Is It Time to Affiliate?

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Sixty-seven percent of U.S. Internet users seek the lowest priced items and 40 percent find coupons, according to Pew Internet and American Life Project's July 2009 "The Internet and the Recession" study. With lower sales, longer purchase consideration periods, and smaller marketing budgets, what can a retailer do to beyond price cutting to drive sales? One cost-effective method is to add affiliate marketing to your marketing mix or enhance your current program.

Affiliate marketing can be a great way to extend your marketing efforts cost-effectively. (To better understand affiliates, check out this report.) Evidence of this is the recent Affiliate Summit East, where affiliates and retailers made real-world connections to solidify their online relationships. This year, the summit had an impressive 25 percent increase in attendance over last year.

Five Reasons to Add Affiliate Marketing to the Mix

For many e-tailers, affiliate marketing is low on the list of marketing tools they use to drive and convert buyers. Here are five reasons it may be a great way to stretch your marketing budget:

• Extends reach. Affiliates provide the means to connect with more potential customers, particularly in terms of relevant niches, which may not be efficient to interact with otherwise. Bolex collectors are a good example of this.
  
  
• Adds distribution channels. Affiliates expand your reach to additional shopping channels. Examples include secondary shopping sites like ThisNext, forum and community sites like FatWallet, and continuity programs like Subscriptions.com.
  
  
• Provides competitive presence. Affiliates enable you to be present on sites at the point of actual purchase, where your competitors are. This is an important decision point when customers may trade off one brand for another. For example, loyalty or rewards sites like Ebates and Upromise.
  
  
• Focuses on late purchase-process conversion. While the buying process may occur over an extended period, customers may need an extra incentive to complete the deal, as with RetailMeNot.com. Further, affiliate marketing networks, such as RevenueWire for technology products, provide a more efficient shopping cart for some online merchants.
  
  
• Pays based on performance. Affiliates are compensated based on actual sales, making marketing expenses more effective and directly attributable to revenues.

Five Hurdles Affiliate Marketing Must Overcome

Despite its ability to drive and close sales, affiliate marketing is still a stepchild in the marketing arena. Here are five potential negatives and why they shouldn't hinder your use of affiliate marketing:

• Incremental marketing cost. Marketers think affiliates insert themselves in the path of purchases that would have come to them through their own sites. For established marketers who have both offline (such as catalogs) and online marketing vehicles, affiliate marketing adds incremental costs, thereby reducing margins. The reality is that customers are savvy and look for the best price. If there's a promotional code box in your checkout process, some portion of your prospects will leave your site to look for a coupon and that's an opportunity to lose the sale.
  
  
• Additional overhead. To work effectively, affiliate marketing must be managed, which includes analyzing and tracking results. This also means working with affiliates and providing such tools as offers, creative, and relevant landing pages to drive sales.
  
  
• Brand control. Always an issue, but marketers can manage their brands by setting and enforcing rules for their affiliates.
  
  
• Unprofessional affiliates. The reality is that most affiliates are full-time business people with a deep understanding of, and relationship with, their market.
  
  
• Credibility. The Performance Marketing Alliance is a new affiliate industry organization focused on raising the visibility and improving the credibility of the affiliate industry. Its board consists of the who's who of the industry and its tackling important issues like the new tax laws.

Five Affiliate Marketing Metrics to Track

Affiliate marketing requires deeper analysis than just monitoring weekly sales reports to track your business. To make affiliate marketing work optimally, strong in-house analytics are critical. Here are some factors to monitor:

• Promotional offer. Which products need special offers? Which products have the margin to allow you to offer a discount to drive sales? Hint: it's probably not your bestsellers.
  
  
• Promotional timing. Are there points in your marketing calendar that could use a boost when sales have a natural slump? If so, adding promotions can help increase sales. Google Affiliate Network's Chris Henger pointed to a retailer whose sales were weak on Saturdays. To counter this slump, affiliates were given a coupon the second Saturday of each month, resulting in improved sales. These promotions have well thought-out limitations, such as excluding certain products, including its top two sellers that always do very well on Saturdays without any extra push.
  
  
• Quality leads. Which affiliates drive the best traffic in terms of the number of quality customers and ongoing purchasing behavior? Will Martin-Gill of eBay Partner Network talked to the need to find ways to reward your affiliates for driving the best quality traffic, no matter their size. This means building a way to identify and deal with the low-value publishers in your program that create fraud, reduce profitability, and try to insert themselves in the flow of purchases that would have happened without their promotion.
  
  
• Sales attribution. Just as paid search marketing buys are assigned to the last click, affiliate sales are often assigned the last click sale because many analytical models have trouble attributing sales.
  
  
• Customer lifetime value. What is the profitability of a customer over time of buying from your firm?

While affiliate marketing may require an investment of resources to work effectively, it can be a productive channel that brings you sales you never would have found on you own.