Letting another company take the financial risk for your online marketing sounds like a good deal. In the past few years, many online retailers have started using affiliate marketing and joined affiliate networks, which act almost like a dating agency for affiliates and retailers. This has allowed them to recruit companies and individuals with online marketing expertise to deliver them new customers.
In the early days of affiliate marketing, this meant web site owners adding banners, buttons or text links to their sites and in return receiving a commission when a consumer clicked through and completed a purchase on the retailer’s site. But, as online marketing methods have become more sophisticated, so have affiliates. Now many of them also use other online marketing media such as paid-for search engine listings, e-mail campaigns and natural search optimisation.
However, more complex marketing activity can risk retailers’ brands if affiliates do not adhere to their brand guidelines. They can also affect retailers’ own online marketing efforts if not managed properly. In addition, as more retailers have launched such programmes, competition to work with the best affiliates has got more intense.
Research this September from E-consultancy, sponsored by affiliate network But.at, looked at the effectiveness of affiliate marketing. It found that merchants in the UK are spending an average of 10 per cent of their overall marketing budget on affiliate marketing and that this channel delivers an average of 16 per cent of their online sales. Interestingly, more than a third of them view the commission they pay to affiliates as a cost of sale, rather than forming part of their marketing spend.
When Dorothy Perkins launched its programme on the TradeDoubler network, affiliates were offered 5 per cent commission on all sales. Other lesser-known companies provide even more competitive terms in order to secure affiliates. World of Linens is offering 20 per cent commission to affiliates for sales generated in November and December.
Marketing agency BLM Quantum affiliate manager Rich Way agrees that this is a very cost-effective marketing platform. He says: “Most online retailers have some sort of affiliate programme. A few years ago, it was seen as a dirty word, but now they understand it more.”
However, he admits: “One pitfall is that there are so many [affiliate] sites out there, it can be difficult to manage from a brand point of view.”
Keep in check
Way’s customers supplement the management they get from an affiliate network with his services, to ensure that their affiliates are promoting their brand in a consistent and desired manner.
90 per cent of the merchants that took part in the E-consultancy survey said they use an affiliate network. And, when choosing a network, those polled cited the network’s relationship with its affiliates as the most important factor. However, technology came a close second, ranked as extremely or very important when choosing a network by 82 per cent of merchants.
Part of the benefit of working with a network, for both the merchants and affiliates, is that they provide technology to track sales that the affiliate makes. They also provide analytics, so both parties can see how successful their online activity is, and allow retailers to create an online depository for all the branding and advertising material they would like their affiliates to use.
Technology is also being used to monitor adherence to the terms and conditions of retailers’ programmes. In particular, the activity of some affiliates in search engine marketing has created cause for concern.For instance, Woolworths restricts keyword bidding on search engines by affiliates on terms such as Woolworths, Woolworths Online, Woolies and Big Red Book. Retailers will do search engine marketing on the most obvious terms themselves, so don’t want to pay for affiliates to duplicate their online efforts.
Affiliate Window head of affiliate channel Kevin Edwards explains that its affiliate network has a proprietary tool to monitor paid search activity around advertisers’ brands. It runs continuously across internet search engines such as Google, Yahoo and MSN.
It logs all paid-for listings on the search engines and can identify whether they were placed by the retailer itself or an affiliate working with any of the affiliate networks. If anyone is bidding on restricted keywords, the tool can alert the client and their Affiliate Window account manager.
Edwards says: “We always insist that the merchant has a defined set of terms and conditions for paid search. We encourage all merchants to have a set that is relevant to their business and they have to factor in their own paid search activity.”
Recently, search engines have tried to offer a more sophisticated product to those who want search listings. Geographical targeting means that the search engines can display different paid listings in search results, depending on where the consumer is.
Edwards says that Affiliate Window is about to launch a geo-targeting system, so that it can randomly monitor ads that are displayed in any location. This should stop affiliates who try to cheat retailers’ terms and conditions by only bidding on keywords in certain areas.
Affiliate Window has also created the AWin Index, which provides a snapshot of each merchant’s quarterly performance, based on measures such as the percentage of commission claims they approve and the turnaround time for such claims.
Likewise, affiliates have created a formidable online community and voice through the use of forums. Retailers who are considered to be playing less than fair with their affiliates are quick to be marked out and their account managers within the affiliate networks use the forums as a way of providing information and highlighting affiliate incentives.
For instance, Woolworths has just announced it is revising its affiliate programme following feedback from affiliates – partly through the forums – that commission was not being validated quickly enough. The validation process is necessary because affiliates don’t normally get paid if the transaction is fraudulent. The retailer now plans to validate all genuine affiliate sales within an average of four days. It says that this window is necessary in order for it to carry out fraud checks.
Trustworthy affiliates also use the forums to highlight how their peers are engaging in untoward practices and seem committed to protecting the industry’s reputation.
E-consultancy says that almost 80 per cent of brands expect to invest more in affiliate marketing in the future. With the tactics and media for marketing to customers online constantly evolving, this medium offers a low-cost and low-risk way for retailers to expose their brands in new ways.
However, with the industry now so large, monitoring all this affiliate activity will undoubtedly mean the use of monitoring technology will need to increase too.
Case study: Hotel Chocolat
Some 75 per cent of Hotel Chocolat’s sales will be generated online this year and affiliate marketing continues to deliver more than 25 per cent of those sales. The retailer has 25 stores, but one affiliate managed to drive more business to Hotel Chocolat’s online store than four stores combined in the week before Easter.
This channel is so important that Hotel Chocolat online marketing manager Chris Bishop spends between 10 per cent and 15 per cent of his time working with the retailer’s affiliates. As a one-time affiliate himself – he built about 50 sites around football clubs – and ex-employee of an affiliate network, he is well placed to understand the concerns and issues facing each party involved in the process.
At this year’s Internet Retailing event, Bishop explained that it is important for online retailers to look after their affiliates. This includes making sure that your own web site is up to scratch. He said: “Affiliates will bring in traffic to your site, so don’t burn your bridges and make sure your site is working properly.”
Bishop said that retailers should have a clear idea of their objectives for their online business. “Affiliates are trying to build business plans, so make sure that you have one as well,” he said.
He wants Hotel Chocolat’s affiliates to both respect the company and love its products. He often goes out to meet affiliates, gives out samples of the products and lets them make their own minds up about how good they are and how much commission they are likely to make from promoting the retailer online.
Hotel Chocolat also uses images of its products on its affiliate programme internet page, to portray a similar impression of the company to that which it gives consumers on its main web site. There is also a blog and video from Hotel Chocolat’s cocoa estate to help affiliates understand the product.
In addition, affiliates are invited to in-store events and social events. As Bishop said: “Affiliates become our online ambassadors. We look at the performers and look after them.”
Bishop uses Skype and instant messaging programmes to communicate with his affiliates, takes them out on corporate days and sends them products as extra bonuses. He said: “We all hear of merchants that cull affiliates. We prefer to send them an e-mail asking if we can have five minutes of their time to find out why they are not making sales for us.”
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