Scroll to the bottom of an e-commerce site and you're likely to find the link 'become an affiliate'. Almost everyone is in on the act, which isn't surprising as affiliate marketing can really be that rare beast: a win-win situation. In a nutshell, an e-tailer appoints affiliate sites to carry links to its site, and they earn commission from the e-tailer each time someone clicks through and makes a purchase. Terms can vary: often it's a percentage, say five-to-eight per cent, or a flat fee.
Many affiliates and e-tailers join networks like TradeDoubler, Be Free or Commission Junction, which act as matchmakers but may offer management services too. It's this issue of management that online businesses are waking up to. When affiliate marketing first emerged, many viewed it as the goose that laid the golden egg - costs are minimal (a sign-up fee with a network, say), and you only pay for results, unlike traditional advertising which needs upfront spend based on forecast results.
"Clients thought 'I just plug it in and I can expect enormous numbers of visitors at a very cost-effective price'," comments Will Cooper, chief marketing officer at affiliate network TradeDoubler. "But, of course, life doesn't work like that. You have to go out and optimise your network." That's why more online businesses are appointing a dedicated manager.
The affiliate-marketing research organisation Affstat estimates that one-third of online businesses have an affiliate manager. Typically, their job involves recruiting affiliates, negotiating deals, managing the design of creatives and ensuring affiliates get paid.
These are all things that networks can do, too. TradeDoubler started offering consultancy services at the end of 2000 when there was a downturn in the market and many businesses lacked the resources for in-house management.
Commission Junction offers a similar service called C J Vantage.
"In the UK,we now have in the region of 40 clients who take our consultancy services and 60 or 70 that take our account management services, which is basically a diluted version of the consultancy," says Cooper. In other words, there are degrees of outsourcing the running of an affiliate scheme.
Cooper says it's not always a clear-cut situation where a client either outsources to a network and uses their consultants or has someone in-house.
Often, they'll have both. As firms realise the value of their affiliate-marketing schemes, they're also waking up to the value of having someone in-house to complement, if not replace, a network arrangement. "People are prepared to put the resources behind it internally as well because of the results it drives," explains Cooper. "It's not uncommon for us to generate more than 20 per cent in online sales, so they can justify putting extra resources into their affiliate programme."
Alison Guise, technology sales director at affiliate network Be Free, agrees, saying that firms are much more aware of the power of affiliate marketing and are acting accordingly. "Previously, they might have fluffed around a bit or given it to someone who didn't make it a priority," she says. "You would have seen that a lot a couple of years ago."
Bookseller Blackwell's appointed a full-time affiliate manager in a newly created role just over a year ago when it found that 40 per cent of its online sales were originating from that route. "Prior to my starting, it was part of the direct-marketing executive's role across the business," says affiliate manager Susie Organ. "It was just tacked on to her role and it never really had ownership in terms of taking the initiative to increase the role of affiliate marketing. It was also to reflect the amount of business that affiliate marketing was bringing to the site."
Unusually, Blackwell's doesn't use a network. Organ has to find all the affiliate partners, though she says most approach the company, and then vets their sites to make sure they're suitable. "Then we'll approve them and help them build their links if they need help," she says. "With the larger affiliates, it's more a case of looking at relationships. We have in-depth relationships with about five per cent of our affiliates."
It's common for e-commerce sites to have strong relationships with a small proportion of their affiliates, which need careful management. An affiliate that drives huge volumes of traffic will expect higher commission rates and may want bespoke creatives, which are regularly updated, to push special offers. The importance of this small group led ebookers.com to hire a dedicated affiliate-marketing executive last summer. The travel firm already had a relationship with TradeDoubler, but Basil Hyman, head of marketing, says the new role was created specifically to manage day-to-day relationships with a handful of key partners out of its total of 2,500 affiliates.
"We realised the importance of ongoing account management," says Hyman.
"It's never going to be optimised if you don't focus on it and give it the right resources. It's pretty competitive out there in our space, and a lot of players are focusing on affilate marketing as they realise it's an easy way to get customers." This two-pronged approach to managing affiliates works well, he continues. "With the TradeDoubler approach, the network sources and manages partners, and the sites tend to be smaller, but there's a lot more of them. The others are more direct, which we source and manage ourselves, and we focus on them a lot more on a daily basis." The affiliates deliver a significant part of ebookers.com's sales - "it's under 30 per cent" says Hyman - but the brand association is also important.
"Our biggest affiliate partner is Yahoo! Travel and that brand alignment is key to our business and brand strategy," he adds.
Be Free's Alison Guise feels that focusing on the big fish in-house is a sensible approach. It means that each party is focusing on what it does best: the online business knows its key affiliates well and the affiliates value having a dedicated contact. And the networks can catch the smaller fish, delivering value on a large scale. "There is no doubt that networks can bring economies of scale to the equation," she says. "They have a good position with the affiliates in terms of bargaining power and they have a very good understanding of the rewards." E
That's all very well if you're an 'ebookers.com', but there are thousands of tiny businesses online as well. In many cases it will not be in their interest to hire an affiliate manager as the volume of traffic and sales wouldn't be enough to justify it, and they are more likely to outsource the management of their programme to a network or make it part of the marketing manager's job. It also depends on the importance of online marketing to the business in general: a small or medium-sized business with a strong offline presence might not be as bothered, but for a large pureplay like lastminute.com it will be vital.
"We always felt this was a very important area," comments Stephanie Gay, head of online marketing at lastminute.com. "It is essentially tapping into the potential of the internet, where individuals can set up niche web sites and build traffic by establishing a strong community."
Smaller businesses will need to look at the potential that affiliates hold for them, says Guise. "If it's a niche offering, where perhaps they're never going to drive an enormous amount through the relationships, and they've got maybe half a dozen of them, they can manage them internally."
Managing half-a-dozen partners wouldn't be a full-time job, but just because an online business is small doesn't mean it can't have a lot of affiliates, and it might need to take a hands-on approach to their management.
Online DVD-rental service Video Island set up an affiliate programme several months ago and uses bespoke in-house affiliate-management software as well as an external network. "We felt it was very important to have our own affiliate management software as well as working with someone else," says chief executive Saul Klein. "A network brings you reach, but there's nothing better than having people who can come to your site, and use tools and services that have been specially designed to integrate into your wider network." The key benefit is that Video Island can track customers itself. "Our own software allows us to track post-click," explains Klein.
"Networks are great at delivering people to your front door, but you need to understand what they're doing afterwards so that you can understand the true value of the lead." E
Monitoring and learning from your customers beyond that front-door delivery is vital if affiliate marketing is to deliver its full potential. If a business can feed what it learns from its affiliate programme into its wider marketing strategy, its value is so much greater. And that's where a dedicated affiliate manager can be worthwhile. Blackwell's Organ says that she aims to learn from affiliate sales so that she can encourage repeat sales to come direct from the customer, rather than through the affiliates, so saving on commission payments. Her role as affiliate manager therefore has to encompass other forms of marketing. "In terms of a long-term strategy, we would like to use affiliate marketing to direct traffic to our web site, but we actually want people to come back directly next time," she says. "So, we're using the affiliates as one marketing tool."
As affiliate management is still new, there is no prescribed career path.
In most cases, managers come from the marketing pool as many of the skills are marketing and management-related. "An affiliate programme is part of our wider partnership strategy and requires the same skills as partnership-building and management - good communication, interpersonal and negotiation skills, people and account management skills, and good business sense," points out lastminute.com's Gay.
TradeDoubler's Cooper feels there is also a big creative angle to the job: "You need to be analytical and able to crunch data, but you also need to identify the creatives that work best, or not so well, and be able to develop the programme creatively."
While it doesn't need to be a full-time job in every case, an affiliate programme will only deliver what is put into it. Guise says the optimum scenario would be for companies to have someone in-house who manages the key strategic relationships and use networks to widen the net, but the most important thing is to give it the attention it needs and have clear objectives. "When they have clear objectives, and know they need to communicate with and manage their affiliates, and be creative, then online companies will see success," she says.
MAJESTIC OUTSOURCES TO NETWORK
Wine retailer Majestic (www.majestic.co.uk) has about 100 UK stores and turnover of around £100m. Many online retailers of that size would have an in-house affiliate manager, but Majestic mostly leaves the running of the scheme to TradeDoubler, which it has been using for a year, with in-house responsibility under the remit of e-commerce director Jeremy Palmer.
TradeDoubler finds potential affiliates and generally checks that they are appropriate. Palmer says Majestic lacks the time and resources to manage it all in-house. He says: "I spend just a few hours a month working on the affiliate scheme. We have a very small team and one of the key things is that we keep costs right down."
The affiliate scheme is important to Majestic. The retailer doesn't specifically work to integrate it into the wider marketing strategy, but that happens anyway because online customers become customers of an actual store for the delivery.
"If our customers wish to be marketed to by that store then they will be," explains Palmer.
"We are not pushing it in an active way, but it's natural that they become part of the customer base."
CODE OF CONDUCT FOR WEB PUBLISHERS IN THE UK
In March 2003, three affiliate networks - Performics, Be Free and Commission Junction - announced a joint campaign to set up a web publisher Code of Conduct in Europe. The code, already set up in the US, is a set of ethical guidelines, which aim to stamp out unethical behaviour by affiliates.
Previously, there were no standard guidelines, which raised concern that publishers might use technologies improperly for their own gain. The UK terms of the code are exactly the same as those in the US, and are divided into three main subjects.
The first issue concerns 'interference with referrals', which prohibits web publishers from tampering with referral mechanisms such as links, which could cut the commission paid to someone else. They cannot use technologies that would replace tracking identifiers, or intercept or redirect a user from being referred by another publisher.
The second subject, of 'altering another publisher's site', says publishers cannot change the appearance to an end-user of another publisher's web site or use their content to obtain a referral, or obstruct access to another publisher's site, regardless of whether it has permission from the user.
The third subject regards software installation and uninstallation. It says publishers cannot bundle downloadable shopping software with other applications in a way that makes installation and uninstallation unclear. Such applications must be clearly presented and accepted by users, and easy to uninstall.
Elizabeth Cholawsky, senior vice-president for marketing and product development at Commission Junction, says the response from the industry has been favourable.
"Both in the US and UK, the reception has been positive," she says. "Publishers look to us as the trusted third-party. Developing and supporting guidelines such as this code underscores the fact that we actively perform that role."
The terms of the code do sound a bit obvious, however. Presumably, everyone knows that tampering with the web pages of someone else is not a good thing to do, so why is the code necessary?
"Because a multiplicity of business models are being used to promote advertisers on the web," explains Cholawsky. "Some are not appropriate to be used in a network-based model. The development of the code sets out what is appropriate and what isn't. It protects the integrity of the business models in a pay-for-performance model. It assures that the publisher who has actually done the work will get rewarded for driving the traffic," she says.
The three networks that created the code continue to promote it, adds Cholawsky. More importantly, they are keeping an eye on their clients across the network to ensure it is being followed.
"We actively monitor publishers in the UK, as well as in the US, for compliance and take action when we find issues," says Cholawsky. "We have also recently involved the IAB in the US - a neutral third-party that would take the code forward."
KEY SKILLS FOR AFFILIATE MANAGERS
Communication Affiliates need to be kept informed of special offers and new creatives, so they can promote them more effectively. Top affiliates may need this daily.
Negotiation Commission rates require negotiation - not all affiliates are equal. If one partner drives a huge chunk of traffic, they'll want greater rewards.
Creativity They may not need to design every banner, but they need to ensure the creatives are fresh. Some sites use competitions to motivate affiliates.
Organisation Many sites have thousands of affiliates and they all expect to be paid on time, although networks may relieve some of that burden.
Analysis Where are your buyers coming from? Do they return the same way? Analysing your traffic is essential.
PREZZYBOX.COM USES NETWORKS AND IN-HOUSE MANAGER
Gift site prezzybox.com is unusual. Despite having only 10 staff, it has a full-time affiliates manager, Zak Edwards, besides using two networks, Affiliate Window and Paid On Results.
The web site launched at the end of 2000 and the affiliate marketing scheme got off the ground at the beginning of 2002.
"Initially, running the affiliate programme was by default," admits Edwards.
"We went with a network that didn't have a management service. But now it's our preferred route because we have more autonomy and control, and we can be more responsive and more individual.
"We can tailor things specifically to our affiliates and do it fairly rapidly," he adds. "We're fortunate that we can offer requirements direct to affiliates." Although prezzybox.com is quite small, it has a lot of in-house expertise. There are designers and technical staff who can do things like design creatives. The site makes 20-30 per cent of its sales through affiliates, so Edwards is kept busy.
"You need to treat your affiliates like a salesforce," he says. "You communicate with them, make sure they've got everything they require, and notify them of new products, new creative, any competitions and incentives."
Edwards also spends time building up the network of partners - they choose prezzybox.com or it finds them. That could be by doing a simple search on Google for potential partners.
"The affiliate scheme is one of the most important things we do, definitely," says Edwards.
"We're not a huge company, but we do tend to be fairly forward-thinking in our strategy. And we value our affiliates. They do well for us."