Affiliates Under the Microscope

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Need to develop strategies that increase market share? Don't have tools to track progress? Join the club. According to VisionEdge Marketing, a majority of marketing executives claim that they're expected to measure, yet not given tools to do so. WebTrends reports similarly.

Online affiliate marketing stands out as a popular strategy that finds itself under the microscope given - unlike search marketing - a propensity toward transparency, hence, measurement. In their quest to measure and understand what works and what doesn't, marketers worry about issues ranging from fraud to overpaying affiliates. They want to know who affiliates are and how they send visitors. They want control and accountability that give them a shot at nailing down success metrics.

Measuring and rewarding affiliates. Affiliate and search marketing strategies are popular based on direct response appeal, yet marketers have an increasing number of online performance-based options to choose from. Where should one focus? Metrics provide answers.

Some want to reward affiliates based on predetermined business rules that revolve around influence affiliates have on transactions. When affiliates provide a slam-dunk, they're rewarded differently versus when merely assisting in creating a sale.

Mike Bibbey, director of e-commerce at multichannel marketer In the Swim, says it's worthwhile to study the mechanics behind various visitor referral partners, as knowledge gained can be used to improve affiliate ROI. It also can lead to more challenges.

"Although knowing the details is strategically useful, it's becoming difficult to identify an absolute source, or group of sources, for a Web-based transaction and 'credit' the channel that created the opportunity," he said. "It would be ideal to visualize telltale customer referral patterns and have preset business rules drive a more creative payment scheme for our partners but there is no silver bullet yet."

Mr. Bibbey suggests that trying to get arms around every influencing party that helps create sales may not be beneficial or even possible. From comparison-shopping engines to affiliate programs and pay-per-click search campaigns, there are many possible referral combinations ... perhaps too many. Mix in touch points like direct mail or broadcast media, and things get complex. Auditing one's performance programs (looking for a few undesirable patterns) and implementing new affiliate rules may offer greater benefit.

"There are many factors working against marketers as they try to understand what actually induces sales," Mr. Bibbey said. "Customers themselves are a point of weakness ... in that marketers rely on them to participate in tracking mechanisms ranging from Web browser cookies to promotion codes given to call center operators."

Controlling costs. Chris Joyce, director of business development for Mercent, recognizes the challenge yet sees a future where marketers can look across channels easily and understand what generates better results, if not manage sophisticated media payment models.

"Understanding actual effectiveness of various marketing strategies is no longer an 'if' but a 'when and how' question," Mr. Joyce said. "Leading marketers are already able to control pay-per-click search partnerships in an automated fashion and based on predetermined cost metrics ... down to the SKU."

Privately, some marketers are adjusting affiliate payments using business rule scenarios. They negate affiliate cookies in certain circumstances wherein affiliates aren't the last referral partner, adjusting and then transferring order-based data (back to affiliate networks).

In my next column I'll dive deeper into evolving best practices wherein marketers are discovering what's really going on within affiliate and search marketing and obtaining new perspective on what works and what doesn't.

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