A Perfect Ten

Most people who start a small business do at least one thing well. For restaurateurs, it’s usually cooking. For painters, it’s wielding a paint brush. For affiliate marketers, it’s often building a Web site that pleases customers.

But too many small businesses fail because the owner isn’t good at something else: running a small business.

To succeed as an affiliate, it takes a lot more than posting links. Here are 10 tips for getting off to a good start with your affiliate marketing effort.

1. The Business Plan

If you do not care where you are going, any road will get you there. But if you want to start a successful affiliate business, you need a business plan. It’s a document that will guide you on a monthly basis to see if you’re reaching your goals and, if not, what you need to change.

Does this sound like a homework assignment? Well, it is. If you’re going to invest time, money and effort in building an affiliate marketing business, give yourself every opportunity to succeed. Preparing a plan will make you focus on those elements that highlight your strengths and improve weaker areas.

What are the elements? Product development, marketing, sales, operations, personnel, finance and management are the components to be included. It’s a document that will help determine your financing, credit history, collateral and whether you can repay a lender (if that’s your direction). You will also review your organizational plan, legal structure and the other important parts.

It will help you answer the tough questions: What’s your strategy? Have you done a market analysis? Have you done a break-even analysis to know your minimum bottom line? What about tax information? What will you tell the bankers?

How you write the document is also important, so get a good book on the subject to guide you. Short is better. Keep the whole document, if possible, to about eight or 10 pages.

2. Grants and Financing

One of the most frequent questions I’m asked as a SCORE counselor is, “How can I get a grant?” It is usually prefaced by something like “My wife is a minority …” or “We are a woman-owned business.”

The reason people seek a “grant” is because it doesn’t need to be repaid. So, if you want one, ask yourself why someone would want you to have it. What are you offering for that grant? What improvement will you be developing?

There are thousands of programs, funds and grants that have been created by federal, state and local governments. In addition, there are foundations and organizations that offer grants. It is impossible to try to list them. There are many programs for minority- and women-owned businesses. States love businesses that will create new jobs

Just about every major government department offers some kind of assistance to small business owners. For foundations, try FoundationCenter.org, which is quite extensive. Read your local newspapers, check out specialized magazines and network with local groups to learn about small grants.

If you’re seeking a loan, let it be known the SBA does not make loans directly to businesses. They work through banks.

3. Need Help?

Where do you start to find a great employee? You know what the job requires, so write down the tasks in the order of importance. With that, you have the basics of a “job description.” The U.S. Department of Labor has published a book called Dictionary of Occupational Titles available at your local library and the nearest state labor department office. This book contains complete job descriptions by title, saving you the work.

You need this to find the person with the right skills; to describe the job duties to the applicant; and to follow the duties over time, readjusting as needed. Your state agency will write the job description when you list the opening. Also, the labor department is an excellent and free source to find the applicants that are most suitable to perform the tasks. They also list openings online.

Be aware that most jobs are filled by word of mouth. That’s an effective way to recruit, but you must be good at finding out the qualifications of the person (See next topic.)

Keep the job description; it will help you to supervise the employee later.

4. Ask Good Questions

Whether you need information to complete a task, to interview a potential employee or to buy a new computer, it is essential to know your goal. When asking questions, you’ll narrow the scope of your questions to obtain the information needed.

The more technical the project, the more you pinpoint your questioning. You knew that.

When interviewing a job applicant, most of the data will be at your fingertips after you read the resume and application form. You’ll need other information, but there are legal requirements about what you may ask.

To stay within the boundaries, ask open-ended questions such as “Tell me what you liked best about that position” or “Will the hours present any problem?” Avoid asking about ethnicity, religion, sexual preference, politics and other personal areas.

Check your local labor department for more information on what you can and can’t ask during an interview. It may help you avoid some big problems later.

5. The Home Office

Most affiliates work at home, but many never set up an area dedicated to that work.

Prepare your work area in a professional manner. Working on the dining room table over a long period of time isn’t the answer. Have a specific area that the family or colleagues know is your “office,” even if it’s a corner of the living room or a closet.

The convenience of a home work area is well known. However, family and friends need to respect the privacy and the hours you indicate you’ll be working. Keep your work life separate.

Get a separate business phone that’s off limits to family except in an emergency. Get call-waiting so you don’t miss calls.

Will you have occasional business visitors? If possible, arrange an entrance to your “office” that avoids family areas.

6. Manage Your Site

Didn’t anyone tell you it would be a full-time job? Update your site by adding fresh content at least two or three times a week. That will keep it interesting to visitors.

Repair broken links regularly. Tweak the appearance to make the site faster, more logically organized and easier for customers to navigate.

As you start to get questions from customers, add the information they’re asking to an online list of frequently asked questions. That will cut down on questions from other customers.

Have friends visit the site and test it for you. If you listen closely, they’ll give you important clues on how to make it better.

If you do these things yourself, you’ll reduce your maintenance costs. But make sure you have the skills and knowledge to do them right.

7. Hire an Accountant

So you’re not an accountant? Nor a bookkeeper? You may need an accountant to do your taxes, and you also may need one to guide you in keeping records.

Start by discussing your business with an accountant familiar with small businesses. You can do this record keeping via computer programs or the old-fashioned way: paper workbooks. Just be sure you are including all the elements needed for tax purposes.

If you are going to do this yourself, a lot of discipline is going to be required. Keep a mileage book in your car and use it each time you go on a business-related trip.

Keep all those receipts. At least once a week, record income, and expenses. Not only does this keep you from falling way behind, it keeps you alert to your business plan progress.

Check your bank and credit card statements carefully to be sure you haven’t missed anything. And meet with your accountant at least quarterly to make sure you’re still on track.

8. Market Your Site

Your Web site is your store. And it’s your job to get people into your store. Make sure your packaging is clear, well organized and attractive. Proofread everything before you put it on. Check word usage carefully. (Do you mean compliment or complement?)

Do you have an electronic and paper brochure describing your business? Bring it along when you go to meetings, public events or conferences, and be sure to network with people.

Develop a publicity plan listing key messages about your company. Where are the best media outlets for your story? Online newsletters and local radio and TV shows are some ideas. Don’t be shy about calling them.

Send press releases to local media to announce your new online business, but be sure there is newsworthy information included. (It’s newsworthy if you would want to read it about some other business.) Follow up a few days later with a phone call asking if they saw the release and ask the news desk if you can provide further information.

Can you afford banner ads on other Web sites? At the least, be sure you have a poster with your Web site in the back window of your car.

Maintain a customer mailing list (email and snail), and use it often.

Get a book on marketing for a lot of other practical and inexpensive ideas.

9. Know Thy Competitor

This logical step is basic when going into business. Let’s explore where you can find out about your competition. Demographic studies are available at state, county and municipal centers. You’ll find facts about most businesses in the area. Look around at the area.

Using your common sense, you can talk to suppliers, manufacturers, distributors, wholesalers, salespeople, public officials, customers, trade organizations and can find out just about anything you need to know. Be their customer. Work for the competition. Ask them directly.

What is all this nosing about going to tell you? It tells you what they are doing right and how you can do it better, and the reverse. It shows how they do business, where they advertise, buy supplies, find help. It answers who their customers are; what their prices and discounts are; whether they give more quantity or quality; how many of them there are; and what kind of reputation they have.

These steps should give you lots to work with and improve upon. The more you do, the more likely that you and your venture will be successful.

10. Get Legal Advice

How would you know when you need a lawyer?

You need one to decipher legal language, when you’re faced with legal action, when you enter long-term agreements or when you purchase property or a business. You also may need one for taxes, patents, copyrights and, of course, lawsuits.

Legally, you don’t need a lawyer to form a corporation. You don’t need your hand held throughout your business transactions. A good business friend or mentor can probably give you just as good advice as a lawyer. A good attorney will tell you that he is not good at business decisions.

However, when you do need a lawyer, be sure you inquire of as many sources similar to your enterprise as possible to find the right one. Don’t be bashful! Interview the lawyer to be sure you’re getting the experience you need for the question you need answered.

MARION S. KURITZ is a SCORE small business counselor who previously was assistant director for the New York department of Economic Development. She’s also worked with the New York departments of Labor and Social Services. She now has a successful home-based jewelry business.

What’s Mary Kay Got To Do With It?

One of the most common myths about the Internet is that this new-fangled technology makes business mysterious, complex or risky. The truth is that the basic laws of doing business still apply. Sure, there are some new technical concepts to grasp, but business is still business. That has not changed. Case in point: affiliate marketing and the Internet.

During the dot-com boom-bust cycle, thousands of businesses failed, primarily due to bad business models, not bad technology. The silver lining is that online merchants became more conservative, resulting in a shakeout of most of the idiotic ideas. Darwin would be proud: The fittest companies survived. Business on the Internet is here to stay. Online spending has grown quarter after quarter. Most American homes now have Internet connections. The number of high-speed connections is skyrocketing. Even stodgy old brick-and-mortar companies with online sales channels are experiencing solid growth.

A large and growing chunk of those online sales are coming through affiliate marketing. Why? Because affiliate marketing is based on a very well-established sales strategy – the outside sales force. Affiliates are very much like the troops of lipstick-wielding Mary Kay consultants or the ubiquitous Tupperware party animals.

Technology may be what makes it cool. But a powerful sales force is what makes it work. If you have a good product, an outstanding compensation plan, a well-thought-out incentive system, personal relationships and excellent sales materials, your business will explode behind zealous salespeople who are eager to evangelize the greatness of your company and its products.

Technology may be great for checking on the number of ads served through your Web site, but it ain’t going to sell your stuff. That’d be like asking the sweaty guys at the Mary Kay fulfillment center to go door-to-door hawking skin softener. No sale.

What works in affiliate marketing is the same set of strategies that works in direct sales. Focus on recruitment. Offer reasonable compensation. Add incentives. Build loyalty. Provide great service.

What won’t work is relying on technology to run your affiliate program.

If an offline company wanted to expand its outside sales force, it wouldn’t think of hiring people without interviewing them and assessing their capabilities. The company also wouldn’t think of sending that person off to sell the product without great sales collateral and constant motivational support. Conversely, a good salesperson wouldn’t consider helping a company that didn’t pay good commissions punctually, offer good customer service or market a credible product.

If your online company wants a successful affiliate program, it needs to stop trying to attract every affiliate on the face of the planet. Be selective. Do your homework. Look for the good ones. Find the sites that have something complementary to your product offerings. Make your commission offer exciting, fair and extremely reliable. Think up great motivational offers. Mary Kay saleswomen work their fannies off for a pink Cadillac. This also works wonders in the online gambling world where top affiliates sometimes drive away with Ferraris. That may not be appropriate for every program, but every program could consider an extraordinary reward for top performers.

Money isn’t the only thing that motivates the salesperson in the direct sales model. There are weekly motivational meetings with recognition given for success. This can be done easily and inexpensively with tele-seminars, regular newsletters and bonuses handed out to top producers. Or, by giving your affiliates top-notch custom-made Web pages with your products data-fed onto their site, like an Amway catalog with the salesperson’s name, phone number and affiliate ID dynamically generated on it.

Treat your affiliates like valued salespeople and they will be loyal and productive. But this can’t be done with thousands of faceless ID numbers on a statistics report.

You’re probably thinking: “Oh, I can’t do that! I have 5,000 affiliates and not even one whole staff person focused on it.” Fine. Then, you need to rethink your affiliate marketing strategy. If you don’t assign human resources to this powerful force, you won’t see the results. Period.

If you expect to join a network, get 2,000 affiliates overnight and then watch the sales explode, you are sadly mistaken. It takes constant and creative effort to nurture this kind of sales channel. Try focusing on less than 100 who are really devoted to your program and work with them personally to build their traffic and sales. If you can’t afford a full-time, experienced and well-paid affiliate manager, consider farming out the management tasks to an outsourcing company that specializes.

Technology is not the most important thing here. Human beings are. Yes, you should use the best tracking interface you can afford. But if you really want to have the best affiliate program you can afford, you’d better start with the best affiliates you can find.

LINDA WOODS helps merchants to start and manage affiliate programs. Through her company, AffiliateGoddess.com, she and her team offer strategy consulting, training and outsourced management services.

Databasics 101

Most small business operators have dabbled with databases, but relatively few use them to their full advantage. So here’s a crash course call it Databasics 101 on why you need them, how they work and what they can do for you.

Businesses live and die on the information they collect and how they put it to use. For example, at my company, we send a reminder for unpaid ads on the day following their entry. This provides a timely reminder with an easy link to our payment page.

The key tool for storing, organizing and making sense of this information is a database. Many programs use a built-in database, such as an email reader, a calendar or a contact manager. These programs are already heavily used by individuals and businesses to manage their activities. However, these programs only perform specific functions.

If you want to send email to all of your clients who registered with you during a particular week last year, you are facing a long manual process with standard personal information management (PIM) tools. A database can provide such a list of addresses with ease. It also can track the performance of individual ads, determine your best customers, provide page-view history for affiliates and automate your billing process.

There are a number of excellent databases that run on desktop computers. Some examples include Access, dBase, FileMaker and 4th Dimension. There are also dozens of programming, scripting and report-generation tools for these databases.

On servers, popular databases include Oracle, DB2, SQL Server, Sybase, Informix, and the freeware MySQL and Postgres. Some of the advantages to having a server-hosted database include the ability to connect from different computers in your office, the option of using a wide variety of programming languages and the benefits of using an industry-standard structured query language (SQL). If you run a Web server for your business, it is relatively easy to connect the Web server to a database.

In my company, for example, we use server databases for both office and Web environments. In the office, we can do on-the-fly queries to find out information about a customer and to determine how much customers spent on each of our features. These queries can be run by anyone in the office, because we access the same common database.

You’re a Sales Machine

Pairing a database with a Web server allows your site to become a customer-driven sales machine. Of course, it will take a little programming to put your business practices online, but the key component is a robust database. With this combination, there are Web sites that support thousands of affiliates, providing customization for each one. The key parameters for each affiliate are stored in a database.

Databases store their data in files optimized for rapid access. You can’t view these files directly, but databases provide facilities for writing and reading information. It’s important that your database provide facilities for backing up this critical information, and that you back it up frequently.

Just about every database has graphical tools for creating, browsing and modifying database content, generally called tables. Desktop databases come bundled with these tools, but for server databases they are often separate products. These tools can help with the creation and casual browsing of database tables.

To take full advantage of a database, you need to look at its scripting or programming interface – a process that may sound harder than it really is. Server and some desktop databases provide a common language called SQL for manipulating their contents. For example, the SQL statement “select email from customer where area code = 310” would select all email addresses from your customer table whose area code is 310. This same statement could be used on any database that supports SQL.

Databases that provide an application programming interface, or API, open their power to third-party or even customer-written applications. One industry-standard API is called open database connectivity (ODBC). ODBC compliance allows third-party applications and programming languages to connect to and manipulate a database.

My company, for example, uses an ODBC interface to connect Java applications to a database. To find all unpaid ads from the prior day, a Java program connects to the database through the ODBC interface. It then issues an SQL request through that connection. The request is something like “select * from classified where starttime > yesterday and starttime < today and paid = 0.” (This is an SQL simplification, but it serves our purpose.) The “*” indicates we are selecting all data from the classified table that meets the criteria.

The classified table contains the classified ad contents as well as information about the ad owner, such as the email address. It’s then a simple matter for the Java program to send an email message reminding the ad owner that the ad still has an amount due. The message can be personalized, and it can include the ad contents of the ad.

This is just one example of how to use a database, but it shows the potential power of one of the most common tools available to small businesses. Doing this operation manually would be a very time-consuming process and would require personal attention every single day. Using a database allows you to automate the entire process, freeing you to focus on growing your business, not just maintaining it.

If the technology is a bit beyond your personal capabilities, don’t despair. Remember, there was a time not long ago when most people were intimidated by the idea of owning their own computer. There are plenty of people around who can help you, and finding them will be well worth your effort.

The best place to start your search for help is from friends who understand the technology. They probably won’t want to do the work for you, and you shouldn’t expect them to. But they can help you screen the person who will do the work.

Professional help doesn’t have to break your budget. In most cases, you should be able to find a contractor for about the same price as a plumber, and often for less. But if you have a complex project in mind, you may want to seek bids from several computer consultants. n

EDWARD ARENBERG, vice president and CTO of EPage, created one of the first fully dynamic Web sites. He manages and develops for EP.com, EPage.com, and AdConnect.com.

Can You Relate?

Not all that long ago, we did almost all business with people face to face. Chances are, we knew them personally and had done business with them before. There was an established relationship.

Now, affiliates are doing business with people around the globe, and the chance of knowing them personally is pretty remote. But no matter where or how we do business, the need for a good relationship is still critical, perhaps even more so. People are not looking only for transactions; they’re looking for relationships. They’re looking for a positive experience, something that really enhances the trust and connection between the parties.

Several years ago, Jan Carlson, the former president of Scandinavian Airlines, wrote a best-selling book called Moments of Truth. Carlson’s belief was that every time someone had any dealings at all with a customer, it was a moment of truth. Whether it was a phone conversation or an actual one-on-one exchange, something happened. He knew that each time a customer had an encounter with his airline, it was going to either enhance or detract from the relationship itself, not just the value with the customer.

Marketing gurus recommend we be mindful of the lifetime value of a customer to look beyond the profit from an initial sale. It’s good advice, but I would take it a step further: Be mindful of the lifetime value of a relationship, not just a customer.

Relationships often go far beyond the customer. They extend to friends, family and acquaintances. How often have you done business with a company because your father, brother, friend or co-worker recommended them?

And it’s not only our relationships with customers that matter, it’s also with suppliers, coworkers, stakeholders, even competitors.

It’s a small world. And more and more people are checking you out before buying from you or partnering with you. Your reputation, which is largely established by how good you are at building and maintaining relationships, will determine someone’s willingness, or unwillingness, to enter into a business transaction with you.

And you never know how your relationship will evolve. I’m doing business with people today with whom I formed a relationship many years ago. We’re not in the same businesses, and in many cases we’re not even in the same industries. Our roles – customer, vendor, employee, employer are reversed. We’re able to do business now in our new roles because we had and have a good relationship.

In Mario Puzo’s screenplay “The Godfather,” a common expression was, “It’s not personal, it’s just business.” I think business is personal, very personal. And the more personal we can make it, the better our relationship will be and the more business we’ll do.

Most business communications today are highly impersonal. When you communicate with someone, especially via email, you can get attention by making it more personal. A warm, friendly style can begin to build a rapport and a relationship that increases sales.

People like to do business with people they like and trust. It’s incumbent upon us to foster an atmosphere where all parties develop relationships of trust, respect and cooperation.

We need to realize that there’s really no such thing as business-to-business or business-to-consumer. It’s people-to-people that counts. Once we get that, we can start to look at ways we can improve upon those relationships.

And it’s actually pretty simple:

  • Treat people the way they – the way you – want to be treated;
  • Keep your agreements;
  • Do what you say you’re going to do when you say you’re going to do it;
  • Under-promise and over-deliver;
  • Train your staff to go out of their way to please the customer;
  • Do it consistently;
  • Reward your customers and your employees when they communicate exceptionally well;
  • Tell the truth with compassion; and
  • Never lie. Never. Ever.

Show people you care. When people get that you care, you’ve got an excellent chance of building a solid relationship. Up until then, it’s just a transaction. Remember that people don’t care how much you know until they know how much you care.

Our profits and our ability to compete effectively depend upon how well we cultivate and nurture all of our relationships. Being honest, playing win-win and treating people fairly aren’t just moral things to do. They are good business, now and in the future.

MICHAEL ANGIER is founder and president of Success Network (at SuccessNet.org), which coaches people on personal and professional success strategies.

Should I Promote This Merchant

There are thousands upon thousands of affiliate programs offered by various Internet merchants. Deciding what programs to promote can be a daunting task. Let’s explore the factors most successful affiliate marketers consider when faced with this decision.

First and foremost, you must consider your site visitors’ propensity to purchase the product or service or take the “desired action” (filling out a lead form, etc.). You should consider the attractiveness of the merchant’s site and offer, but you also need to consider your ability to properly pre-sell the product or service and your interest in doing so. After all, if you don’t refer a qualified buyer, and if the merchant’s site doesn’t convert your referrals, you won’t be successful with this offer.

Once you’re satisfied, both you and your customers will be interested in what a merchant has to offer, then consider the following six factors.

1. The Agreement Read the Terms and Conditions of the program, and be sure you understand and agree with all the points. If there is no such document, move on.

2. Compensation Terms How much a merchant is willing to pay you is surely important, but you must also consider the expected conversion rate. Look at the program’s earnings-per-click, or EPC. A program that pays you $5 per lead may be far more attractive than one offering an average commission of $25 per sale. Using this example, if 10 out of 100 of your referrals submit a lead form, you’ll earn $50, with an effective EPC of 50 cents. If just one in 100 of your referrals makes a purchase, you’ll earn $25 with an effective EPC of a quarter. You’ll also need to consider the volume of clickthroughs, which isn’t part of the EPC measurement. In other words, if very few of your site visitors click on the lead campaign and many more click on the per-sale campaign, you could end up earning more total commission on the per-sale campaign, even though it does not convert as well.

The average EPC is public knowledge for many programs. If it isn’t disclosed, I urge you to write to the program manager to ask about the average EPC. I suggest participating in programs with a minimum EPC of 10 cents (unless you expect very high volume).

3. Return Days and Lifetime Commissions “Return days” refers to the length of time a cookie is set on your referral’s computer to allow you to earn commissions even if the referral returns directly to the merchant’s site.

The importance of return days will depend on the length of time a customer typically takes to decide to purchase a particular product. As a general rule, I suggest you consider programs with a minimum of 30 return days.

Many merchants expect customers to make repeat purchases. It’s even built into many situations, like ongoing services. As an affiliate, you should be compensated for future purchases, so look for these types of programs to offer lifetime commissions. (Especially good are those tracked by a database, where your referred customer is “assigned” to you and your ongoing commissions aren’t dependent on cookie tracking.)

4. Leakage I define leakage as any time affiliates don’t get credit for commissions they rightfully earned (based on the program’s terms and conditions). Below are a couple examples of leakage. Again, don’t hesitate to ask the program managers how they minimize these issues for their affiliate partners.

Phone Orders: There are ways to credit affiliates with their phone orders. (Contact me at my company if you’d like more information.)

Participation of Parasite Affiliates: This critical issue is beyond the scope of this article, but clearly you want to avoid programs that have relationships with affiliates who will intercept your referrals and claim the commissions for themselves. There are many sites and discussion groups where you can find lists of affiliate programs that have parasites participating in their programs.

Even if you’ve earned commissions, there are unscrupulous merchants who may not pay as they have promised or are very slow payers. Again, check the affiliate discussion boards before you start promoting any merchant to see if other affiliates have registered complaints about them.

5. Program Management If you’ve gotten this far in your evaluation of an affiliate program opportunity, then I suggest you also look for information about the program’s management. Have you been provided with full contact information for an individual you can reach with your questions or comments? If so, chances are, you’re going to get the support and guidance you will need to promote this merchant. On the other hand, if you’re given a generic email address (affiliates@companyxyz.com) that you find is unresponsive to your inquiries, this should be a red flag. I also suggest you avoid programs that use “customer service” to handle all kinds of affiliate matters.

A productive affiliate should be viewed as a true business partner or an in-house salesperson. Therefore, look at the quality of the sales promotion support. For example, does the program go “beyond the banner” and provide affiliates with good content in the form of articles you can publish and/or emails you can send to your subscribers? Do you have access to individual product links or a product data feed? Has it provided you with a list of its most important keywords and keyword phrases? Does the program manager keep affiliate partners informed of the hottest-selling products and most successful promotions? Are you provided with coupon/promotion codes or other special deals that you can offer your customers?

6. Reporting Most well-run programs will allow you to log in to your account 24/7 so that you can view your performance in real time.

While there are no guarantees, following these guidelines should help you to partner with those merchants who offer you the greatest chance of success. Above all, remember to work smart, run your affiliate activities professionally and be aware of red flags.

JIM GRIBBLE is managing director of LinkProfits.com, which he founded in 1999 to manage partnership programs. He also runs LinkProfit.net, an exclusive business development network, and PartnerIndustry.com, a resource for merchants and affiliates.

Bringing E-commerce Back Home

Jeannie Otero wanted to change her life. A single mom with two young daughters, she hated the three-hour round-trip commute to her job in Miami, time she would rather spend with her girls. She dreamed about starting her own business, thought about investing in real estate. But she had the age-old problem: You have to have money to make money.

Then, she heard that a good way to make money was to build a Web site that connected shoppers with online merchants. “I put up this funky little site called PartyClowns.com,” Otero laughed. “I didn’t know what I was doing at all. It had a bunch of links to coupons, and it didn’t actually have anything about party clowns.” But it was the first step in her road back home.

Otero had entered the world of affiliate marketing, a sort of parallel economy in which anyone at all can become an online retailer with almost no investment or experience. Two years later, she’s generating a good supplemental income and looking forward to quitting her day job. She’s discovered that all an affiliate needs is a combination of some smarts, some personality, some common sense and a ton of ambition.

Affiliate marketing has quietly become a booming industry, involving thousands of U.S. corporations, millions of affiliates and hundreds of millions of dollars in transactions. If you haven’t heard of it, here’s the deal: You sign on as a commission-only salesperson for an Internet retailer. You use all the creativity, intelligence and perspiration you can muster to get customers for that merchant – customers it might not find on its own. For every customer you refer to the merchant, whether it’s for a paid purchase, a new subscription or a name for its email-marketing list, you get a commission. Because merchants pay only for results, they consider affiliate programs a form of advertising called pay-for-performance.

Affiliates have the whole world of commerce at their fingertips. They can put together an array of products from global selection of retailers and offer them to their own customers. They typically build one or more Web sites that mix content with links to products on merchants’ e-commerce sites, and sometimes feature products in email newsletters or place ads on others’ sites. They never see or touch the merchandise themselves; the merchant handles all aspects of payment, warehousing and shipping. They get paid once a month, or whenever their commissions reach a pre-determined threshold.

Sounds easy, doesn’t it? It’s not. While just about anyone can sign up for an affiliate program and put up a site, earning those nice commission checks is another story. While figures are sparse, the Internet Affiliate Marketing Association estimates that fewer than 5 percent of Internet affiliates have revenue of over $100 a month. That’s because affiliates face some of the same challenges as any other entrepreneur. Inexperience and a lack of basic business skills short-circuit some people’s attempts. Others don’t have the drive to persevere without a boss standing over them.

According to AffTrack, a service provider that aggregates statistics about the industry, 2 percent of affiliates make 98 percent of the commissions. “Affiliation is so easy to get into, that you might only have 10 percent of people who sign up actively promoting merchants, and a smaller amount still might be making any real money,” said AffTrack CEO Scott McNulty.

Like any other frontier, the affiliate world is rambunctious and confusing. There’s more than a whiff of the old envelope-stuffing scam to this industry, where you’ll find site after site promising that you can earn thousands of dollars working at home a few hours a day. It’s also gotten a bad rap from unethical affiliates, who bear some guilt for contributing to the spam deluge. When evaluating affiliate programs, don’t forget to apply the rule that if something sounds too good to be true, it probably isn’t true.

Retailers know affiliates can drive sales and keep customers coming back, but they give most of their attention to the top producers. “Retailers have begun to think about the way affiliate programs will work for them in a more efficient way in terms of driving quality traffic and repeat traffic,” said Carrie Johnson, senior analyst with Forrester Research.

This doesn’t mean that there’s less opportunity for you as an affiliate. But it does mean that you’ll have to work smarter and better to be part of that successful 2 percent. Like everyone else in this tight-fisted era, online retailers expect more for their money.

While there’s more competition, there is still plenty of opportunity. Affiliate marketing is the second wave of transformation in the global marketplace. The first wave, the rise of the commercial Internet, put the power of information in the hands of consumers, letting them compare prices among merchants anywhere in the world. This second wave has leveled the playing field between huge conglomerates and individuals who represent online merchants.

Raison d’Etre

Sending traffic to merchants’ sites is the affiliate’s major goal. While you’ll find plenty of affiliate sites that are just lists of links, many experts say that it’s unique content that draws visitors and keeps them there long enough to get interested in your merchant’s offerings. “Your site has to have a reason to exist,” said Brad Waller, vice president of affiliate and business development for EPage, a content syndicator. “It’s rare that someone can create a site and make money from affiliation without doing anything himself. No one will look at it because it’s not original.”

This doesn’t mean that you have to be a professional Web designer or an experienced writer. Most affiliate sites are highly personal; like Otero’s, they’re often sparked by a personal interest in a particular subject.

“The personal touch makes a big difference,” Otero said. For example, she created a special Web page with a rave review of one baby item, just because she thought it was so neat. “I had eight visitors and made $20,” she said. Now, she writes introductions and personal notes for most of her Web pages and plans to write a personal review for the best product in each category for her BabyShoppingGuide.com site.

A smart way to decide what your first site should be about is to choose an audience, according to Robert Bennett, an affiliate with eight years’ experience who also runs affiliate programs for several ISPs owned by his company, Archieboy Holdings. “Do you have any connections in any industry, or any opportunity to market to a certain group that other individuals don’t?” he asked. “Identify the market you’ll target, then figure out what products they might be interested in.” For example, if you lead a youth organization, you could look for products related to school or sports, then build your site content around those products. Ideally, the products become part of the content.

Creating your site is a lot like merchandising a store. You could go broad or deep. For example, you might spend time finding absolutely everything anyone could ever want for camping and put it all in one place. From freeze-dried food to sleeping bags to flashlights to first aid kits, you’ve got links to it. On the other hand, like Jeannie Otero did, you could identify a niche, and then scour the Web for every baby Halloween costume available. In either case, the work you do to find and maintain fresh, working links and to gather or create interesting content is the value you add – and the way you make money.

It’s easy to find affiliate programs:

Just search for the merchant’s name plus “affiliate.” Many programs are completely automatic. “Just grab any banner, fill out the form, add the code to your

Web site, and you’re done!” one vitamin retailer promises.

If you’re working with many different merchants, maintaining one-to-one relationships with them all could get hairy. You’ll need to check that the merchandise you feature is still available, and then keep track of what they owe you and when they pay. While most merchants are honest, the message boards are rife with complaints and feuds about payments and other problems.

For more hand-holding and help, you could join an affiliate network. Networks are services that help affiliates and merchants find each other. Then, what’s more important, they manage the process of keeping track of commissions and paying the affiliate. There are several advantages to joining a network:

  • You can get organized and comparative information about a number of merchants without having to search through individual e-commerce sites;
  • In some cases, the network will act as a matchmaker, suggesting partnerships or products that make sense;
  • Some offer support, productivity tools and forums to help newbies learn;
  • They may offer reporting tools that let you analyze your various relationships and see how much income they produce; and
  • They back up your bookkeeping. Instead of keeping track of commissions and payments from multiple merchants, you get a single check each month from the network.

There are many different networks, and affiliates tend to choose them based on the merchants in the network; many work with multiple networks in order to get the range of products they want. Despite the growing interest in the

business and concomitant number of affiliates, “Good affiliates are always in demand,” said Hayley Silver, director of affiliate development for LinkShare, a network that offers tools and services for merchants and affiliates. “[For merchants], they’re your salespeople. No one is ever going to turn down a strong salesperson.”

Content Connection

Once you have an array of products and services to sell and an audience to address, it’s time to flesh out your Web site to make it a true destination. While everything on your site could be considered content, most of it will be in the form of text. That includes your original writing, articles that you reprint, classified ads and user-generated content in the way of forums and message boards. You can arrange to receive automatic updates of syndicated articles and news feeds, either free or for a charge. There are even content sites that offer affiliate programs. They provide free content and, if a visitor to your site clicks back to their site and pays to subscribe or read premium content, you get a little lagniappe.

According to affiliate marketing guru Ken Evoy, your site must satisfy the needs of visitors, the search engines and the merchants; if you serve visitors well, you’ll go a long way toward satisfying the other two players. Site visitors want outstanding information and interesting, highly relevant links. Lots of fresh, relevant content encourages visitors to bookmark the site, come back, and tell their friends.

After all, people who want a book on a particular subject or a recipe could go directly to an online bookseller and search its inventory. They also could plow through literally thousands of entries returned by a search engine. “If someone was searching for information and finds your editorial [content], that person feels smart for having found you, and you become a trusted source of reference,” said Evoy. “By the time that person arrives at the site of a merchant you recommend, she is presold.”

That doesn’t mean your content should consist of plugs for products. Quite the contrary. If your content simply hypes products, your readers won’t trust you. If you write a book review, for example, tell your readers what you really think of the book – good or bad. You’ll earn their respect with your honesty. Then they can decide whether to click on the link you provide to an online bookseller. If all your reviews are positive, your visitors will probably end up looking for a more objective Web site.

High-Traffic Destination

The most authoritative site on the Web is wasted if no one sees it. So, your next task is to lure visitors. If you’ve started with a pre-existing audience or circle of influence, provide them with valuable information and your traffic will grow by word of mouth. Others will find you through search engines.

There are two approaches to increasing your site traffic via search. Some people focus on optimizing pages for the different search engines, while others approach their Web sites as writers and editors, assuming that if the site seems relevant, search engines will find it without extra effort.

Optimizers geek out over page statistics and the workings of various search engines. They analyze how many times key words appear in each page and use them over and over to get a higher ranking for the page. They religiously check how high their pages rank in searches, then tweak pages in order to get them higher still. There are lots of software applications that help automate this process. Optimizers often engage in arcane practices such as “cloaking” or coding phantom pages that exist only to fool search engines. In order to play these games well, you’ll need to know HTML and even some programming languages like PERL.

Experts, on the other hand, focus on becoming the go-to resource for people interested in something specific. This approach requires a passion for the topic; a smidgen of previous experience won’t hurt, either. Instead of trying to trick the search engines, they create focused pages and pack them with information that “appeals to humans, not search engines,” as Evoy said. Because search engines are designed to help people find what they’re looking for, this method can create pages that rank high in search results with much less work.

But successful affiliates say you should never sit back and wait for traffic to find you. Be prepared to constantly expand your customer base with shrewd marketing. “There are lots of different tactics and techniques,” said Hollis Thomases, president of Internet marketing services company WebAdvantage. Affiliates can place banner ads on other Web sites, buy keywords on search sites, exchange links with appropriate sites, send emails to existing customers or contact the media and try to get press. Some affiliates spread their content around the Web by writing articles for other Web sites, making sure to include a link to their own sites. “All publishers tend to try all of them at one time or another, refining and tweaking to see what works best,” Thomases said. “That’s where the art comes in.”

Now, can you sit back and watch the checks roll in? Uh uh. Prepare for steady work to make your site better. Whether you go the optimization route and spend your work time fiddling with keywords and links to improve your ranking in the search engines or take the expert approach and create a series of new pages, treat your Web site as a living thing. Nurture it and the fruit of your labor will be financial success and the pride of owning your own thriving business. And, maybe, spending more time with your kids.

Susan Kuchinskas, managing editor of Revenue, has covered online marketing and e-commerce for more than a decade. She is also the co-author of Going Mobile: Building the Real-time Enterprise with Mobile Applications that Work.

Affiliates, Start Your Engines

Unless you’ve been living in a cave for the last year or so, you probably realize by now that in order to get customers to your affiliate site you have to market it on search engines. Even if you haven’t realized this, your competitors certainly have, and if you don’t take advantage of what the search engines have to offer, your Web site is likely to go the way of many other dot-com dodos.

Over the last few years search engines have emerged as the most viable option for reaching many users on the Web. As an Internet marketer, your success online may be determined by how well you learn how to play the search engine marketing game.

In recent studies, search engines emerged as the number one way people find products or services on the Web, with about half of all Internet users utilizing search engines to find you.

Searching for what you need using search engines has become so ingrained in the Internet psyche that people even go to a particular engine like Overture, and type searches like www.Yahoo.com in the search box, instead of typing that URL into the address bar. Some of the top searches on many of the search engines come from people using the search engine to find other search engines.

As you may also have noticed, search engines are in the news lately. Google is always grabbing headlines, and the industry has consolidated, with many of the larger companies gobbling up the smaller folks in a race for Internet dominance. First, Overture bought Alta Vista, Fast and AlltheWeb; FindWhat merged with Espotting; and now Overture is hand-in-hand with Yahoo, which already purchased Inktomi.

MSN is beefing up its own search services in order to compete, and is rumored to be eyeing Looksmart and Ask Jeeves as potential purchases. So a realistic scenario in the next few years will be that three major engines will control over 80 percent of all U.S. searches on the Web, and the balance of searches will be performed between hundreds of smaller engines.

How can affiliates take advantage of that information?

Think of some keywords that represent your business. There are hundreds of Web sites competing with you for placement in millions of searches per month. Competition will only get worse as more businesses start to get their Internet act together. You can’t ignore search engines in your marketing efforts if you want to succeed. And, after all, search engines do have many advantages:

Affordability: The cost of a lead gained from a search engine marketing campaign is currently averaging about 29 cents. That’s a significant savings from the next least expensive Internet marketing vehicle, which is email at 50 cents per lead, according to a study conducted by Jack Myers LLC and presented at a Direct Marketing Association conference last March.

Equality: The Internet is still the great equalizer when it comes to marketing. Any affiliate marketer or small business with a Web site can utilize smart search engine marketing practices and to compete with their larger and better-known competitors. Even though you may not have the money to launch a large search engine marketing campaign, with a little knowledge, you can do most of the work yourself and still compete with the big boys. Many small businesses have built a decent living just using the power of search.

Flexibility: There are very few other venues where you can control so many aspects of the marketing campaign and stick a toe in the water for very little money. Search engine marketing allows you to test copy, placement, budget, messages and offers, on the fly, in real time. You don’t have to commit to a long-term contract or a minimum buy. You control the amount you spend, the cost per lead and the duration of the campaign.

Accountability: If you set up your tracking correctly, you can easily and quickly establish the return on investment (ROI) for your campaign. This will allow you to correct as you go, redesign your Web site, change your product offering and make adjustments based on your profit margin. Never start a search engine marketing campaign without the proper tracking in place. You can learn so much from the insight you receive that you may have to rethink your whole business model.

Accessibility: You can reach more targeted users utilizing search engine marketing than with any other marketing vehicle. You can target your campaign locally if your business is constricted by geography, or internationally if the world is your marketplace. Either way, Internet use is only going to grow in the next few years, so don’t let this opportunity pass you by.

In light of all this, it seems obvious that the more you can learn about search engine marketing, the more successful your Internet business will be. You don’t have to do it all yourself, but you should certainly know how it’s done. That way you can decide whether to keep search engine marketing in-house or hire someone else to do it. Either approach will yield good results.

In future columns I’ll discuss the different forms of search engine marketing and provide you with plenty of tips and tricks to ensure that you get your fair share of Internet customers. We’ll delve into all those acronyms you may have heard bandied about but never knew the definition of. Yes – the joys of SEO, WSO, PPC, CPC, SEM, PI and others, lie ahead. (Somebody stop me!)

MARY O’BRIEN is a partner at Traffic Mentor.net. She has worked in Internet marketing for the past five years and was formerly senior director of sales at Overture.com.

Blair’s Flair For Affiliate Marketing

How did a 93-year-old company that got its start selling black raincoats to funeral directors by mail wind up as a big winner in affiliate marketing?

Blair did it by building an innovative affiliate marketing program that does just about everything you’d want it to. And the effort is paying off handsomely. While year end results weren’t available, the program appeared on track to generate about $14 million for 2003.

Blair, like thousands of other corporations around the globe, is learning quickly that a low-cost affiliate program can help offset slipping revenue in other sales channels. It’s a strategy that helps Blair maintain its position as the 8th largest U.S. clothing retailer, competing with the big chains like J. C. Penney, Wal-Mart and Sears and the catalogue icons like Eddie Bauer, Spiegel and Land’s End.

“As we work to more fully integrate our offline and online marketing initiatives into a seamless cross-channel experience, our affiliate program is well positioned to play a key role in our growth,” said John E. Zawacki, CEO of the Warren, Penn.-based merchant.

The beauty of the typical affiliate arrangement for Blair is the high return on investment in the program. “There is some overhead associated with managing them, but in the grand scheme of things, it really isn’t a lot,” said Jeff Parnell, Blair’s vice president for e-commerce.

To be sure, affiliate sales still make up a small fraction of Blair’s total revenue, which totaled $568.5 million in 2002. The company generates most of its sales through its traditional catalogue operation. It also operates four retail stores – three in Pennsylvania and one in neighboring Delaware. But the rapid growth of the affiliate program combined with the increasing importance of other online activities is helping Blair adapt to a shifting market.

Like the majority of large companies, Blair grew fascinated with the potential of e-commerce during the late 1990s. The reality was clear. Blair’s traditional customers were getting older and the company had to appeal to younger, more active shoppers in new ways in order to attract new business. The Internet, management was convinced, was a pathway that would lead the company to its next level of success.

Blair’s most popular offerings appeal to older women who order mostly through the catalogue. To attract more baby boomers, the company put more emphasis on Blair .com and also created a hipper new brand, Crossing Pointe, with its own catalog and Web site. As a result, Blair put itself in place to compete on price and style through catalogues, retail stores or the Internet.

During the first quarter of 2000, Blair made significant progress in its strategic plan to establish an interactive e-commerce Web site. The new site would become a key part of the company’s program to capitalize on the rapidly expanding market of online shoppers, boost sales and shrink operational costs. Blair launched the site with plenty of time to get the bugs out before the vital holiday shopping season.

It was a good start. But a lot of companies took similar steps during the dot-com craze, and many of those efforts floundered. What set Blair apart was its almost uncanny ability to make just the right moves as its strategy began to unfold.

There are always things that can be improved. For example, we wondered how Blair.com would rank against competitors on Google. So we asked 10X Marketing, a firm that specializes in search engine optimization, to find out. Neither Blair nor Crossing Pointe showed up in the top 200 sites. An archrival, Coldwater Creek, ranked ninth, and an affiliate site called Blair-Clothing.com showed up at 148. Clearly, Blair could work on that (see chart on page 26).

However, in our look at Blair, we noted eight distinctions that set Blair’s effort well above many competitors. None is rocket science. In fact, you’ll see most of these strategies recommended in other parts of this magazine. But Blair’s revenue growth is proof that they work when executed properly.

1. Effective Promotions

Chris Park, who manages Blair’s affiliate program, said affiliate marketing works for Blair because savvy affiliates are “able to market some promotions, percentage-off savings and reduced price or free shipping” all bona fide inducements to the target market.

Those are just the right perks to attract repeat online buyers, according to the 2003 Retail Consumer Retail report from Jupiter Research. The report shows:

  • Discounted shipping and handling continues to be consumers’ favorite online promotion.
  • 33 percent of buyers often or sometimes make unplanned purchases to take advantage of a special deal or promotion. For the foreseeable future, retailers will still have to provide incentives to influence these purchases.
  • High or hidden shipping and handling charges have led 44 percent of buyers to reduce their purchases at certain stores, and 36 percent of buyers have stopped buying because they have been required to register at certain stores.

“It’s one thing to put a banner (ad) up,” said Park, “but it’s quite another to say, ‘You’ll get $50 worth of free shipping.”‘

2. The Right People

Park’s presence at Blair is, in itself, a sign that Blair’s pro-gram is on the right track. It isn’t enough simply to have someone in charge of online sales. Running an affiliate marketing program at a large company is a full-time job.

“Chris is able to give affiliates his hands-on attention. He is in constant contact with them about upcoming offers and promotions – two key components to a successful AM program,” said Parnell.

“One of the biggest keys is to have at least one person dedicated to it,” said Shawn Collins, author of Successful Affiliate Marketing for Merchants. “One of the biggest mistakes I see is that people assume it’s a magic bullet all by itself, but you have to dedicate staff to it full-time.”

3. The Right Products

Time is precious to affiliates, and most won’t promote a product unless they believe in it. Blair’s longevity bespeaks the quality of its goods. Clearly, no catalog company could survive so long without products that please consumers.

“You’ve got to have value,” said Parnell. “If the products don’t sell on repeat business, the affiliates don’t want to work with you. The fuel in the affiliate marketing program engine is the merchandise.”

The new brand, Crossing Pointe, was closely tied to the Web strategy. The brand’s mission was to provide fashion items at moderate prices to the 37 million female members of the baby-boomer generation, those 36- to 54-year-old women who presented a huge opportunity for Net sales. It’s a crowded market and Crossing Pointe is unknown to many shoppers, but Blair relied on its traditional value proposition to build the brand.

“We’re not L. L. Bean when it comes to name recognition,” said Park. “We service middle-income America with value-priced clothing.”

4. Strong Partners

“Partnerships and alliances are key building blocks in today’s marketplace, so we are encouraged about our [affiliate] program’s short and long-term potential,” said CEO Zawacki.

Parnell, who came to Blair from Performics, hired his old company to provide the technology for tracking affiliate sales, but he opted to keep program oversight and the handling of key affiliate relationships under Park’s control.

“[Performics] is a very important partner and they are very visible and active in selling [affiliate relationships] in their own right, but we also enhance and synergize that effect,” Parnell said. “We do a lot of our own research and follow-through.”

5. The Big Affiliates

The mainstays of the affiliate program are the big online shopping malls that feature hundreds (sometimes even thousands) of consumer shopping options. To set itself apart from competitors, Blair has paid slotting fees for preferred placement on selected sites.

“This is similar to what is done in a grocery store where companies pay a fee to have their products displayed at eye-level instead of the bottom shelf, or to be next to the chips and pop section,” said Parnell. At CouponMountain.com, for instance, Blair.com, filled the top slot on the women’s clothing page. (When we looked, Gap was in the second spot.)

At ActivePlaza.com, another affiliate, Blair.com was featured in the top slot on the women’s clothing page in October. CrossingPointe dominated the right side of the page. At a third affiliate, IShopWorld.com, Blair.com’s link was prominently featured in the top-selling women’s clothing store slot. A rival, Coldwater Creek, received even better billing with an overhead banner ad.

Blair is regularly featured on a wide range of loyalty-based sites, like EBates .com, that offer points, airline miles, rebates and other perks to Internet shoppers. And then there are the smaller storefront sites that may feature only a handful of buying opportunities.

“Blair does very well with affiliates that offer something back, sites like MyPoints and EBates, where you get something back,” Park explained.

Advertising is fine, but personal relationships also play a key role in building sales at these very important affiliates.

“The relationship we have with Blair is so strong because of the communication they have with us,” said Chris Washburn, head of business development for CouponMountain.com. “Chris Park is my communication link with Blair, and he is always sending me information about deals and coupons, which, as you can tell by our name, are very important to us.”

6. Mom and Pop

“We do work with a lot of smaller sites and we literally have thousands of mom-and-pop operations in our affiliate marketing program,” Parnell said. And, by the nature of affiliate marketing, those thousands of affiliates instantly become evangelists for Blair. Of course, Blair is continuing to recruit more.

Becoming active on the affiliate marketing industry message boards run by IAFMA.org and ABestWeb.com is a great way to get more affiliates, according to Collins, whose full-time job is marketing manager for ClubMom.com, a membership organization for mothers.

“They (message boards) are great for recruitment, so it’s great to take an active role in the industry and show that you really care,” Collins said. “I track all of the links I post and a lot of recruiting comes from there. It’s an indirect way to recruit new affiliates.”

Is there any screening before affiliates can sell Blair merchandise?

“We retain the right to approve any affiliate marketer,” Parnell said, using words like “objectionable” and “polarizing” to describe the types of sites that Blair would shun.

The big affiliate marketing program companies, like Performics and Commission Junction, also have guidelines regarding the types of sites they will work with and requirements for affiliate marketing participants.

Through Performics, the mom-and- pops earn a 9.5 percent commission on Blair sales. At Commission Junction, the commission Blair pays is 8 percent.

7. Top Line Growth

Strategies are nice, but this is business. And the changes to the online program showed measurable results almost immediately. That’s a key for any corporate e-commerce effort in the aftermath of the dot-com meltdown.

“For the first complete year [after the re-launch of Blair.com], online revenue grew to $35 million,” said Parnell. “In 2002, that number went to $58 million. By the halfway point of 2003, online sales climbed to $36 million.”

8. An Open Mind

Blair aims to extend its marketing relationships and online partnerships wherever and whenever the opportunities present themselves – even if the payoff isn’t obvious or conventional. Parnell cites Blair’s relationship with Tide, the icon detergent brand from multi-product powerhouse Procter & Gamble, as an example of the latter.

“We’re working with Tide and they’ve got a link on our site as part of their Give Kids the World program,” he said. “That’s a good example of two companies working together in a different sort of way.”

A link from Tide’s home page sends interested parties to Blair.com to complete the purchase of a model car – a die cast 1/64th scale replica of the 2003 Tide #32 Winston Cup racer. Through a link from Blair.com’s home page, shoppers get a chance to learn more and support the program. In both cases, the Web page is also a platform for Blair to plug its latest set of email specials.

“Any business book you read today talks about alliances and partnerships and ‘co-opetition,'” Parnell said. “Activities like this simply give companies like us more opportunities to work together.”

And working together is really what affiliate marketing is all about.

FRANK THORSBERG, is a veteran business writer with experience covering finance, small business, technology, sports and investments for a wide range of online and offline publications.

Here’s Herby

From his passionate crusades against spam and “scumware” to hosting his group’s annual summit, the baritone-voiced entrepreneur has a knack for stirring things up and forcing long-neglected ethical issues to the front burner. Now, he’s ready to launch an accreditation program that would require participants to act more responsibly.

Herby (hardly anyone uses his last name) has been a leading advocate for the creation of a magazine about affiliate marketing and generously shared his expertise as we assembled this first edition of Revenue. Herby sat down recently with Editor-in-Chief Tom Murphy for a frank talk about his organization’s background, problems and goals.

TOM MURPHY: Why was your group formed, and what does it hope to accomplish?

HERBY OLSCHEWSKI: In 1999, I was a speaker at an affiliate marketing conference in San Francisco. There were about 700 people in the audience who basically paid money to listen to different affiliate solution providers bicker with one another. It made me realize there was a need for an association.

Our main goal is to help merchants and affiliates keep it fair in revenue share. That’s really a two-sided coin. It’s to help merchants understand what affiliates need in an affiliate program. And we have to help affiliates understand how best to reach the revenue share opportunity offered by merchants.

TM: How big is your association?

HO: We have just over 4,000 members, and that’s really without having done any sort of membership drive. Hence, we know that there’s a need to band together into a professional platform that will help to further the interests of affiliate marketing.

TM: How many of your members are merchants?

HO: We estimate about 55 percent of our members are merchants with affiliate programs. About 45 percent are pure affiliates. We must remember the overlap; there are affiliates who are merchants and vice versa.

TM: What are the top two issues facing the industry right now?

HO: Predatory advertising and the need for the public to understand just what affiliate marketing really is.

TM: Let’s start with the second one. What do you think is the misconception about affiliate marketing?

HO: The first misconception is that affiliate marketing is actually some kind of multi-level marketing. Nothing could be further from the truth. The basic difference between an MLM program and an affiliate program is the commission structure. In a multi-level program, you can have anywhere from three to 16 levels. In an affiliate program, there are only two levels, a first tier and a second tier. It can be equated to a car dealership where you have a car manufacturer making cars available to a wholesaler and the wholesaler having dealers out there.

TM: I think a lot of people who hear “multi-level marketing” think about pyramid schemes. Do you think that?

HO: One of the goals of the association is to fight the trend of multi-level programs in companies that are trying to get around the stigma of that area by calling their revenue-share opportunities affiliate marketing. The Internet Affiliate Marketing Association takes a strong stance against that. And the way to do that is to educate the public on what affiliate marketing really is.

TM: The other area you mentioned was predatory advertising. Can you explain the problem there?

HO: Let’s first see how these predatory advertising mechanisms are distributed. The first is a Trojan horse mechanism where a software company will offer freebie software that might appear to be a music file-sharing program or whatever the case may be. What they include in that software program is a memory-executable program that will determine when the user goes online to search for a particular product or service. So, if somebody were searching the Web for “baby clothing,” that program in memory will remember that and will pop up an advertisement for baby clothing. That makes it very targeted for a merchant. The merchant will have a much higher success rate from that pop-up. But the problem is, how did that pop-up get into that system? The user, nine times out of 10, doesn’t even understand that they loaded that program onto their computer.

TM: When people first hear of affiliate marketing, the first image that pops into their heads are all the ads for male potency drugs, bank loans, or weight loss products that trash-up their in-boxes. Is that affiliate marketing at work?

HO: No, that is not affiliate marketing, but we do have affiliates that go out and spam in order to increase their commission rates. We help merchants identify who those affiliates are, and we would actually report them to the merchant. It’s in the best interest of the merchant to curtail that and to expel that affiliate from their affiliate program.

TM: I know you certify people within your organization. How does that touch on some of the ethical issues, like spamming or predatory advertising?

HO: We’re launching a certification process where our members can apply to be an approved merchant, an approved affiliate, a recommended solution provider, etc. The difference between membership and the certification process is that we want everybody to feel welcome to be a member, including the unethical people and the uneducated people.

Our mission is really to educate our membership, and the certification process revolves around our manifesto. The member voluntarily agrees to sign the manifesto and agrees to abide by a certain code of ethics. One of those line items in the code of ethics is regarding spamming. They have to make a public declaration that, A, they won’t spam, and, B, they won’t tolerate affiliates who do spam.

TM: You’ve had your share of controversy within your organization recently. Some of your postings on bulletin boards were deleted and I know you took some flak personally for making that decision. Can you tell me what happened and why you did that?

HO: In most online forums, people sign into the forum with a pseudonym, Zorro123, or XYZ. We’re opposed to that in our forum. We have a very strict first-name, last-name policy. We believe that anyone who says something in our forums should do so under their own name and with personal decorum. We don’t have moderators. What happened recently was that some of our members got too emotive about the industry, and specifically about predatory advertising. We don’t believe in making litigious, derogatory statements against merchants, so we curtailed that sort of behavior.

We created a thing called “Forum Decorum,” which is very basic. It’s Professionalism 101 on how people can debate with one another. Four of our members chose to flaunt that publicly, and we had no choice but to enforce a seven-day posting suspension. They reacted to that as censorship, and they voluntarily left the association. And, to be quite honest, good riddance. Our forums have ended up being far more professional as a result.

TM: In another recent controversy, you recently had a split with one of your long-term colleagues within the association. Could you talk about that?

HO: That involved the previous president of the United States chapter of our association. We had a difference of opinion as to the role of affiliate managers in the association. He wanted a bigger voice for affiliate managers and a separate forum that only affiliate managers could enter. The association in general is against that sort of thing because we don’t want to create a them-versus-us situation. We believe affiliates, merchants and anybody else in the industry should be on equal footing and should be available to each other to discuss issues. This individual subsequently decided to start his own forums for affiliate managers and also decided to start a rival summit to our summit, which is now in its fifth year. (See sidebar: Shawn’s Turn)

TM: Do you have a rough estimate of how many affiliates there are in the world?

HO: It’s almost impossible to say. If I had to take a guess, I’d say it’s in the 10 million, to 15 or 20 million range. Now these are people who may or may not be operating a successful affiliate program.

TM: I would think many of those would be participating in more than one program. When you eliminate the duplicates, the final number of affiliates is actually quite a bit smaller, isn’t it?

HO: Yes, an affiliate may be a participant in more than one affiliate program. It’s almost impossible to say [how many affiliates do that] until we can establish from the affiliate managers themselves. Because of the privacy policies in most affiliate programs, it’s almost impossible to say.

TM: When we talk about the number of affiliates out there, the truth is most of them don’t make a lot of money. Isn’t that right?

HO: Absolutely. I would hazard to guess that less than 5 percent of the affiliates out there actually make any money at all. A popular theory is that most affiliates don’t even make $100 a month. But there are some that make hundreds of thousands of dollars a month. It works in the two extremes.

TM: We’re looking at a few of those success stories in the magazine. What in your mind is the difference between them and the others?

HO: The difference is really how well the affiliates niche themselves. If you look at a stay-at-home mom or someone trying to derive a second income from the Web, then they need to focus on something. Let’s take baby clothes for example, or retail clothing. They really have to build a site around that, and they will make money. You’re not going to make money by just creating a site and slapping up a banner for it. Your success will be extremely limited that way.

TM: How many merchants would you say are involved?

HO: We have a mailing list of over 7,000 affiliate managers, so the estimate is that there are anywhere between 7,000 and 10,000 affiliate programs.

TM: That strikes me as a very low number when you consider the number of corporations there are in the United States.

HO: The problem is that affiliate marketing was perceived as the underbelly of the Internet. It was seen as people sitting at home in their pajamas, writing scripts in order to generate incomes from affiliate programs. In the dot-com era, it was one of the things that suffered. A lot of affiliate programs went under. And affiliate marketing was hyped up. Companies didn’t get the return they were expecting, and they left affiliate marketing. Our job now is to get those companies back.

TM: What do you see as the greatest challenge for the year ahead?

HO: The greatest challenges for the year ahead are, A, get the public to understand what affiliate marketing is and, B, keep the companies from being wooed away by the predatory advertising agencies. What ultimately could happen is that affiliate marketing could die away, and a great opportunity would be lost to help companies market their goods on a pay-per-performance mechanism that makes far more sense.

TM: What is your vision for the association going forward?

HO: The vision is that everybody is welcome, and those who do choose to be part of the organization need to abide by a simple manifesto that lays down industry standards. We’re not going to get all merchants in there. We’re not going to get all affiliates in there. We just want to create a little oasis for people and to grow the association. Over a period of time, people on the outside will realize the benefits of being on the inside, and the association will just grow naturally.

TM: It almost sounds like you are building a self-regulatory organization. Is that because of the lack of regulation internationally on the Internet?

HO: Absolutely. If you look at the Internet as a whole, it’s a great medium for global communication, but without frontiers. We already know it’s going to be absolutely impossible for any one country to control the Internet. That’s even truer in the case of affiliate marketing where an affiliate in New Zealand can be making a lot of money out of merchandise in Cleveland, Ohio. Who is going to lay down regulations? No country can do that.

TM: Say I’m getting spammed. Is there anything I can do as a consumer to get your association to help me out?

HO: Yes, absolutely. We’re shortly going to be publishing a series of guides to look at affiliate marketing from various points of view. And the very first guide is actually the rev-share guide from a consumer perspective. And we’ll be telling consumers how to combat spam, how to get discounts on products, how to use affiliate marketing to their advantage.

TM: I have a personal philosophy that it takes about 20 years for new media to develop. We saw that with radio and television. Since the dissemination of the first popular browser, Mosaic, it’s only been about 10 years. I think we have another 10 years to go before the Internet really matures. Do you believe that’s true?

HO: I do. We see a lot of consolidation in the industry. Web sites are consolidating. Dot-com companies are getting together. Affiliate marketing is really an opportunity for the average guy or lady in the street to derive a second income from the Web and also for the small merchant to sell their products on the Web beyond the realm of traditional advertising, which is unaffordable in many cases.

I think probably in the next 10 years, affiliate marketing is going to grow in three ways: as a way for merchants to sell their products, as a way for people to make a second income on the Web, and as a way for corporations that can actually reduce their advertising expenses by learning how to pay for performance and not just shove money into ads.

Guerrilla Affiliates

Because you’re reading Revenue, which is as focused upon affiliate marketing as you are, I doubt if I have to remind you of the glories of such marketing. If ever there was a win-win business proposition, this is it. If affiliate marketing is good enough for Wal-Mart, Amazon and eBay, I’m figuring that you realize it’s also good enough for you. Do you know what you have by the millions? Potential affiliates.

But (and my wife once warned me to listen extra carefully to everything that comes after the word “but”) like the Web, affiliate marketing does not do the job. It only helps to do the job.

“The job” is to market your program to planet Earth, especially to your own affiliates. They are well-meaning people, every last one of them, but they need you to show them how to cash in on their affiliation with you.

In addition to giving your affiliates a dynamite product or service, a generous commission and a vision of financial splendor, you’ve got to give them non-stop sales support. You’ve got to arm them with ultra-powerful marketing tools to help them sell your offering.

So send them ads that they can put in their e-zines, email letters they can customize for their customer lists, banners to add pizazz and profitability to their sites, even online audio marketing to keep your marketing fresh and up-to-the-moment. You’ll see the difference.

If you can create killer articles with a link to their site, they can send those articles to their newsletter readers. Traditional marketing is a full-spectrum affair, affiliate marketing is no different.

Set a time each month for a tele-class pep talk to your affiliates. Single out the ones who have done the best and share their secrets with your other affiliates. Let them know that you sincerely care about their success with your marketing support, your regular telephone presence, your tone of voice, your passion. Passion is contagious, you know. And you want passionate affiliates.

But mere passion isn’t quite enough. You also need solid marketing savvy, which means marketing your affiliate program anywhere and everywhere you can.

Guerrillas know that all the media work better if they’re supported by the other media. Feature your affiliate program on your Web site. Put your Web site onto your TV commercial. Mention your advertising in your direct mail. Refer to your direct mail in your telemarketing. Plant the seeds of your affiliate program offering with some kinds of marketing, then fertilize them with other kinds.

You’re not really promoting your affiliate program unless you’re cross-promoting it. Your trade show booth will be far more valuable to you if you promote it in trade magazines and with fliers put under the doors of hotels near the trade show. Guerrillas market their affiliate programs with the same zest and vigor devoted to their primary offering.

Multimedia

Your prospects, being humans, are eclectic people. They pay attention to a lot of media, so you can’t depend on merely one medium to motivate a purchase. You’re got to introduce the notion of your affiliate program, remind people of it, say it again, then repeat it in different words somewhere else. That share of mind for which guerrillas strive? They get it when they combine several media. They say in their ads, “Email, call or write for our free brochure.”

They say in their yellow pages ad, “Get even more details at our Web site.” They enclose a copy of their magazine ad in their mailing. They blow up a copy to use as a sign. Their Web site features their print ads.

Guerrillas are quick to mention their use of one medium while using another because they realize that their affiliates equate broadscale marketing with quality and success. They know that people trust names they’ve heard of much more than strange and new names; and guerrillas are realistic enough to know that people miss most marketing messages, often intentionally. (The remote control is not only a way for TV viewers to save their steps but also a method of eliminating marketing messages.)

No matter how glorious their newspaper campaign may be, guerrillas realize that not all of their prospects read the paper so they’ve got to get to these people in another way. No matter how dazzling their Web site, it’s like a grain of sand in a desert if it is not pointed out to an unknowing and basically uncaring public.

Cross-promoting your affiliate program in the media is another way to accomplish the all-important task of repetition. One way to repeat yourself and implant your affiliate program message is to say it over and over again. Another way is to say it in several different places. Guerrillas try to do both. Nothing is left to chance.

If you saw a yellow pages ad that made you an offer from a company you’ve never heard of and another with the same offer except that the ad said, “As advertised on television,” you’d probably opt for the second because of that added smidgen of credibility. I rest my case.

Psych ’em

The psychology of marketing an affiliate program requires basic knowledge of human behavior. Human beings do not like making decisions in a hurry and are not quick to develop relationships. They certainly do want relationships, which is what affiliate programs are all about, but they’ve been stung in the past, and they don’t want to be stung again.

They have learned well to distrust much marketing because of its proclivity to exaggeration. All too many times they’ve read of sales at stores and learned that only a tiny selection of items were on sale. They’ve been bamboozled more times than you’d think by the notorious fine print on contracts. And they’ve been high-pressured by more than one salesperson. In short, they’ve been used.

That’s why they process your marketing communications about your affiliate program in their unconscious minds, eventually arriving at their decisions because of an emotional reason even though they may say they are deciding based on logic. They factor a lot about you into their final decision – how long they’ve heard of you, where your marketing appears, how it looks and feels to them, the quality of your offer, your convenience or lack of it, what others have said about you, and most of all, how your offering can be of benefit to their lives.

Although they state that they now want to help you sell what you’re selling, and they do it in a very conscious manner, you can be sure they were guided by their unconscious minds. The consistent communicating of your affiliate program benefits, your message and your name has penetrated their sacred unconscious mind. They’ve come to feel that they can trust you, and so they decide to sign up and work their tails off for you.

Any pothole in their road to purchasing at this point might dissuade them. Are they treated shabbily on the phone or forced to wait for an email response? You’ve lost them. Do they access your Web site for more information and either find no Web site or find one littered with self-praise? They’ll leave. Do they visit you and feel pressured or misunderstood? They’re gone.

You’ve got to realize that the weakest point in the marketing of your program can derail all the strong points. Excellence through and through, start to finish, is what potential affiliates have come to expect from businesses, and these days, they won’t settle for less.

Understand Them

Just keep in mind that affiliate marketing is a 360-degree process, and you’ve got to do it right from all angles at all times. When it comes to affiliate marketing, people have built-in alarm systems, and any shady behavior on your part sets the bells to clanging, the sirens screaming.

It is very difficult to woo a person from the programs they support right now to your program. Although they are loathe to change, they do change. And when they do, they knock themselves out as high-energy affiliates and all because you’ve proven that you understand the psychology of human beings and the true nature of marketing. That depth of understanding is what they’re hoping for.

If you give your affiliates exactly what they hope for, there’s a strong chance they’ll help you get what you hope for.

Guerrilla marketers are able to get what they hope for because they know that the key to successful guerrilla marketing is in embracing not the concept of competition, but the beauty and advantage of cooperation. And cooperation is the lifeblood of affiliate marketing, it’s raison d’tre.

One of the most rewarding, inexpensive, underused and effective methods of all marketing is to align your marketing efforts with the efforts of others. In the

U.S. this used to be known as “tie-ins.” A Business Week cover article referred to it as “Collaborative Marketing.” In Japan and by guerrillas worldwide, this make-everybody-wealthy marketing tactic is called “fusion marketing.” Affiliate marketing is the highest form of fusion marketing because it is so performance-based and has mutual gain as its goal.

Fusion marketing is the guerrilla saying, “Hey Sara, if you enclose my brochure in your next mailing, I will enclose your brochure in mine. And I’ll give you $5.00 for every new customer who mentions your name.” And it is, “OK, Randy. And if you put up a sign for my store in your business, I’ll put up a sign for your business in my store. If I get a customer who says you sent them, I’ll give you ten bucks.”

Sara and Randy immediately see the wisdom in the guerrilla’s affiliate offer. Their marketing exposure has just been expanded. Their marketing costs have just been reduced. Hey, this is a good idea! Of course it is! Why do you think you’re watching all those McDonald’s commercials that turn into Coca-Cola commercials and end up as Finding Nemo commercials? Why do you think so many members of frequent flier clubs have learned that their airlines have fused with hotel chains, auto rental companies, even cruise lines? Because there’s a whole lot of fusing going on. And today, the majority of it is affiliate marketing, by whatever name you choose.

Gone Cyber

Now it’s online. It’s happening very visibly among the large businesses, but it’s happening more frequently among small businesses, even teeny-tiny businesses. The gas station fuses with the video store. The restaurant fuses with the clothing store. The sporting goods store fuses with the ski area and the tennis club and the golf course. It’s happening all over.

The purpose of an affiliate marketing arrangement is mutual profitability. Glad we’re clear on that one. Realize that almost everyone in your community and on your planet is a potential affiliate, that almost all of them will see the wisdom in your suggestion of a connection for mutual profit.

The key for you to keep in mind at all times is that your affiliate program is a lot like your product or service. It must spring from a basic marketing plan. It should adhere to your marketing calendar. It requires patience, repetition, consistency, and aggressiveness in your overall marketing effort.

It takes commitment to your plan, an assortment of marketing tools, constant testing, precise measurement of results, and your time, energy, imagination and knowledge. But it does not take your money. It provides you – and your affiliates – with money if you go about it the right way.

In this magazine, you’re learning how to go about it right. In this article, you’re learning how to market it right. You can’t ask your Dad or your college professor to help you on this one. Affiliate programs are too new for them. But they’re right on the money for you.

There is no real magic in marketing. And there is no real magic in affiliate marketing. But when you combine the two and season them with your own marketing insight, “abracadabra” might become your battle cry.

Jay Conrad Levinson, is the author of the Guerrilla Marketing series of books, the most popular marketing series in history, with 14 million copies sold in 39 languages. GuerrillaMarketingAssociation.com features marketing ideas and information about its affiliate program.