Affiliate marketing: Survive the online jungle

LONDON - The multitude of price-comparison, cashback and voucher-code sites make it hard for brands to control how customers reach a purchasing decision on the web.

Affiliate marketing: Survive the online jungle

The plethora of jumping-off points that consumers use to buy products on the internet has turned online retailing into an experience akin to navigating a particularly overgrown jungle.

Marketers have to keep their wits about them when promoting their products on the web or risk losing control of sales to the myriad voucher, price-comparison and cashback sites that can influence the online journey.

Affiliate marketing networks face new competitors  

Many consumers do not go directly to a retailer's site to make a purchase. First, they research it on the web. Their journey might take them to an online product review and then to a price-comparison site to find the cheapest retailer. They might click on a banner ad, or search Google for a product and then visit one of the many sites listed in the results.

It is believed that on average, a fifth of online sales are made after consumers click into a retailer's site from a price-comparison site, via websites and blogs offering editorial comments and product reviews, or from money-off voucher code sites.

Affiliate marketing programmes put marketers in touch with these websites and allow them to ensure that they promote
their products in a suitable way. By paying commission to affiliates that send shoppers ¬ to their own websites, retailers can lure customers in from across the web.

According to a report from e-consultancy, UK affiliates helped sell £3.82bn of goods and services in 2008, a rise of 20% on 2007. An estimated £227m was paid in commissions and fees to affiliates and networks last year.

However, with so many routes available for shoppers to take before they arrive at a purchase, brands may find that they end up paying commission of up to 10% to affiliates on sales that would have happened anyway.

Discount dilemma

Moreover, a growing number of consumers are prefacing purchases with a thorough search of the web to find a voucher code offering them money off the product price.

Google figures show that since last autumn there has been a steep rise in searches for sites giving discounts through voucher codes, as consumers look to save cash.

Zak Edwards, managing director of gift site Prezzybox, says: ‘If you speak to a marketer, they will say voucher-code sites are beneficial because they boost sales. But those who look after the money, such as finance directors, believe vouchers are giving away value.'

Edwards predicts that many merchants will tighten up on their voucher codes over the next year, for instance, by paying commission only to those authorised to feature the codes. At present, many affiliates simply copy voucher codes from authorised sites and claim the commission when consumers click through from them to a merchant's site.

Online retailing's ‘last click wins' approach means that the final site that directs the purchaser to the merchant's website receives the commission, ranging from 1% of the purchase price for travel products to 5% for retail goods and even more for financial-services products.

So, as the final port of call, the voucher-site owner can claim the commission, even though they have done little of the hard work in advising people which product to buy.

Moneysupermarket.co.uk has recently established its own voucher-code service, which shopping manager Simon James says will be as transparent as possible and use only codes offered direct by merchants. It will not trawl the web for unauthorised codes, which, in any case, are often turned down by merchants.

Moneysupermarket should benefit from offering its own series of codes since shoppers are more likely to stay on the site until they click through to a merchant. This is a way to ensure that the price-comparison site receives commission for its hard work, rather than losing it to a voucher site.

James concedes that the idea that web retailing is a jungle is an apt metaphor. ‘It is a like a dense forest, on the outskirts there are blogs and chatrooms, but go deeper and you get into comparison sites and other editorial commentary,' he says. 

Another problem with discount-code sites is that they strong-arm retailers into giving away value because if they do not, their rivals will. ‘Without the shelf space you might not get the sale,' says Adam Russell, media account director at digital marketing agency, LBi.

Track and trace

Russell adds that there is a push to develop ways to assess the whole customer journey so that it is not simply the last click that receives the commission.

By knowing the steps the user takes before buying the goods, a merchant could, for example, offer greater commissions for the more desirable routes. This might include paying more for customers that come from clicking a banner ad than via paid search.

‘You need to make sure you work out the true value of every channel,' says Russell. ‘It isn't being done through affiliates, they are just beginning to catch up. We are trying to make sure merchants are assessing their different affiliates in the same way.'

He adds: ‘In the short term, voucher-code and incentive sites might lose out, and true content sites might pick up more business and higher commissions. In the long term, if you don't evaluate each affiliate in this way, merchants will take a hard-line view and say incentive sites don't add value and could stop paying them completely.'

Marketers have to find the best ways to ensure they maintain control over their brands in all the ways they are promoted across the web.

Some, such as Direct Line, have taken a radical approach. It refuses to allow its insurance products to be marketed through price-comparison sites. Its ad campaigns
also criticise price-comparison sites for claiming to offer impartial advice when,
in reality, they are ‘middlemen' acting as brokers for insurers.

The price-comparison sites, not surprisingly, refute Direct Line's claim that the brands they promote most strongly are those that are paying them the highest commissions.

At flight-comparison site cheapflights.co.uk, online marketing manager Michelle Santos advises cautious use of affiliates by brands. ‘Affiliate sites can be an extremely powerful way of promoting a website and its products but can also be damaging if it compromises other online marketing initiatives,' she says.

‘We address this by specifying what can and cannot be done in terms of the programme contract. And we choose which affiliates to work with to ensure we drive better lead value to our advertisers.'

For instance, many retailers do not
permit affiliates to bid on their brand names through Google paid search, as this can
drive up the cost to the retailer of bidding
on its own name. It is also advisable for brands to supply their own creative for ads that will be displayed on affiliate sites.

Affiliates are battling to win customers
that they can direct to merchants' websites. While this holds dangers for retailers and can lead their brands into some of the more unsavoury areas of the web, the fact remains that a well-managed affiliate marketing campaign can significantly boost sales. N

In practice: buying a Nintendo Wii on the web

Finally succumbing to family pressure, I've decided to buy a Nintendo Wii. It looks fun, but I've never bought a computer game before, so will need some guidance. I'm sure the web can help.

I type ‘Nintendo Wii' into Google. Up come official websites in the natural rankings and sponsored links to Littlewoodsdirect, Toys R Us and NintendoWii.Swoopo.com, which claims ‘the hammer fell at £18.60 this time'. Near the bottom of the page, Pricerunner offers price comparisons on the Wii from various
online retailers.

I click in. Amazon tops the table, with a price of £129.98, though stock information is ‘unknown'. Amazon's second entry is for £164.99, with confirmation that it is in stock.

I trust Amazon, but want to know whether there is a cheaper price.

I'm confused about what exactly I'll need in terms of accessories. I visit the Nintendo Wii site and read about the Balance Board. I want one.

I can see this is going to get expensive. I try out the Nintendo site's ‘buy this item online' recommendation, but it's all for the US.

So I go back to Google and type in ‘Nintendo Wii UK'. I can't find anywhere to buy online through the UK site, so type into Google ‘Nintendo Wii UK lowest price'.

Amazon tops the search results. That's where I want to buy it. I look for a voucher code, but they all seem to have expired. I suppose I'll have to research this on the high street and come back and try again.

Lovefilm: quality and quantity

Lovefilm was an early convert to affiliate marketing. It launched its programme in 2002 when it was locked in combat with rival service Screen Select. It has since bought out its rival and continued with affiliate marketing.

Jason Norris, Lovefilm's affiliate marketing manager, says affiliates form an important sales channel for the brand. Its programmes are run through affiliate networks TradeDoubler, buy.at and AffiliateFuture.

Lovefilm has relationships with thousands of affiliates, though only a
few hundred are active at any one time. Affiliates can earn extra commissions by sending through high volumes of traffic. However,  Norris has other considerations.
‘We are trying to look not just at the quantity of traffic but the quality of those customers, so we can reward the affiliate if those people take up the free introductory offer and then stay on as paying customers,' he says.

He rates affiliate Quidco among the top performers and praises its model of charging £5 membership, giving cashback to consumers and building its site as a social network with blogs and forums. ‘It is not just there to make money, but to communicate more effectively with consumers,' he adds.