What's Your Business Objective?
Professionals charged with Web affiliate marketing programs increasingly are asking themselves a familiar question: "What's our business objective?"
Given their ability to track a few performance indicators such as new-to-file customers and lifetime value, marketers are re-examining the fundamentals. Considering that most operate in a multichannel selling environment, some direct marketers are scrutinizing affiliate-related sales and restructuring terms and conditions - the way they work with affiliates. It's not enough for marketing programs to operate at an assumed level of efficiency. Many marketers are fine-tuning to get the most bang for their budget's buck.
As their ability to track metrics increases, DMers are notorious for wanting to market more efficiently. Yet, as discussed in the last column, identifying every influencing party that helps create sales may not be operationally practical in a multichannel world.
Specifically, creating a rules-based system to reward one's Web affiliates may not be worth the effort, considering various constraints including those imposed by affiliate tracking/reporting/payment solution providers. However, a few tenacious direct marketers believe it to be strategically beneficial. In short, it makes bottom-line business sense to know how one's affiliates send sales and whom they're sending so as to shape cost-effective and brand-supportive terms with affiliates (and tracking solution providers).
"Understanding how affiliates use your trademarks is merely one example," said Lisa Papageras of What on Earth, Art & Artifact, Signals and Wireless catalogs. "If affiliates are providing a clearly defined financial, competitive or branding-focused value add by leveraging trademarks, then it makes sense to spend. But if not, it's wise to rein them in."
Despite efforts of analytics-focused pros like Ms. Papageras, most DMers don't - yet - have a precise understanding of how many touch points serve to create any one particular online order. That stated, she suggested her company has achieved progress in cost efficiency and felt confident that decisions being made are sound. She uses a simple system based on four levels of source-encoded links and order match-backs.
Indeed, Ms. Papageras reported she cannot afford to get bogged down in cumbersome data analysis. She leverages relatively simple data analysis into better affiliate terms and commission structures.
In re-evaluating affiliate programs, Ms. Papageras warned, "Your goal should be more than 'to make money,' or you may find yourself paying twice for the same order.
"Our objective was to drive sales from new customers who we were not actively mailing catalogs," she said. "After an initial order match-back on test orders, it was confirmed that a clear majority of our affiliate orders were from customers who already received our catalog."
She reported that 55 percent of those affiliate-associated orders were from house-file customers while 45 percent were existing prospects on her active mailing list. The revelation resulted in Ms. Papageras revising her affiliate terms to pay higher commissions on sales from new-to-file customers (those who, upon order match-back, did not appear on her mailing lists) and lower commissions for return customers.
In considering how to proceed, your goal should be based on your specific business model. This goal helps determine the types of affiliates you should recruit to promote your company as well as the terms under which they will operate.