Affiliate Market Maturing

The affiliate space is getting more sophisticated and complex, according to the findings of the AffStat 2006 Report, an annual study examining the state of the affiliate marketing industry.

Released earlier this year by Shawn Collins Consulting, the survey polled nearly 200 affiliate managers from a cross section of the industry on their overall statistics, as well as a number of issues about their affiliate marketing channels, such as staffing, recruiting and management.

Of those surveyed, 77 percent were pay-per-sale, 19 percent pay-per-lead and 4 percent bounty affiliate programs, which is almost exactly in line with the report’s 2005 breakout of how companies paid out commissions.

Over the last year, however, the size of pay-per-sale programs seems to have shifted. The latest report shows an increase in the number of affiliates in the midrange, with 23 percent of this year’s respondents reporting 5,001 to 10,000 affiliates compared to 13 percent a year ago, yet 18 percent said they had too many affiliates to manage effectively.

The trend toward smaller programs is also on the rise. A year ago, 16 percent of respondents had between 2,001 and 5,000 affiliates. The latest figure jumped 7 percent for 2006. Last year, however, 26 percent of respondents had 5,000 or more affiliates and rose just 3 percent for 2006.

Part of moving to small programs is that merchants are giving more scrutiny to the affiliate approval process. And while 17 percent still approve affiliates manually, that is down from 23 percent for the previous year.

Another interesting finding from the survey: Nearly two-thirds of in-house affiliate managers earn $40,000 to $80,000 a year. In the pay-per-sale programs, 71 percent had dedicated affiliate managers; 24 percent had fewer than 500 affiliates; 22 percent had 501 to 2,000 affiliates; 23 percent had between 2,001 and 5,000 affiliates; 15 percent had 5,001 to 10,000; and 14 percent had more than 10,000 affiliates.

Commission Junction continued to lead the pack when it came to which affiliate networks, solution providers or software solutions were being used to track affiliate programs. CJ had 31 percent of the total survey respondents, up from 26 percent in 2005. Some of that gain is likely from Be Free, which is owned by Commission Junction. Be Free dropped 2 percent to comprise 6 percent of this year’s total for respondents.

The use of homegrown tracking solutions rose to 22 percent from 17 percent in 2005. LinkShare moved up 2 percent from last year, to account for 11 percent in 2006. Performics also gained some ground; up to 3 percent from 2 percent in 2005, while ShareASale.com inched up 1 percent to reach 6 percent overall for 2006.

Still, some lost ground. My Affiliate Program//KowaBunga dropped to 8 percent from 13 percent for 2005. Direct Track dipped to 8 percent from 9 percent in 2005, while the response for “other” dipped to 5 percent from 9 percent in 2005.

There was virtually no change in attitude from 2005 to 2006 in responses to the question, “Do you permit your affiliates to bid on your trademark name in pay-per-click search engines?” Fifty-nine percent responded no; 29 percent said yes; 7 percent said yes, but with restrictions; and 5 percent did not know.

As for blogging, of those surveyed, 21 percent had a blog, compared to 15 percent last year.

And the biggest challenge for affiliate marketing for 2006, according to the report, continues to be recruiting new affiliates. This year 31 percent cited it as the largest challenge, compared with 24 percent in 2005.

The entire report can be found at http://www.affstat.com/products.shtml.

Winning the Seasonal Race

Managing a seasonal program is akin to drag racing – lots of hard work goes into the preparation, the light turns green, then it’s over.

For a seasonal program to be successful, it’s crucial for its managers to think like affiliates. If you were a top affiliate looking for a program, where would you go and what would you want to hear? If you can get into the head of an affiliate, you can gain the perspective of a top performer, understand the tools necessary for success and learn how to win.

Attracting Valuable Affiliates

All of your affiliates are valuable, but the top performers will give you the highest return on investment. Forget the 80/20 rule (80 percent of revenue comes from 20 percent of affiliates). In 2005, for example, only 1 percent of TaxBrain.com’s affiliates generated 80 percent of affiliate revenue. Obviously some affiliates were better prepared before the season began. They most likely used the following steps to success.

Find the best program. Check out resources such as search engines, affiliate networks, directories, forums, events and other networking opportunities. Within these, look for the most compelling stories on potential earnings in terms of conversion rates, clicks per sale and commission structures.

Use the right keywords. Your program’s online presence begins by building affiliate pages optimized for keywords in your niche. Online marketing success means ranking high in the search results for your particular niche (such as "tax affiliate program"). Searching on Google for "affiliate program" yields 134 million organic results as opposed to 74 million for "top affiliate program." Paid search has a decent ROI, but you can also achieve meaningful results by site-targeting popular affiliate and webmaster hangouts, as well as home businesses and small-business portals.

Spread the word. Take advantage of communication opportunities available through your affiliate network. These include multiple category listings, newsletters, conferences and email marketing. Top-performing seasonal programs are often overlooked by the Big 3 affiliate networks (Commission Junction, LinkShare and Performics). This is because their indicators are heavily weighted with off-season trends. To overcome this, capture your performance results when it’s your time of the year and trumpet that information all year long.

Get listed. Affiliate directories work well, so get listed in as many as possible and pay those that are worthwhile. Often, reciprocating links are all you need to offer. To attract the best performers, talk payouts, highlight impressive stats or try catchy headlines like "Top Affiliate Earned Enough Last Season to Take Rest of Year Off!" Most directories don’t offer much listing space, so make your sales pitch count.

Use the forums. Forums are a beautiful thing – think of them as the eBay feedback mechanism of affiliate marketing. They allow you to monitor affiliate concerns and provide an excellent opportunity to market your program. Buzz around the forums, abide by the rules, post when appropriate and be sure that your signature promotes your affiliate program.

Make it personal. Personal relationships with affiliates often begin at trade shows and other industry networking events through direct contact. When online, you can gather contact information by using freebies and give-aways as motivation. For example, offer T-shirts or publications in exchange for direct contact information.

Optimizing Your Program

With thousands of seasonal programs all claiming to be the best and attempting to clear obstacles such as being overlooked by network indicators, it’s imperative that awareness of your program rises above the noise. For a seasonal program to be a winner, it must be well-tuned. To achieve maximum performance, managers can use the following ideas:

  1. Evaluate all existing affiliate communications from sign-up to acceptance. Review and revise your program listing to sell the opportunity, not just the product. Adjust your welcome letter and carefully craft your first message so they are appealing.
  2. Review competition in and out of your own network. Sign up as an affiliate and join your competition’s programs. Examine messaging and compensation within those programs for strengths and weakness. Implement strategies to exploit the weaknesses of your competition. Use the information to increase the appeal of your program while reducing your competition.
  3. Determine the lifetime value of a customer and create the highest commission structure in your niche. Pay more and pay faster. Pay your best affiliates the most. Provide additional strategic information and offer customization. PPC players don’t have much time to test a seasonal program, so you can accelerate their acceptance and understanding by releasing specific ROI stats from your own PPC performance.
  4. Create program offers that are appropriate for differing business models. Loyalty, incentive, shopping and content sites may have different needs than those of email marketers. To help accelerate sales during the season, create tiered offers that reward affiliates with additional commissions when well-defined revenue targets are achieved. Be sure your reward structure is attainable and measurable.
  5. Assess and build compelling creative. Ensure that initial messaging and associated landing pages match for consistency. Eliminate extra clicks or distractions at registration and preserve the initial click through messaging throughout the experience to checkout.

With your engine tuned for best performance, it’s time to put team dynamics into play.

School Your Affiliates

Once you have affiliates, you must teach these new business partners how to sell your product effectively. They have the ability to generate traffic, but you have to show them how to deliver it for maximum conversion. Here are some helpful tips to get the job done.

Organize your approach into complete campaigns – define targets, duration and exact message, using your affiliate Web pages for emphasis. Produce a matching keyword list. Promote each campaign individually.

Separate affiliates into meaningful groups to quickly spot trends. Create "watch" groups so you can track performance and monitor activity. Consider grouping by like business models or by special promotion. Continue to reorganize and regroup as business conditions change.

Communicate specific selling opportunities and develop a messaging strategy around each campaign. Start a blog enabled with RSS, in lieu of an emailed newsletter, to keep affiliates informed. Give your affiliates sufficient notice to put a new campaign into play (some need up to a month’s lead time).

Motivate your affiliates. Contests make things fun, but more importantly they help keep your program top of mind all season. For maximum exposure, create a contest that anyone can win. Have a daily prize throughout the selling season.

Try to identify demographic shifts or new trends that might be happening, then communicate this new information quickly. As an example, Hurricane Katrina created new government initiatives that benefit survivors, which could affect the way consumers search for tax products. This made new keyword combinations such as "hurricane tax," "katrina tax relief" and "hurricane katrina tax forms" valuable.

When managing a seasonal affiliate program, remember it’s the off-season that’s critical to next year’s success. That’s when you should learn from the experience, evaluate performance, incorporate new technologies and make all necessary changes. Recruit, optimize and communicate – these are the keys for managing a topperforming seasonal program.

 

TODD TAYLOR manages business development for TaxBrain.com from Petz Enterprises in Tracy, Calif. He is a technology veteran and entrepreneur with more than 20 years in the industry. He studied economics at Carleton University and is a graduate of computing from St. Lawrence College.

Managing a seasonal program is akin to drag racing – lots of hard work goes into the preparation, the light turns green, then it’s over.

For a seasonal program to be successful, it’s crucial for its managers to think like affiliates. If you were a top affiliate looking for a program, where would you go and what would you want to hear? If you can get into the head of an affiliate, you can gain the perspective of a top performer, understand the tools necessary for success and learn how to win.

Attracting Valuable Affiliates

All of your affiliates are valuable, but the top performers will give you the highest return on investment. Forget the 80/20 rule (80 percent of revenue comes from 20 percent of affiliates). In 2005, for example, only 1 percent of TaxBrain.com’s affiliates generated 80 percent of affiliate revenue. Obviously some affiliates were better prepared before the season began. They most likely used the following steps to success.

Find the best program. Check out resources such as search engines, affiliate networks, directories, forums, events and other networking opportunities. Within these, look for the most compelling stories on potential earnings in terms of conversion rates, clicks per sale and commission structures.

Use the right keywords. Your program’s online presence begins by building affiliate pages optimized for keywords in your niche. Online marketing success means ranking high in the search results for your particular niche (such as "tax affiliate program"). Searching on Google for "affiliate program" yields 134 million organic results as opposed to 74 million for "top affiliate program." Paid search has a decent ROI, but you can also achieve meaningful results by site-targeting popular affiliate and webmaster hangouts, as well as home businesses and small-business portals.

Spread the word. Take advantage of communication opportunities available through your affiliate network. These include multiple category listings, newsletters, conferences and email marketing. Top-performing seasonal programs are often overlooked by the Big 3 affiliate networks (Commission Junction, LinkShare and Performics). This is because their indicators are heavily weighted with off-season trends. To overcome this, capture your performance results when it’s your time of the year and trumpet that information all year long.

Get listed. Affiliate directories work well, so get listed in as many as possible and pay those that are worthwhile. Often, reciprocating links are all you need to offer. To attract the best performers, talk payouts, highlight impressive stats or try catchy headlines like "Top Affiliate Earned Enough Last Season to Take Rest of Year Off!" Most directories don’t offer much listing space, so make your sales pitch count.

Use the forums. Forums are a beautiful thing – think of them as the eBay feedback mechanism of affiliate marketing. They allow you to monitor affiliate concerns and provide an excellent opportunity to market your program. Buzz around the forums, abide by the rules, post when appropriate and be sure that your signature promotes your affiliate program.

Make it personal. Personal relationships with affiliates often begin at trade shows and other industry networking events through direct contact. When online, you can gather contact information by using freebies and give-aways as motivation. For example, offer T-shirts or publications in exchange for direct contact information.

Optimizing Your Program

With thousands of seasonal programs all claiming to be the best and attempting to clear obstacles such as being overlooked by network indicators, it’s imperative that awareness of your program rises above the noise. For a seasonal program to be a winner, it must be well-tuned. To achieve maximum performance, managers can use the following ideas:

  1. Evaluate all existing affiliate communications from sign-up to acceptance. Review and revise your program listing to sell the opportunity, not just the product. Adjust your welcome letter and carefully craft your first message so they are appealing.
  2. Review competition in and out of your own network. Sign up as an affiliate and join your competition’s programs. Examine messaging and compensation within those programs for strengths and weakness. Implement strategies to exploit the weaknesses of your competition. Use the information to increase the appeal of your program while reducing your competition.
  3. Determine the lifetime value of a customer and create the highest commission structure in your niche. Pay more and pay faster. Pay your best affiliates the most. Provide additional strategic information and offer customization. PPC players don’t have much time to test a seasonal program, so you can accelerate their acceptance and understanding by releasing specific ROI stats from your own PPC performance.
  4. Create program offers that are appropriate for differing business models. Loyalty, incentive, shopping and content sites may have different needs than those of email marketers. To help accelerate sales during the season, create tiered offers that reward affiliates with additional commissions when well-defined revenue targets are achieved. Be sure your reward structure is attainable and measurable.
  5. Assess and build compelling creative. Ensure that initial messaging and associated landing pages match for consistency. Eliminate extra clicks or distractions at registration and preserve the initial click through messaging throughout the experience to checkout.

With your engine tuned for best performance, it’s time to put team dynamics into play.

School Your Affiliates

Once you have affiliates, you must teach these new business partners how to sell your product effectively. They have the ability to generate traffic, but you have to show them how to deliver it for maximum conversion. Here are some helpful tips to get the job done.

Organize your approach into complete campaigns – define targets, duration and exact message, using your affiliate Web pages for emphasis. Produce a matching keyword list. Promote each campaign individually.

Separate affiliates into meaningful groups to quickly spot trends. Create "watch" groups so you can track performance and monitor activity. Consider grouping by like business models or by special promotion. Continue to reorganize and regroup as business conditions change.

Communicate specific selling opportunities and develop a messaging strategy around each campaign. Start a blog enabled with RSS, in lieu of an emailed newsletter, to keep affiliates informed. Give your affiliates sufficient notice to put a new campaign into play (some need up to a month’s lead time).

Motivate your affiliates. Contests make things fun, but more importantly they help keep your program top of mind all season. For maximum exposure, create a contest that anyone can win. Have a daily prize throughout the selling season.

Try to identify demographic shifts or new trends that might be happening, then communicate this new information quickly. As an example, Hurricane Katrina created new government initiatives that benefit survivors, which could affect the way consumers search for tax products. This made new keyword combinations such as "hurricane tax," "katrina tax relief" and "hurricane katrina tax forms" valuable.

When managing a seasonal affiliate program, remember it’s the off-season that’s critical to next year’s success. That’s when you should learn from the experience, evaluate performance, incorporate new technologies and make all necessary changes. Recruit, optimize and communicate – these are the keys for managing a topperforming seasonal program.

 

TODD TAYLOR manages business development for TaxBrain.com from Petz Enterprises in Tracy, Calif. He is a technology veteran and entrepreneur with more than 20 years in the industry. He studied economics at Carleton University and is a graduate of computing from St. Lawrence College.

Flipping the Switch

Maybe your relationship with your network has soured. The reports are frequently late, revenue is down and your questions are not being answered in a timely fashion. You’re thinking about switching to another network, but that means learning new tracking processes and establishing relationships with an unknown group of affiliates.

So, is it really worth all the potential trouble to move over to another network?

Switching networks is a disruptive business decision that temporarily reduces income and requires additional commitment of resources to restart your affiliate program. Yet merchants large and small are choosing to change networks primarily out of frustration.

Anger Management

Merchants cite a variety of customer service reasons for jumping to another network, but they share a common theme: Merchants aren’t happy with the way things are and think they can get better service elsewhere.

While increasing revenue is the ultimate driver of most business decisions, the impulse to switch is usually a reaction to negative experiences. A nagging feeling of neglect from the network foments the frustration and leads a merchant to end the relationship. These feelings of frustration can be found on merchant and affiliate blogs and message boards and are aimed at each of the largest networks.

Ask a dozen people about the performance of their network and you are likely to get a range of opinions from highly positive to very negative, according to Noelle Bermingham, site manager of affiliate SavingsWatch.com. Bermingham says it is similar to the opinions rendered about mobile phone companies. While some people switch from company A to B to get better customer service, others are switching from B to A for the same exact reason.

Each network also has its strong and weak points, according to Bermingham, who worked as a consultant for Home Depot on its affiliate program before becoming a publisher.

The networks “all have their issues,” says Bermingham, who has worked with many of the leading networks during her career, including Performics, LinkShare and Commission Junction.

Lee Gientke, affiliate manager of ProHealth.com, was dissatisfied with the service she was receiving and decided it was time for a change. In August she switched from Commission Junction to LinkShare. A few months after the switch, Gientke is thrilled, saying she has already eclipsed her previous high in monthly income.

She attributes her improvement to LinkShare’s superior reporting capabilities, as well as a “better commitment to service,” she says. She is saving money because LinkShare includes services such as emails to affiliates at no cost that previously required paying additional fees.

Seth Greenberg, who runs eHobbies .com, used a change in technology platform as an excuse to re-evaluate his entire operation and change networks. He shares the blame as to why his program with Commission Junction was under-performing. “We haven’t done a great job internally with affiliate programs,” he says. “We weren’t taking advantage of them in a positive way.” Greenberg says that oversight of the affiliates was an internal bandwidth issue.

Greenberg decided to move eHobbies from internal fulfillment and Yahoo’s online store platform to Amazon.com’s technology and distribution services. Reprogramming the site for a new network at the same time would eliminate the need for another round of updates later.

For Greenberg, the risk was outweighed by the opportunities of starting over. “We didn’t have much to lose because we weren’t taking advantage of the channel,” he says.

Change Is Good

Regardless of motivation for switching networks, merchants undergo a cathartic experience in ridding themselves of a negative relationship. Similar to periodically cleaning out your wardrobe closet, it feels good because you are being proactive, closely evaluating what stays and what goes.

As part of the housecleaning process, merchants will cut the ties with under-performing affiliates and focus on what is being done right with the 10 to 20 percent that are bringing in the cash. While revenue will hopefully increase as a result of the change, you feel better for having done something, which will likely motivate you to work smarter in the future.

During the network switch, merchants also reflect on the internal processes that have been successful. In many cases, this new attitude and focus makes it difficult to determine whether it is the change in network or improvements within the merchant’s operation that prompt subsequent increases in revenue. If a merchant reverts to bad management habits, then the improvement could be only temporary.

Preparing to Switch

Reducing the disruptive impact on your revenue flow of switching networks requires several weeks of preparation to bring your most effective affiliates to the new network, as well as learning the new system for reporting and communications. Although sometimes the work can be done within 30 days, a two-month period of preparation will increase the likelihood that a merchant will start earning comparable revenues from a new network.

The first two weeks of a planned switch are dedicated to contacting the top performers who bring in 90 percent of your revenue, according to Todd Crawford, vice president of sales for Commission Junction. Successfully recruiting the top affiliates, setting up their accounts and updating their links can take up to 30 days, Crawford says, after which the attention is focused on the remaining affiliates that merit moving over. Merchants may see a dip in revenue during the transition, but ordinarily that disappears quickly.

During this time Commission Junction also notifies the top 20 to 30 performing affiliates on its network that a new merchant is coming on board. These affiliates often share the news about the new merchant’s arrival with their peers, creating the “network effect” of additional affiliate relationships, Crawford says. If done correctly, growing the stable of well-performing affiliates should boost revenues above previous levels.

Before notifying your current network that you are leaving, merchants should make sure that another network relationship is cemented. Commission Junction carefully screens merchants and accepts only 50 of the 1,000 or more that apply each quarter, according to Crawford. The network looks at the merchant’s existing revenue figures, and if Commission Junction isn’t sure it can do better, the company will decline to accept the merchant.

“I would rather have someone unhappy that they are not with us than have them unhappy for being with us,” Crawford says. He says it is important that both parties agree up front on realistic expectations for revenue growth and earnings per click. “The last thing I want is for people to join from a competitor and be unhappy and go back.”

Crawford, who recently won the business of outdoor equipment maker REI and shopping site Buy.com from competitors, says larger merchants are less likely to switch networks than small and mid-size merchants because the amount of work and perceived risk is greater. “It’s similar to the difficulty of turning around a large versus a small boat,” he says.

Commission Junction isn’t happy when a merchant chooses to go with another network, but Crawford says the company doesn’t want to impede a merchant’s business. He says the company allows the existing network links to stay in place for an overlapping period of 30 to 60 days. “If we turned it off as soon as they went live with someone else, we would be foregoing some revenue,” he says.

More Than Money

Merchants that switch networks primarily to save on costs or reduce the revenue share are likely to be disappointed, according to Heidi Messer, president and chief operating officer of LinkShare. Messer says merchants focusing on costs are more likely to “under-invest in the channel” and have unrealistic expectations. LinkShare screens potential customers to make sure that they will make the necessary investments in the technology platform to make the affiliate program succeed.

Having the contact information of your existing affiliates is crucial when switching networks, according to Messer, who says LinkShare has won more than 40 clients from other networks during the past year. “A migration is only as useful as the information you have about your affiliates,” she says.

Messer recommends that merchants expect the switch to a new network to take several weeks, although it can be accomplished more quickly if necessary. However, she advises merchants against overlapping the networks because it makes managing revenue and crediting sources difficult.

If a merchant switches networks, Messer says, the impact on most affiliates will be minimal. Most affiliates likely have relationships with all of the networks, so they are familiar with how to code their links and work with their reporting systems, she says.

A merchant that frequently switches networks also risks losing partnership opportunities, according to Linda Buquet, president of affiliate consulting company 5 Star Affiliate Programs. Merchants that regularly require their affiliates to change their links will develop a reputation as a “network hopper” and have difficulty finding new affiliates.

Buquet spoke with one merchant that had switched from Commission Junction to LinkShare and then back to Commission Junction. She declined to work with the company because it was viewed as untouchable by many affiliates.

Sharing Affiliates

Merchants that also have in-house affiliate programs should consider if they want to convert any of these relationships to the network as part of their switch, says James Green, affiliate manager of MingleMatch.com.

Moving your high-performing affiliates to the network could raise your earnings-per-click statistics, making you a desirable partner for affiliates, Green says. By boosting EPC, “you represent yourself better to recruit other affiliates,” he adds, but at the cost of having to share a percentage of the revenue with the network.

While adding your best affiliates to the network could enable you to attract new affiliates, you may also lose some of the direct connection, as communications must then go through the network.

Merchants might avoid having to switch if they better understood the strengths and weaknesses of each of the networks. For example, LinkShare is great at protecting large brands while being weaker at publisher development, according to SavingsWatch.com’s Bermingham. Commission Junction offers hands-off affiliate programs that enable merchants to “be more of a do-it-yourselfer,” and is improving the way it works with larger merchants, she says. Performics’ strength is in comprehensive affiliate management, but the company does not have programs that allow merchants to manage affiliate relationships themselves.

Turning the Tables

The frustrations of one affiliate lead to the creation of a network competitor. J. P. Sauve, who ran several affiliates, says he was frustrated with not being treated well by the major networks’ “our way or the highway” attitude. His emails to network representatives went unanswered, statistics were often incomplete and campaigns sometimes disappeared without warning, he says.

After sharing his frustrations with peers, Sauve co-founded MaxBounty as a competitor to the large networks. “Our policy since day one has been to treat all affiliates, big and small, with the same respect we’d expect from others,” he says. The network encourages direct communication between the merchants and publishers and competes on price by charging a lower percentage of the revenue, according to Sauve.

The decision to transfer networks requires careful consideration of your existing relationship and a dispassionate critique of internal business practices. It is a good time to focus your energies on what is working while eliminating affiliates that have not been contributing. Terminating the relationship with your network sends a clear signal that service is important, which needs to be communicated to the next partner to ensure that the problem does not recur.


JOHN GARTNER is a freelance writer in Portland, Ore. He is a former editor at Wired News and CMP. His articles regularly appear on Wired.com, AlterNet.org and in MIT’s TechnologyReview.com.

Educating and Informing Your Publishers

As anyone managing an affiliate program knows, educating your network of publishers is a vital and often daunting part of building and growing an affiliate program.

This is definitely true for RealNetworks’ program, which focuses on digital media subscriptions, including Rhapsody, with more than 1.3 million songs, GamePass with hundreds of games and SuperPass with premium news and entertainment content.

Though thousands of publishers may have joined our affiliate program, some may not even be familiar with the products, let alone the tools and tactics for successfully marketing them. So with the limited resources available to manage and grow these programs, it’s important to be efficient in your efforts to educate your publishers.

The keys are constant communication with your network, listening to your publishers’ feedback and implementing change from it and sharing best practices and insights on marketing your products.

Your welcome email, the first correspondence your publishers receive upon joining your program, is extremely important. This is your chance to provide new publishers with helpful information on tools available in the program, as well as to present information on your products and tips for successfully marketing them. Many publishers won’t read your welcome email, but it’s worth making it good and helpful for those who do.

It is also important to communicate with the entire network via an email newsletter on a consistent and ongoing basis. These mailings should include broad information such as updates and tips on marketing your products. Again, many publishers will ignore these e-newsletters, but you should make it as educational and informative as possible for those that take the time.

Next is the important step of segmenting your publisher network. Your top-volume drivers will have needs that differ from your mid-tier publishers, which also have needs that differ from those who’ve barely begun promoting in your program. The size of your segments is also likely to vary. Your top-tier group is typically the smallest, while the largest segment is often made up of newcomers and non-performers (for those who keep them in the program).

How much time should be allocated to each segment is really a matter of preference and experience with the individual program. Some managers might find that working to increase a top publisher by a small percentage has a greater impact on revenue than seeing each mid-tier publisher grow by one transaction a month. Others may find the opposite to be true. That’s why it’s extremely important to test both tactics in your program and at different points throughout the year.

Again, the main elements to the education process are constant communication with your network, listening to your publishers’ feedback and implementing change from that feedback, along with sharing best practices and insights on marketing your products.

So let’s start with the big guys. These publishers are invaluable partners to the company and key players in your affiliate program. For RealNetworks, they are the ones who continue to amaze and impress us with their constant innovation and online marketing savvy. They often build, test and optimize faster than we can and move quickly to implement new products and offers. We stay in constant contact with these publishers, keeping them informed of upcoming launches, providing them with new products and offers first, granting their requests and requesting their feedback.

We provide our top publishers with tips on top-performing search keywords, any new knowledge we’ve acquired through recent testing, customized creative and updates on the constantly changing and increasingly competitive digital music and entertainment space.

Requests coming from these publishers have helped to shape our program and have greatly influenced the development of the tools and processes we have in place.

The mid-tier publishers can be defined in a number of different ways and may even be split into multiple tiers depending on the size of the program and the amount of management resources available. In our program, we consider the mid-tier publishers to be those who have shown some success in generating revenue, but have not reached a certain threshold to be considered a top performer.

There is a great deal of opportunity within the mid-tier, especially since these publishers have already put some time and energy into marketing your products and have started testing and gaining knowledge. One helpful way to gauge the potential of these mid-tier publishers is to keep a spreadsheet showing their best week. This key metric provides a benchmark and an opportunity to understand the potential impact of focusing on this group.

Working with mid-tier publishers often entails a combination of a one-to-many approach as well as a certain amount of individual attention. Consistent, ongoing e-newsletters and email messages to these publishers are a great way to let them know about new promotions, products, tools and tips. Since they probably already have a basic understanding of the products and tools available in the program, we try to focus our communications here on new information.

In addition, we also designate certain times throughout the year when we reach out to our mid-tier publishers by phone or direct email. For those who are interested in taking the time to speak with us, we find it invaluable to understand what is and isn’t working for them, and give them tips and ideas for growing their volume and finding greater success in our program.

And finally there’s the low-tier publishers – those who have barely begun or have not had much success promoting our product, or have joined the program but have not successfully driven a transaction. While some programs choose not to allow inactive or nonperforming publishers to remain in their program, we view them as an opportunity to activate a publisher who has shown enough interest in our program to at least complete the registration process. We take a purely one-to-many education approach with this tier, using similar tactics of sending e-newsletters and emails to educate them on our products, as well as alerting them to tips and tools in our program to help successfully market our products.

I believe that there is a large opportunity within this tier, particularly because it’s one of the biggest segments. For example, our program can, within one quarter, get 5,000 inactive publishers to drive one Rhapsody trial; we that as a fairly significant lift.

There is one important caveat to the segmentation model: If a large publisher joins your program, reach out right away to ensure they are aware of the data feeds and other tools in your program.

By continually informing and educating your publishers, you can ensure success and a long-term, mutually beneficial partnership.

RACHEL LAZAR is a consumer marketing director at RealNetworks. She previously worked at Amazon.com in online advertising and launched the Inshipment Marketing Channel. She holds a B.S. in psychology from Santa Clara University.

The Overstock Obsession

Every so often, there’s a company, a person or a philosophy that attracts such a rabid following it can be only be described as a phenomenon.

In music, the Beatles and Elvis come to mind. It’s hard to think of either without envisioning ecstatic throngs of screaming, teary-eyed fanatics who would do anything for a souvenir to link them forever to their idol.

In technology, Apple Computer has survived as much (or more) on the strength of its zealous customers as on more mundane considerations like operating efficiencies or distribution channels. A piece of advice: Never try to tell a Macintosh user there are any advantages to using a PC.

In dieting, the current rage is Atkins. Eat all the protein and fat you want, but lay off the bread and pasta. Want to know more? Just ask someone who’s on it. They’ll talk the pounds right off you.

Overstock is like that in the affiliate world. Although it’s a nascent company that is far from perfect by some business measures, its customers, affiliates and employees simply ooze adoration for the fast-growing e-tailer and its undeniably magnetic CEO, Patrick Byrne. It’s not just that they like the company. This is unbridled zeal. It’s the kind of blissful rapture one expects from saffron-robed monks selling flowers at the airport.

The numbers show the love. Gross merchandise sales jumped 88 percent to $96.6 million in the company’s second quarter from the year before. And more than 3 million consumers have now bought something from the site, thanks in large part to Overstock’s 35,000 evangelistic affiliates. To put that last number in perspective, Macys.com has only 2,000 affiliates, or less than one for every 16 that Overstock claims.

After only five years in business, Overstock has blossomed into the 18th largest e-tail site. It attracted 9.3 million unique visitors during July alone.

Much of that success can be attributed to Byrne, a sort of existential capitalist whose top-tier schooling (BA at Dartmouth, MA at Cambridge, PhD at Stanford) has left him with a penchant to quote philosophies ranging from the Bible to Sun Tzu to Obi-Wan Kenobi. He often speaks in adages colored by a metaphysical hue.

“If you treat people well and customers well, you’ll be rewarded,” he says describing the “virtuous circle” of the retail world. “You can’t cheat karma. The karma police will always get you.”

He’s first to admit his company’s shortcomings in a way that enhances his credibility. In the company’s last earnings report, for example, he expressed his disappointment with Overstock’s “Daily Deals” promotion. “I am not giving up,” he said, “but this has been a dud.” He also admits to worrying about “bottlenecks” and declared outright that “B2B has been a disappointment.”

“Cynics claim that my candor is but an attempt to pump my stock by drawing investors looking for someone who does not pump his stock,” Byrnes wrote in the company’s recent earnings report. “I am flattered to have attributed to me such Machiavellian subtlety!”

Byrne grew his company the hard way after “getting turned down by 55 VCs (venture capitalists)” in his quest for funding. Overstock went public in 2002, using the same Dutch auction process that Google adopted this year.

The Art Of Affiliates

He’s so dedicated to building his affiliate program that he’s given Affiliate Manager J.T. Stephens a force of 10 assistants to build it. Byrne required them all to read Sun Tzu’s The Art of War, which he views as the “textbook on Internet affiliate marketing.” And, although Overstock’s commissions are relatively low at 3 percent to 7 percent (many merchants pay 10 percent to 12 percent), affiliates love the company for its highly personalized support.

“It isn’t always the commission,” says Sandy Breckenridge of SlipCovers- Fabric.com. “Higher commission sites don’t come near Overstock when it comes to support and personal attention.”

Another devout affiliate, Asif Malik of Plaza101.com, strayed from the Overstock flock for a while until one of its managers came after him like a shepherd looking for a lost lamb. “For a while, I dumped them,” says Malik. “But I got a call from Adam Russo and that changed.” Now the two work closely on updates, sometimes talking several times a day to make sure Malik is doing all he can for Overstock.

“It makes a difference,” says Malik. “I email or call and they respond right away. I email or call other companies and sometimes never hear from them. Or I get a message back telling me they don’t provide tech support.” Malik scoffs. “I don’t need tech support. I have technical know-how. I am just trying to help generate revenue for them. They are fools and I drop them. If they are too busy to talk to an affiliate like me, they lose.” And Overstock wins.

“No other merchants are calling them,” says Stephens. “We call them. We’re like a free marketing consultant, and affiliates are all ears.We tell them our best sellers and suggest placement. We give them the resources and tools to make money.”

Industry Advocate

The company also won admiration from many affiliates for filing the first suit under Utah’s groundbreaking Spyware Control Act. The suit alleged rival SmartBargains created ads that popped up over the Overstock Web site. (SmartBargains had filed its S-1 for an IPO. At the time of publication, it was in a quiet period and could not comment.)

“I love them,” said affiliate Connie Berg of FlamingoWorld.com, who recently shared LinkShare’s award for “Most Vocal Advocate” with Overstock’s affiliate team. “If they can get some spyware stopped, it helps people in other programs, not just Overstock’s.”

Byrne sees his raft of affiliates as his not-so-secret army to do battle with larger rivals like Amazon.com. “It’s a war of the fleas against the elephant,” he says. “A few years ago, affiliates did $150,000 in sales a month. Now they do millions It’s not yet $10 million a month, but it will be by the end of this year.”

While many companies trim inactive affiliates from their ranks to concentrate on their top producers, others see them as a source of potential growth. LinkShare CEO Steve Messer, for example, believes that once an affiliate shows interest in a company, “there’s always a chance to reactivate them.” (See Issue 3, Share And Share A Link.)

Overstock never cuts affiliates, meaning many of those 35,000 soldiers are ghosts that occasionally come back to life. One “inactive” affiliate who hadn’t generated any sales for Overstock in more than three years recently turned in $10,000 in one month.

Overstock champions the little guys, small affiliates who generate between only $500 and $3,000 in sales per month. The superaffiliates may generate more sales per affiliate, but they also demand higher pricing, flat fees and enhanced commissions, which makes them more expensive and harder to work with.

“We like the medium and small affiliates. I’d rather have 10,000 of them anyway. We try to do well by our affiliates. At this point, we think of them as jedis and padawans,” says Byrne, referring to the fully trained warriors in Star Wars and their young apprentices. “They are a mercurial bunch and they react quickly to good treatment.”

Stephens, meanwhile, translates the focus on the smaller affiliates to hard cash. “When you work to get 50 affiliates to add even $1,000 to $2,000 each in sales each month, it ends up affecting the bottom line,” he says. “Everyone else is cutting down and we are building out. Other companies limit themselves. But their loss is our gain.”

And the company does try to treat them well. “You can never lose sight of the fact that affiliate marketing is a symbiotic relationship,” says Stephens. This focus on affiliate appreciation seems to be paying off for Overstock. Affiliates like knowing they are talking to someone who specializes in their category (see list).

“Overstock is one of the easiest ones to set up and start earning money with,” says Gabriel Lam, who runs GotApex.com. “They have a wide range of products and very good pricing.”

Less Than Perfect

Of course, just as Elvis had a weakness for fried peanut butter and banana sandwiches, Overstock has a few flaws, too. Its immense expansion had led to some growing pains, and the company has yet to achieve profitability.

Some affiliates report that Overstock’s coupons get posted but don’t work right away, which they say happens very infrequently with other merchants. And Overstock spends a lot on advertising: $5 million in 2003 and $2 million in January through July 2004. It acquired 744,000 customers during 2003, but the cost was high – $13.30 per customer.

Overstock handles all advertising internally, a risky venture for a company dependent on brand awareness and national media buys. (It had to back off its “Big O” campaign after Big O Tires complained.) And Wall Street analysts remain wary. Only two analysts follow the stock and both are from investment banks that do business with Overstock.

In a research report published in July, analyst Tom Underwood of Legg Mason Wood Walker rated the stock as a “hold,” roughly the equivalent of a grade of C in school. “Success is not only still unassured,” he said, “we can’t quantify potential financial results around the business with any accuracy.”

And then there’s the area of search engine ranking. Overstock does its own optimization and could use some improvement. In a recent Google search for “discount shopping,” Overstock didn’t even appear on the first page for sponsored or unsponsored links. (The sponsored links included Target and SmartBargains. Curiously, Connie Berg’s FlamingoWorld .com topped the unpaid list.) Because Overstock describes itself as selling “name-brands at clearance prices,” Revenue ran a search for “name-brands clearance prices.” Again, Overstock was a no-show, paid or unpaid.

‘Smitten’ Buyers

Some affiliate managers find that some of their best customers are their own affiliates. It makes sense given that affiliates want to support their merchants and earn a commission on their own purchases. But Overstock’s cultish shoppers have been known to turn that model around by becoming affiliates simply because they love shopping at Overstock.

That’s the case with an affiliate named Beverly C. Lucey, editor of the blog WomanOfACertainAgePage.com. She has affiliate links to Amazon because, as an educator she wants to encourage reading. She turns down other business ventures offered her – from manufacturers of Viagra, weight loss products and “anti-aging goop.” But she decided to provide a link on her site to Overstock.com. “They didn’t ask me to,” Lucey wrote in an e-mail interview. “I’ve been a happy customer for the last four years.”

Of course, she swoons, there was another factor: After hearing an NPR interview with Patrick Byrne, she became “smitten.”

Byrne seems to have that effect. “Everything he touches turns to gold,” gushes Stephens. And Marketing Vice President Kamille Twomey says, “He is an exciting and convincing man. ” I came in to talk to him and a few minutes later, I was working for him.”

Special Treatment

The company runs network-wide promotions with tiered bonuses, but it also brokers one-on-one deals with Web sites, letting affiliates sell, say, a Burberry scarf, for less than Overstock does. Many affiliates who Revenue interviewed said special deals were a great incentive.

“I call Overstock and Amazon the Masters of Promotion,” says Michael Conley of Amazing-Bargains.com, who has been working with Overstock since 2000. He also likes their dependable and cheap shipping, which is usually $2.95 whether users buy a book or a couch, and sometimes is free. The symbiosis should help around the holidays.

The holidays are critical to Overstock. “In 2003, half our sales were in the fourth quarter,” says Twomey. In the late summer, the company employed about 500 people. With seasonal help, that number will jump to 2,500, up almost 80 percent from the 1,400 working for Overstock last holiday season. Clearly, the company is preparing for sales of biblical proportions.

“We’ve been thinking about the holiday season since January,” says Byrne. “In past Novembers we finished the ark by wading in waist-deep water pounding nails in the rain. This year our ark will be complete before the first raindrop falls.”

Spoken like a true believer.

DIANE ANDERSON is managing editor of Revenue.

Five Who Drive

It takes a special something to be among the best in your field, especially when the field is as competitive as affiliate marketing. We all know it takes more than commission checks and banner ads to rise above the crowd.

Revenue decided to take a look at five strong programs and the people who run them. Of course, convincing program managers to talk about their success is rather like getting Grandma Virginia to share her famous cherry cobbler recipe. But there are some commonalities in these programs that deserve attention.

The first thing we found is that each is led by a strong manager with a clear vision of how that company differs from its competitors. And all these managers demonstrate great respect for their affiliates, although they may show it in different ways.

You’ll see other similarities, to which we’d like to offer one more: You don’t need to be one of the top 100 retailers to see a big increase in your affiliate sales. But it never hurts to think big, as did these five individuals.

Mondera.com

Name: Chris Sanderson
Title: Affiliate Manager
Business: Jewelry

Mondera.com found its crown jewel in affiliate marketing, which generates 30 percent of the online jeweler’s income in an average month, according to program manager Chris Sanderson. During the holiday season, the percentage climbs even higher.

Mondera sells a wide range of wedding and engagement jewelry, such as diamond engagement rings and wedding bands. It also sells a wide range of support jewelry for birthday and Christmas presents, with prices ranging from $30 to more than $500. The average sale at Mondera totals $1,250. Affiliates can earn from 5 to 20 percent per order.

To help drive sales, Sanderson said the company began a modest affiliate program on BeFree in 2000, but “we left it to manage itself.” The company switched over to LinkShare in July 2002 and ramped up its efforts. The extra work has paid off smartly. Sales started rising about three months later and reached their peak after 18 months of Mondera’s continuous effort.

Sanderson attributes the success of Mondera’s affiliate program to four important factors: constant, dedicated support, an easy-going, accessible approach to affiliate management, a firm stance against parasitic activities and, of course, commissions that most affiliates only dream about. “Who doesn’t dream of getting a commission on a $10,000 diamond sale?” he asks.

Sanderson is quick to note the benefits of affiliate marketing and has lots of advice for other managers.

“Affiliates put in the same amount of effort that you put in,” he says. “Providing affiliates with fast, friendly support is very important. When things go wrong, put your hand up. Affiliates respect trust and honesty – and a high conversion rate – above all other things.”

He also notes affiliates can be a great source of feedback about a merchant’s site, and can even become a valuable pool of customers. “If they promote your products and like your products they will also buy from you. Ten thousand happy affiliates means 10,000 potential customers,” he says.

“There are a number of affiliates who don’t add value, intercepting traffic before it arrives at your site and inserting tracking to make it look like they are driving sales. Merchants need to review their partners carefully to ensure they are adding value,” he says, adding one final piece of good advice: “Always pay on time.”

Shoes.com

Name: Brook Schaaf
Title: Affiliate Manager
Business: Shoes

Shoes.com had an active affiliate program in place from the moment the site launched in 2001, and Affiliate Manager Brook Schaaf says the program started generating sales in the six figures after just half a year.

The affiliate program has been a very comfortable fit for the shoe merchant, which doesn’t use traditional media. “We like programs we can measure. CPA and CPC are our big revenue generators,” says Schaaf, who is also delighted at how the program has given the business a good deal of trend reporting.

“We see an increase in sales beginning with back-to-school and climaxing with the holiday season, then again in the spring – very strong in the spring,” Schaaf says. “Taking program growth into account, we did 40 percent more business in the last half of 2003 compared to the first half.”

Schaaf gives affiliates most of the credit for Shoes.com’s affiliate marketing success. Affiliates earn 10 percent on each sale, but Shoes.com has been known to run promotions that increase the base commission rate for affiliates.

“My favorite affiliates are mom-and-pop-type operations; often literally a husband and wife team working from home. They’ve got good control of their sites, are responsive and easy to work with,” Schaaf says. “With thousands of affiliate programs out there, part of the challenge is staying on top of people’s minds. Our network, Commission Junction, has also given us a lot of credibility and visibility.”

His advice for other merchants just getting started with affiliate marketing?

“Consider your tracking needs carefully,” Schaaf said. “I am partial to Commission Junction. Performics is good, too. Most important: Hire a full-time manager and empower him to make decisions for the program. Know how much you can afford to pay and what your competitive advantages are. Communication and consistency are important.”

And Schaaf notes that it’s important to look out for your affiliates.

“Remember that affiliates – real affiliates – are making a living off of sales, so you have to speak to their heads as well as their hearts,” he says. “Say, ‘You’ll earn more money with me’ and coordinate internally to make this a reality. Listen to everyone but listen closely to the people who are sending you big sales because they talk the least.”

T-shirtking.com

Name: Bill Broadbent
Title President
Business Retail Sales/T-shirts

T-shirt King President Bill Broadbent isn’t new to the business of selling T-shirts. He’s been doing it – quite successfully – since the 1970s.

T-Shirt King was recognized this year as one of the “Best of the Web Top 50 Retailing Sites” by Internet Retailer magazine. Broadbent continues to see consistent growth in his company’s online presence and brand recognition. That’s surprising when you consider that the company houses only 18 selftaught employees and is considered to be one of the largest employers of tiny Mountaineer, NM.

Although he didn’t enter the affiliate marketing arena until 1998, affiliates already account for a third of the company’s sales. He now views his decision to start an affiliate program as a turning point for the company.

“We saw results in six months, because that’s when we got serious about it,” Broadbent said. “Affiliate marketing can bring you results immediately if you take a serious approach and invest time into it,” he says.

Ian Larson, who manages T-Shirt King’s program at PartnerCenter, says much of the success of this program lies in the product. “The T-shirts sold by T-Shirt King are marketable because they are officially licensed and represent such a broad range of interests, from music to favorite bands to politics. T-shirts are most people’s way of expressing who they are quickly and succinctly without having to even say a word.”

During the holiday season, T-Shirt King rakes in 40 percent of its annual sales. So the company’s Web site offers publishing partners a 365-day cookie that allows affiliates to make the holiday season last all year long.

Broadbent says the benefits to his company go beyond mere revenue. “Even if we were not making sales with our affiliate program, our message is out there,” he says. “People see us, they become familiar with us. The exposure is a great benefit. We are reaching an international audience from rural locations.

“It’s amazing.”

Broadbent has advice for other retailers who are considering an affiliate program: “Don’t do it unless you are serious about it. Be proactive and committed to the program.”

Redenvelope.com

Name: Myles Felsing
Title: Director of Interactive Marketing
Business: Luxury Gifts

Although RedEnvelope didn’t launch its affiliate program until September 2002, the program now accounts for half of sales for this online retailer.

But RedEnvelope’s quick success didn’t come without extensive pre-launch legwork, and they want to make sure other merchants realize this before diving into affiliate marketing.

“Do research before beginning an affiliate program,” says Myles Felsing, director of interactive marketing. “Evaluate the marketing channels you currently have in play. Make sure it’s a good fit for your business.”

RedEnvelope learned the importance of doing research the hard way. Originally known as 911Gifts.com, the company was launched in 1997 as a way for last-minute male shoppers to find the perfect gift.

Two years later, it went through a high profile restructuring, with a new name and a new mission: to sell upscale, luxury gifts starting at $20. In addition to its affiliate program and online sales, the company is now planning to launch a catalog company backed by traditional marketing in the coming months.

The company’s revenue was $79.3 million for its last full fiscal year. Per-order sales were $72 million in the first quarter of the current fiscal year, with a profit of $38 million. The company went public during 2003, trading under the ticker REDE.

Affiliates earn between 8 to 12 percent per sale. RedEnvelope also offers incentive plans based on demand volume. This makes it possible for its best affiliates to have an overall effective revenue share of 20 percent.

“Affiliate marketing appealed to us because of its performance-based structure and broad reach into areas where we did not have internal recourses to manage direct relationships. By introducing an affiliate program into the marketing mix that operated at a high efficiency, we were able to not only scale our online marketing efforts significantly and increase our overall ROI for online programs, we were also able to extend our direct marketing efforts as well while attaining our overall efficiency goals as a company,” says Felsing.

What advice does Felsing have for other merchants? Start communicating.

“We focus on fresh creative and keeping our affiliates up to date on promotions and new items,” he says. “We reward our top affiliates by giving them a higher commission during peak seasons, or establishing a revenue goal with the affiliate prior to a peak season, and if they meet that revenue threshold, a bonus is paid out. These arrangements encourage our top affiliates to promote us even more.”

Urbanscooters.com

Name: Frank Minero
Title: CEO
Business: Electronic and gas scooters

Motorized scooters may not pop into your mind as a hot item for online sales, but Frank Minero has been in the business since 2001. He first heard about affiliate marketing about a year later.

As it turns out, he stumbled across a forum on ABestWeb.com and liked what he read. “I dug in and learned all I could,” he says.

He launched his affiliate program in the fall of 2002 and, within the first few months, started seeing steady sales of his gas and electric scooters, which go for $99 to $1,000 each. By Christmas 2003 he had doubled his sales from the previous year Affiliates earn 7 percent on Internet sales and 5 percent on telephone sales.

“I believe the success of our program boils down to open and honest communication, good information and a bit of fun,” Minero says. “I simply ask myself, ‘Self, if you were an affiliate, how would you like to be treated and what information would you need to get the job done?'”

That soul searching helped him understand that affiliates need incentives, but that they also have a lot to offer in return. “We offer an affiliate contest annually and reward our top affiliates with cash and prizes,” Minero says. “We have some pretty knowledgeable affiliate partners, and through the course of sharing information I’ve learned things that have greatly benefited our business.”

In addition to an affiliate program, Urban Scooters also uses other measures of Internet marketing such as pay-per-click advertising and organic search engine optimization. “In the last two years we’ve tried other traditional methods of advertising and found these three methods to be the best,” says Minero.

Minero says managers who are thinking about launching an affiliate program must be ready to make the kind of commitment it takes to be successful. “Give it a shot, but make sure you allow the time to provide your affiliates with the information they need to effectively sell your products,” he says. “It does take a good amount of time to effectively manage an affiliate program. Unlike Ronco’s Rotisserie, you can’t just ‘set it and forget it.'”

LAURA SCHNEIDER is the marketing editor for About.com. Her articles have been published by more than 4,000 Web sites and magazines. She also serves as operations manager for PartnerCentric Inc. and owns a consulting firm, ZealSpin Inc.

A Show-Stopping Performance

In times when change comes quickly, many things can keep online marketing managers up at night. The question is: What should keep them up?

Some grapple with balancing their own search marketing efforts against affiliates’ or understanding which marketing strategy delivers a better yield in terms of marketing cost as percentage of sales (CAPS). Others struggle with an increasing need to spend on customers more than once, through multiple advertising venues, in order to earn the final purchase.

Looking forward, e-commerce executives must plan to actively deal with two critical issues: embracing integrated performance marketing and adjusting their goals, success metrics and tactics. While this sounds simple enough, the risks behind making the wrong choices continue to rise.

Performance marketing surrounds us and has converted Web marketing from a grand experiment into a must-have for direct, retail and brand-focused marketers. Given this hyper-focus on performance, savvy marketers and the agencies they employ are playing in multiple facets of online marketing ranging from traffic-focused cost-per-click, to awareness focused barter arrangements, to cost-per-sale/action campaigns.

Other interesting trends include the emergence of geographically targeted and “day part” search buys wherein pre-set business rules help to automate decision making behind campaigns. Contextual marketing technologies like the UK’s Vibrant Media or Quigo also offer potential leveraging strategies that employ text-based ads and use content relevancy to place them.

If they could, marketers would choose a single, reliable, integrated technology or agency partner that offers vital insights, reduces friction and streamlines media buying. Centralization of campaign data across multiple advertising strategies offers the potential of an information-rich environment to make short- and long-term decisions. It also opens the door for rule-driven automation that enhances the productivity of already constrained human resources. This is integrated performance marketing, or IPM.

Moving forward on such an approach requires an appreciation for complex legislative, technical and operational issues that shape today’s performance-focused strategies. Many marketers have surface-level perspectives on how, as an example, affiliates actually generate legitimate (or illegitimate) sales or return on advertising spending on key search terms. Making the leap to IPM will provide marketers with insights needed to streamline decision making.

Until then, reality demands marketers must plan, execute and optimize their campaigns with fragmented tools. Marketing managers responsible for numerous performance initiatives will continue to be at the mercy of disparate technology solutions. Tracking campaign performance within individual spheres – email, affiliate programs, CPC media buys, etc., – is simple. But centralizing data is difficult, making it harder to work smarter or faster. Search marketing company iProspect created iSEBA to address these needs.

Concurrently, in an environment filled with change, executives are forced to come to grips with mergers and acquisitions among vendors. (See story, page 60). Industry consolidation inside the affiliate, search management, ad-serving and comparison shopping spaces serve as examples. As companies like ValueClick, DoubleClick and aQuantive continue to cobble together performance-focused technology and service providers, the market is forced to ask itself, “Why?” and “What’s in it for me?” Time will tell, but IPM looms on the horizon.

Not So Simple

There is agreement in that performance strategies are not as simple as they look. Marketers are suffering through the intertwining of performance strategies such as affiliate and search marketing. A more sophisticated approach to measuring and benchmarking the effectiveness of individual strategies is needed.

As an example, although affiliate marketing is perceived as purely performance based, experience dictates otherwise. Specifically, what appears on the surface to be affiliate-generated sales oftentimes result from multiple customer behaviors, unscrupulous tactics or other marketing campaigns. Efficacy of each is clouded.

By assuming an integrated perspective and focusing on how customers end up arriving on their Web site, savvy marketers are discovering that customers are being driven to purchase based on multiple online and offline ad/marketing spends. As an example, individual orders generated by customers may involve multiple media interactions such as radio advertising, a shopping comparison portal and, finally, a cash-back affiliate site. Today without the proper tools, it’s difficult to see such trends. With an IPM approach, it is possible both to spot them and to adjust media spending accordingly so as to significantly lower marketing CAPS.

Seeing Through New Glasses

Brand awareness and direct response advertising can coexist and must plug into corporate goals shared across the e-commerce team. IPM can help. Inside these different marketing realms, campaign-level spending and objectives are measured in different terms yet both intersect with overarching business objectives such as CAPS and lifetime value (LTV) of customer. These measures drive strategic decision making (i.e., media budget allocation) offline and online; they must be understood clearly.

By aggregating data cross-strategy, decision makers can hold various types of media spends up against each other using a common, business rule-driven yardstick specific to their goal. The marketer may be interested in hitting a predetermined marketing CAPS and/or LTV number. In either case, centralizing results data yields new perspectives on cost efficiencies of each particular strategy. While a handful of marketers are able to engage in such an approach and reap the benefits, costs may very well outweigh the benefits.

Embrace And Adjust

More and more, we see the need for technology solutions to facilitate streamlined IPM. In order for marketers to develop smarter media spending plans, a cross-strategy viewpoint aimed at good, better and best strategies is needed. Yet many struggle by integrating existing and homegrown solutions.

Search management and performance-marketing agencies like Advertising.com, AvenueA and iProspect are beginning to roll out solutions in which business rules drive media buying decisions under a single strategy. In order to make the best media spending decisions, it is paramount to measure effectiveness across multiple types of performance campaigns in real time. This requires a tactics-level understanding of the details of each strategy, such as how affiliates generate sales numbers. Equally important, marketers are being forced to identify quickly which marketing vehicle delivers results better than others and why.

JEFF G. MOLANDER is CEO of Molander & Associates Inc., a Chicago-based publishing and consulting firm that helps multi-channel retailers, catalogers and service companies to manage their affiliate programs.

Bad Guerrillas

The biggest mistake of all is launching an affiliate marketing program without knowing perception from reality.

THE PERCEPTION is that you’ve been running your affiliate program earnestly and professionally. That’s why you have lots of affiliates. You don’t feel you’ve got to be very aggressive with your marketing because all the affiliates already know about you.

THE REALITY is that very few of your own affiliates know about your business. Even if you’ve been in the same business for five years, if you assume your affiliates know what you sell and why it’s terrific, you’re making a major misjudgment.

THE PERCEPTION is that you can’t treat your affiliates any better than you do right now. Each one of them is happy and delighted with the rewards of their service. You don’t have to improve your affiliate program.

THE REALITY is that your affiliate base represents a teeny tiny percentage of the potential market. Treat them like royalty but start to focus upon those affiliates who are proving to be above the rest. Zero-in on finding more just like them. Need I tell you that all affiliates aren’t created equal?

THE PERCEPTION is that all of your business is repeat business and that you’re doing everything right. Your focus is 100 percent on your existing affiliates.

THE REALITY is that if you’re not growing, you’re on the way to going out of business. No business can rely solely on its existing affiliates.

THE PERCEPTION is that you get a great deal of your business strictly by the energy and resourcefulness of your affiliates, so you don’t have to invest in real marketing.

THE REALITY is that when you invest in affiliate support materials in all shapes and forms, then provide them to your best affiliates, you’ll realize that those tools are some of the best marketing investments you’ll ever make – and you really don’t have to invest much money.

As a marketing phenomenon, Internet affiliate marketing is one of the new kids on the block. Whenever marketers flock to a new marketing medium, they seem to repeat the same mistakes.

A big mistake made with Internet affiliate programs is failing to consistently market the program and the products to the affiliates. These are not ordinary people. These are the extraordinary ones who made a conscious decision to participate in your program. Somehow, you conveyed a vision to them, and they saw themselves in that beautiful picture. You showed them how to be an important part of it. They paid rapt attention. They signed up to carry your banner forward into the fray.

And suddenly a monster of a mistake was made. Nothing happened.

You told your story once but once was not, is not, never is enough. Your affiliates have to see that vision again and again to incorporate it into their essence. Unless you consistently stay in touch with them – email, telephone, online chats, snail mail, regional meetings – they are not going to be the evangelists that the best of them can be with the proper care and feeding.

Of all the people who sign up for your program, only a very few will be true Rolls Royce affiliates. Your biggest job is to learn who they are, then treat them the way deities deserve to be treated. Forget the 80/20 rule. In Internet affiliate marketing, you need to remember instead the 95/5 rule. You’ll get 95 percent of your program profits through the efforts of only 5 percent of your affiliates.

It’s a mistake of the highest order to treat all your affiliates the same. Guerrillas are very adept at playing favorites. Your affiliate marketing program has a better chance of coming through for you if you understand what affiliate marketing really is and also exactly what it is not.

Guerrillas know that affiliate marketing is just a fancy phrase for helping people earn money by selling your offering, then treating those people exceptionally well.

It is more common sense and patience than anything else. But too many people make the boneheaded mistake of thinking that affiliate marketing is also a bunch of things it isn’t, such as:

  1. Affiliate marketing is not email. Some companies think they can get all the affiliate support they need with email. A microscopic number of those companies are right. Most businesses need a plethora of other marketing weapons in order for their email campaigns to succeed. If you are doing email only, you’re no guerrilla.
  2. Affiliate marketing is not telemarketing. For business-to-business marketing, few weapons succeed as well as telemarketing. And telemarketing response rates can be improved by augmenting it with advertising, yes, advertising, and email, even snail mail. But marketing is not just telemarketing.
  3. Affiliate marketing is not having a Web site. Sure, you’ve got to have a Web site to provide information, answer questions, reassure, take prospects to the next level and deepen the relationship between their lives and your company. But you must remember that a Web site only helps with the job. It does not do the job. Not hardly.
  4. Affiliate marketing is not producing brochures. Many companies rush to produce a brochure about the benefits they offer, then pat themselves on the back for the quality in the brochure. Is that brochure marketing? It is a very important part when mixed with 10 or 15 other very important parts – but all by itself? Forget it.
  5. Affiliate marketing is not show business. There’s no business like show business, and that includes marketing. Think of affiliate marketing as help-to-sell business, create-a-desire business, inspire-a-vision business, expand-a-company business, generate-motivation business. But don’t think of yourself as being in the entertainment business because affiliate marketing is not supposed to entertain your customers.
  6. Affiliate marketing is not an invitation to be clever. If you fall into the cleverness trap it’s because, unlike the guerrilla, you don’t realize that people remember the most clever part of the marketing even though it’s your enticing offer they should remember. Cleverness is a marketing vampire, sucking attention away from your primary offer.
  7. Affiliate marketing is not complicated. It becomes complicated for people who fail to grasp the pure simplicity of marketing, but affiliate marketing is user-friendly to guerrillas. They begin with a seven-sentence guerrilla affiliate marketing plan, create a marketing calendar and select from 100 weapons, over half of them free. Not too complicated. The full list appears online at www.GuerrillaMarketingAssociation.com.
  8. Affiliate marketing is not a miracle worker. More money has been wasted due to marketers expecting miracles than to any other misconception of marketing. Affiliate marketing can be the best investment you’ll ever make – if you do it right, and doing it right requires knowledge, commitment, patience and planning.

Value Proposition

With the many affiliate offerings out there, why would anyone want to align himself or herself under your banner? The answer is: your value proposition. You must structure your referral fees with a fair percentage to make it worth their while. It should be generous to make them sense that they are, indeed, earning a passive income.

And it must be simple to make their lives easy. You must offer them the tools of today’s technology: auto-responders, hyperlinks, team-building techniques, incentive programs, contests, sweepstakes, and training materials.

Affiliate marketing is an opportunity so new and unlike what your daddy did that it intimidates many business owners, who then steer clear of it. For guerrillas, affiliate marketing is a ticket to ride first class, avoiding the potholes, on the road toward financial well-being.

But even as you avoid the potholes, you’ll still see affiliate road kill littering the landscape. That’s because it’s so easy to make a mistake with a new concept such as Internet affiliate marketing. Our pioneers made their share as they settled our nation. Why should it be any different among pioneers in marketing? Mistakes are part of the deal, but if you know them ahead of time, perhaps you can sit out that hand.

As all affiliates are not equal, neither are all stupid affiliate marketing mistakes. Stupid mistakes in horrid abundance have been made by otherwise bright companies when testing the affiliate marketing waters. Because guerrillas can learn from these blunders, it’s worth your time to know the most notable:

  • Failure to attract attention during the announcement of a program dooms many brilliant affiliate efforts before they have a chance to shine. Opening lines, email subject lines and first impressions are the gates to your offer. Open them wide.
  • Not facing the reality of an affiliate marketing explosion relegates your attempt to the ordinary, which means the ignored. Guerrillas say things to rise above the din, to be noticed and desired in a sea of affiliate marketers. If you were the only game in town that would be a different story, but there are many games. Act and market accordingly.
  • Focusing your message on yourself instead of your affiliate will usually send your effort to oblivion. Affiliates do not think of themselves as affiliates. They think of themselves as people, husbands, wives, brothers, parents, sports fans, business owners, professionals, consultants. They care far more about themselves than they care about you. So talk to them about themselves ” and help them to see themselves as affiliates. Expect magic if you can do this.
  • Not knowing precisely who your market is will send your affiliates off in the wrong direction. Research into pinpointing that market will be some of the most valuable time you devote to your affiliate marketing campaign. Those hard-working affiliates of yours need all the help they can get. Guerrillas are helpers supreme.
  • Marketing to other than honest prospects wastes your affiliates’ time. If you make your offer to people who don’t really have a need for your offering, it will be an incredibly tough sale. As in all direct marketing – and make no mistake, affiliate marketing is direct marketing – the target market is the most important factor, followed by the offer and then by the way that offer is presented.
  • Initiating affiliate marketing programs without specific objectives gives you too hazy a target for bull’s-eyes. Begin by setting the goals you wish to attain, then the steps you’ll take to reach those goals – and the benchmarks you’ll use to measure your progress. Without benchmarks, you’ll be affiliate marketing in the dark.
  • Featuring the benefits of your product or service to your affiliates first is telling them what they don’t want to know yet. First, your job is to make them see how they can gain financially. Then, they’ll pay rapt attention to the vehicle that will convey them to that promised land. To a hungry man, the most important benefit is the promise of a good meal. To a business, it’s profits. To an affiliate, it’s financial independence.
  • Failing to test all that can be tested is a goof-off of the highest order. Test your commission structure, price points, benefits to stress, contact times and mailing lists to know the real winners. Test various marketing weapons with your affiliates so you can provide them with the most lethal. Guerrillas test everything they can, constantly subjecting the results to the litmus test of profits.

There. Now you can never say that you weren’t warned. You can never plead ignorance when you commit a monumental boo-boo. On the other hand, perhaps you can take a deep breath of relaxation knowing that others have made the really moronic errors for you and that there are no more to be made.

Guerrillas giggle at that idea. When it comes to Internet affiliate marketing, as new as it is, they operate according to a single mantra: “Don’t make the same mistake once.”

JAY CONRAD LEVINSON is the author of the Guerrilla Marketing series of books, the most popular marketing series in history with 14 million sold in 39 languages. He also publishes the Web site GuerrillaMarketingAssociation.com.

Wanted: Affiliate Manager

Here in the midst of the fearsome jobless recovery, one job remains hard to fill: affiliate manager.

And nobody seems surprised. After all, online affiliate marketing is still a relatively new field. While thousands of corporations have established affiliate programs, many still haven’t figured out the skills required to manage the programs well, much less what they’re worth.

Can you blame them? Anyone who has ever tried to explain affiliate marketing to a friend knows the very concept can be, well, a bit abstract. But now some very large companies are starting to notice there is real money flowing in from that strange little group of people in the affiliate marketing area. And the pressure is on to find someone who can lead them to greatness.

But what exactly goes into that job description? What skills are required? What experience is needed? And how much, exactly, should the affiliate manager earn? Is this a technical job or a marketing position? Or does it require an MBA?

We set out to answer those questions after we discovered salaries spread out, pretty evenly, from $40,000 to $250,000 – a range that reflects a great deal of confusion. (About one in eight AMs makes more than $120,000 annually.) With the help of many experts, we also learned there are some common elements to great affiliate managers. Revenue is proud to present the top 10 traits that the folks in HR absolutely must list when placing an ad that reads: “Help Wanted – Affiliate Manager.”

1. Great Communicator

Perhaps the No. 1 skill desired in an affiliate manager is the ability to communicate well through many media to many affiliates. Affiliates need to know about your products, prices, promotions and a whole lot more. “Tell your affiliates when you’re having a promotion, tell them what your hottest products are,” said Matt Ranta, affiliate manager for electronics retailer Vann’s. “Don’t make them go out and find it.” Monthly or weekly newsletters and regular emails are key to that communication.

Carolyn Tang, AM for CollectiblesToday.com, uses informal, usually weekly, text emails to communicate affiliate stats, merchandising ideas or details on the merchandising manager’s “hot product” picks. “Communication isn’t just the writing,” Tang said. “It’s the ability to communicate with affiliates on different levels, from casual to complete professional, like making sure checks get paid on time and problems are solved.”

Since affiliates come from many backgrounds – single parents with children at their feet, retirees, home-based entrepreneurs and companies sometimes larger than the merchants themselves -“we put marketing tips in the newsletter, from ‘How to increase conversion rates’ to ‘How to increase your average order size,'” Driscoll said.

“I am in contact today with 400 to 450 affiliates that I consider to be the top producers in the industry,” said Andy Rodriguez, an outsourced affiliate manager and owner, Andy Rodriguez Consulting in Miami, Fla. “Our conversations include ‘How’s your family, how’s your dog?’ It’s that information I can draw upon when I bring a new affiliate aboard.”

2. An Entrepreneur

In true entrepreneurial form, AMs must be self-motivated innovators who can create a custom blueprint for growing the merchant’s affiliate program, follow and forecast revenue, select affiliate tracking technology, understand contracts, manage data feeds, and represent the merchant’s brand and interests through the affiliates – often with little support from others within the company.

“The affiliate manager is basically CEO of this little slice of pie within the bigger program,” Driscoll said. “They basically get to run their own show, their own business, with their own sales force through the affiliates.”

Todd Daum, vice president of marketing for Overture, added, “Being able to recognize an opportunity, such as a high-potential affiliate or an opportunity for a new promotion, will go a long way in helping differentiate one affiliate manager from another.”

3. A Bit of a Nerd

Of course, it’s not enough just to be a hotshot entrepreneur. Great AMs should also be, well, a little geeky. They’ll need to understand html, search engines, coordination of search keywords and search URLs. They’ll need to provide quality control for the Web site, as far as researching availability of images, scanning images and uploading images.

It also pays to have hands-on experience with BeFree, Commission Junction, LinkShare and/or Performics management interfaces. And, of course, the AM should be a whiz at communications tools such as instant messaging, PDAs and online chats. Online forums are great learning tools for uncovering current tech issues, such as new parasites and new pop-up or anti-virus software. So managers may want to hang out in some.

Many AMs also are affiliates themselves, giving them the experience of working with technology from the affiliate’s point of view. “Have your own affiliate site, or set up a test account in Commission Junction [or other network interface],” Ranta said. “Go in and see what an affiliate has to go through to get a text link, a banner or individual product links. That way, [you] can walk new affiliates through the process.”

4. A Marketing Maven

Hear ye, hear ye: AMs must be able to sell affiliates on using their program, and sell internal Web designers on creating a site that makes sales once people discover it. “If you’ve got the qualifications [for being an AM], and it’s apples to apples, what breaks the tie is chemistry – someone who could really keep the affiliates motivated and pass on that enthusiasm for our products to them,” Driscoll said.

Marketing goes one step further: “You want to give your affiliates good sales tools – not just banners – that really work,” said Jim Gribble, an outsourced AM and managing director of LinkProfits.com and PartnerIndustry.com. That includes links coded to product tracking information, so affiliates don’t have to log onto a management interface and go through the rigmarole of downloading each individual product.

It also includes having real, personal relationships with at least your top 20 affiliate partners, Gribble said. “Then spend at least 25 percent of your time prospecting for partners. Even if the program is going well, [you should] always be looking for new partners.”

5. Resourceful

AMs face constantly moving challenges: forming alliances with key players who can move the merchant’s program forward and finding creative ways to reach decision makers on the sites they want to partner with. “Maybe pick up the phone, or use regular mail to get their attention,” Gribble said.

The AM also has to know how to adjust quickly to increasingly sophisticated affiliates. “There’s more and more (affiliates) who are really getting smart about their business,” said Michael Brucker, affiliate manager for Yahoo. “They are placing the search engine bids. They’re coming in and asking really targeted questions, and they’re challenging us: What’s our conversion? What are our proprietary keywords?”

6. Good with Numbers

It pays to keep track of sales numbers. “I monitor that on a daily basis,” said Jack Boulant, affiliate manager for InsureMe.com. “We have an amazing IT department, so we can really see the affiliates that are drivers for us.” How does Boulant reward his superaffiliates? “Increase their payouts,” he said. “A fair thing is to pay them 45 percent of what we make – so we’re both making a profit. Together we are growing this company.” AMs also must take care of financial reporting, figure commissions, cut the checks, and analyze what clickthroughs are legitimate and what could be fraudulent.

7. Graphically Inclined

An AM must come up with fresh banner ads and provide design input for Web sites in order to increase sales. “They must know how to work with a designer, or have Photoshop experience,” Ranta said, “and be able to do quite a bit yourself or communicate what’s needed to the design staff.” A 30-day version of Adobe Photoshop can be downloaded for free at Adobe.com. AMs will need to create special storefronts for seasonal events, size and process new images, research and load missing images, and coordinate photography of new products with the photo studio and designers.

8. Respectable

AMs must have a commitment to doing the right thing: being truthful, ethical, and quick to resolve problems. “Be true to your word,” Ranta said. “Your word is your bond.” For instance, Ranta recently made a mistake in a contest he was running and errantly told one of his affiliates that she was the winner. “I gave her the prize anyway, and told her in person that I had made a mistake,” Ranta said. “If you tell your affiliates you’re going to have a new data feed available, or you’re going to go in and do new creatives, you need to follow through in a timely fashion. Don’t say something just to get them off your back.”

Because affiliate managers are salaried plus commission, rumors abound that “doing the right thing” with affiliates is held back if that means AMs could lose money on their sales charts. “But it’s been proven that once they do the right thing, such as dropping parasitic relationships, the sales numbers just blow up,” de Poel said. “It doesn’t matter what your competition is doing; it doesn’t matter what search engine optimization guys are doing. It matters what you are doing for your channel, treating your affiliates appropriately and rewarding your affiliates for the business that they drive.”

Remember, said Tang, “We all make mistakes. The ability to say, ‘I’m sorry,’ and make up for it is where all the respect comes in.”

9. Contactable

By returning toll-free calls, emails, forum questions or instant messages within 24 hours, affiliates feel like telecommuters and part of a team. Even if the affiliates aren’t contacting you, it’s a good idea to be checking in with them: “I always check in with my affiliates, some more than others,” Boulant said. “I at least try to do it on a monthly basis; some of our top affiliates I talk to on a weekly basis, some more than that.” But what about those affiliates who don’t like to be bothered and are happy just being paid on time? “It’s all part of the relationship process: you have to learn what your affiliates want,” Boulant said. “What I do is I send new affiliates a welcome-mail, and then leave them a voicemail just to introduce myself so they know that there is someone here just to help them. If I get a response by email, I know they’re more responsive to communication that way. Some call, and I respond the same.”

Said Rodriguez: “You have to be able to go home at night, and think that you have people working until 2:30 or 3 in the morning for you, placing links and banners on their pages to sell your products. Be accessible to them, even at that time.”

10. A Team Member

The best AMs can work with cross-functional teams including customer service, sales, technology and administration. “Excellent affiliate managers should have the ability to work closely and effectively with account managers,” said Daum at Overture. “Taking the time to develop those relationships is imperative.”

AMs must also treat affiliates well, be good relationship builders, and know how to reward but not “manage” their affiliate sales team. “The long and the short of it is maintaining and building a relationship with an affiliate,” Boulant said. “Good or bad, it should be ‘Tell me and I’ll take care of it.'”

It boils down to this, said Rodriguez: “Be sure that the merchant and the AMs are on the same page. Treat your affiliates as partners, they are your salespeople. Be sure you have open communications to build a level of trust, so that when everything is going great, everyone is on the same page, but when you have a problem, you can go to them and say, ‘Everything is going to be fixed’. It’s no different than a marriage, [except] the goal here is for everybody to make money.”

JENNIFER MEACHAM, managing editor of Revenue, has been writing about business and technology for more than a decade. She was named the Region X Journalist of the Year by the US Small Business Administration in 2002.

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.