The following piece was written by Paresh Vadavia and appeared in Revenue Performance magazine in November, 2009.

Affiliate Corner — Paresh Vadavia

Judging by the way our economy has plummeted in the last year, it seems the 2009 holiday season does not bode well for retailers — online or off.

Tens of thousands of people are still getting laid off every week, the job market simply won’t do us the kindness of opening up, and consumers are squeezing pennies so hard that Lincoln feels their pain.

Given this collective reluctance to spend money on anything but essentials, where does that leave online luxury retailers? Better yet, where does that leave their affiliates?

I recently launched my own affiliate management agency to help such online retailers increase their affiliate sales. I have gained valuable knowledge and experience in the industry over the years, notably during the time I spent managing the affiliate program for two online fine jewelry retailers: Ice.com and Diamond.com.

Deals and Steals

While I was at Commission Junctions’ CJU conference in Santa Barbara recently, I spoke to several publishers who were all singing the same song: there is a clear decline in sales for luxury goods.

But the fact of the matter is, even in this economy, no consumer wants to give up their plush lifestyle; they just want to pay less for it. To put it simply: today’s consumer is out for a deal like a shark is out for blood — and the holiday season will be no exception.

Luxury retailers have every reason to push discounts and special sales in these precarious circumstances. So make the best of this environment to mold your affiliate promotions into something from which you can benefit.

Think Outside the Box

My rule of thumb: you never know until you ask. Contact your affiliate managers and seek out ways of adjusting the rules of the game. For instance, propose to reduce your commission on a given product in exchange for an increase on the item’s discount.

During key seasons at Ice.com like Christmas, Valentine’s Day and Mother’s Day, I would bring down certain publishers’ commissions from 15 percent to 5 percent on select jewelry items and then grant them a reduction in the item’s sale price, making sure it still had a reasonable margin. This gave advertisers an exclusive discount on select products, allowing them to shine in the face of their competitors.

And while their commissions weren’t as strong, the higher discounts generated more sales than if the items had been at their regular price.

Keep in mind that this may be a hard sell for your affiliate managers, who will most likely have to cater to your request by creating a new commission term for that one item, customizing a link for it and producing a unique coupon to accommodate the special offer.

You must convince them that they will gain from this out-of-the-box thinking (and added complications). My suggestion would be to introduce a "Deal of the Day" kind of offer on your homepage that will create a recurring sense of urgency for potential customers visiting the site, and consequently drive more sales.

Again, for every item that appears as a deal of the day, you take a hit on your commission in return for the lowest possible price. Remember: more sales at a lower profit are better than no sales at all.

Read ’em and Reap

Affiliate newsletters are excellent tools that you have at your disposal, so use them. I realize certain affiliate network providers like LinkShare have designated pages where retailers can inform publishers about the goings-on of their company; but not all of them do.

So it’s imperative that you read what affiliate managers have to say about their upcoming promotions in the newsletters they fire your way: they give you the guidance you need on what’s hot and what is bound to sell despite the state of the economy. Trust them.

In the newsletters I sent out, in addition to the discounts we were proposing for the season, I would point out that I had a list of our top-selling items for anyone who was interested. While this was a valuable opportunity that many could have grabbed a hold of, only a small few would reply.

I did my best to subsequently communicate these offers to partners personally, but not all affiliate managers have time to contact their hundreds of publishers to inform them of their hottest deals. So pay attention or you’ll miss out!

So if you’re wondering how best to promote luxury goods in light of this unforgiving economy, always keep in mind that consumers are hungrier than ever for good deals. Open the lines of communication with your affiliate managers and propose new ways of promoting their products, even if it means a lower commission. And use the tools that are available to you — like affiliate newsletters — to stay on top of things.

You’ll generate sales, reap the benefits, keep your customers coming back and establish long-term relationships with your affiliate managers. It’s a win-win situation, regardless of how badly the economy is behaving.

PARESH VADAVIA recently launched the OPMpros agency, short for Outsourced Program Management. It can be found at OPMpros.com.