, and style. For example, some managers prefer to receive communications in a set format, while others are content simply receiving an email with bullet points. Keep in mind the frequency and style of communication, and when in doubt, ask your boss how he or she likes to receive communications.

Finally, the content of the communications are key. If you have no idea what your boss wants to see, it's likely that your reports are lacking the substance your boss is looking for. When I'm not clear on what I'm looking for, I have to kick myself when I receive updates from my team that lack key bits of information. As a manager, be crystal clear on what, when, and how you get the information you want, and your team will keep you out of choking mode.

I'm not screwing off, really

How many times has this scenario happened to you? You've been analyzing reports for the past two hours, and your brain is total mush. You decide to take a quick five-minute brain break and hop on YouTube where you're watching the newest viral video sensation or a new social media application that is being heavily touted on iMedia Connection when your boss (or boss's boss) walks by. The next thing you know, you're in your boss's office hearing about how you seem to be screwing off, and maybe you really can handle a bigger workload. Sound familiar?

If you really are spending most of your day screwing off, then you probably have a long line of people who want to strangle you, including your boss and all of your coworkers who are picking up your slack. But I'm guessing that this isn't the case. More than likely, you're busting your butt, and instead you have a perception problem.

So what can you do to align perception with reality? The answer isn't to lock yourself to your computer. In the marketing business, we're always looking for new technologies, playing around with mobile, getting ideas from the latest big viral hit, and checking out great executions when it comes to social media. That said, it's very easy for everyone else in the organization to perceive this activity as screwing off while everyone else has "real work" to do.

The key is in how this is communicated to the rest of the organization and what you do with insights you come up with. Put together a white page or simply give a link and an application analysis to your boss. This is a great way to keep your boss in the loop regarding the things that we all may take for granted in our daily work lives.

In addition, it's vitally important that your boss understands all of the work you're doing and the results that are being created. Otherwise you run the risk of the Paradox of Excellence. For obvious reasons, you want your boss to know how well you're doing your job, as opposed to your boss thinking that you must be screwing off most of the time.

Make a mistake, rinse, and repeat

We all make mistakes. It's the best way that we learn and translate lessons learned into breakthrough results. The key is that you actually need to learn from those mistakes, not continue to repeat them. Nothing makes me want to strangle someone on my team more than when mistakes are continually repeated.

It's a two-way street when it comes to mistakes. It's important that you're allowed to make mistakes, but when you make one, you need to make sure you learned something and that it doesn't happen again. This is when your boss can be your greatest asset. If your boss isn't already pointing out mistakes and giving suggestions, be proactive and set up the meeting yourself. Point it out as a sticking point, and your boss will likely have some good suggestions for you.

The key to avoiding mistake repetition is realizing when you don't have the answer. I've had some of my greatest personal growth moments after making mistakes (sometimes really big ones) and seeking out answers so that I didn't repeat them.

As a manager, I'm lucky that my team understands that mistakes are good learning opportunities, and it's rare for a mistake to be repeated continually. I enjoy working through problems with people on my team and plugging up holes so that mistakes don't crop up over and over.

What were you thinking?

Do you have business decisions you've made in the past where you wonder what could possibly have been going through your head? A cornerstone of smart business is the ability to make decisions that are based on logic, experience, and a grounded process. When you throw all caution to the wind and toss a good decision-making process to the curb, your boss will want to strangle you. And you're definitely not setting yourself on a path to promotion.

Illogical decisions will make you a target for micromanaging. When I see someone make a decision that makes no sense and epitomizes a complete disregard for logic and process, it makes me cringe. Processes, logic, and experience should be documented for the purpose of avoiding pitfalls. Other people before you have made plenty of mistakes, and that's likely how many of your business processes were solidified.

If you get caught on the wrong side of making these types of decisions, you'll need to take a step back and analyze why you made that decision. Were you acting from emotion (probably the biggest reason) as opposed to logic? Were you blindly relying on a recommendation? Or did you simply have a judgment lapse? In any case, it's best to make a quick assessment and proactively approach your boss with a clearly defined set of lessons learned.

OPM -- other people's money

When you're doing business with vendors, entertaining clients, traveling, or making any one of a number of purchase decisions, are you treating the company dime with the same care you would if it were your own money? Or are you making irresponsible business purchase decisions? Maybe you view business travel as an opportunity to treat yourself to the most lavish meals and travel perks?

Having purchase power comes with a great deal of responsibility. If you prove that you're irresponsibly liberal with the company checkbook, your boss and your CFO will take turns strangling you.

As a manager, it's crucial that anyone on your team with purchase power understands and plays by the rules of the game. These rules are going to vary depending on your company, your position, and the situation. Regardless, these rules must be clearly spelled out, especially with people who have never had purchase power before. Hopefully you're lucky and you've hired fiscally conservative and highly responsible people.

In many companies, your boss will receive a bonus based on performance and adherence to budget. If this is the case, ask to see the budget and help your boss make their bonus numbers. Nothing will make your working relationship with your boss better (and increase your value) than working hard to help your boss hit bonus levels.

Hamster in the wheel

Do you feel like a hamster in a wheel? Are you spinning your wheels working really hard but not seeing the results? If you're in sales, being busy and not producing sales is going to get you a kick out the exit door quickly. In other positions, the lack of results may not be evident as quickly, but you still should have a good measuring stick regarding how you're tracking toward your goals.

At one time or another, we've all had the disconnect where we've been busting our butts, feeling overwhelmed with work, but still not getting the results we were expecting. It's one of the most frustrating positions to be in. It's just as frustrating for your boss, especially when they see you working extremely hard.

This is another situation where you need to take a step back and take a serious look at the activity you've been doing. Maybe you just need to tweak something in your process? Or maybe you need to move in a different direction altogether until you can break through?

When you find yourself in this sort of rut, continuing along the same path is going to result in you figuratively strangling yourself before your boss does it for you.

Time to stop screwing off, get off the hamster wheel, and communicate your sound decisions that produce results.

Sean Cheyney is the VP of marketing and business development for AccuQuote.

On Twitter? Follow Cheyney at @scheyney. Follow iMedia Connection at @iMediaTweet.

Rob is CEO of Converseon, the independent, award-winning full service social media consultancy that has helped brands "join the conversation" to meet business objectives. since 2001.Converseon utilizes proprietary Listening/Engagement technologies...

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