ensuring incremental growth in any affiliate program

Ensuring Incremental Growth in Any Affiliate Program

Affiliate Summit West 2014January 13th, 2014 | Las Vegas

Robert Glazer, Acceleration PartnersDavid Naffziger, BrandVerity

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Where Affiliate Programs Have Been

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1. Management: Whoever was available in-house & network based management. <2 years.

2. Metrics & Payout: “Revenue” and number of affiliates. More volume equals more $ and >%

3. Affiliates: 95% loyalty/toolbar and coupon sites

4. Networks: Multiple, often redundant networks

5. Transparency: Little to none, no referring url

First Generation Affiliate Programs

The result is a expensive retention program masquerading as a new customer acquisition channel.

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And Where Affiliate Programs are Going

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1. Management: Experienced in-house managers or specialized third party firms partnering with in-house

2. Metrics & Payout: Incrementality; new customer acquisition & conversion rate. Pay for quality.

3. Affiliates: Bloggers, platform tools, shopping sites, more relevant content focused sites

4. Networks: Fewer networks, bigger not necessarily better

5. Transparency: Knowing who your affiliates are and how they are promoting

Second Generation Affiliate Programs

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The Result:

A smaller, more valuable

new customer acquisition program aligned with business development

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How Affiliate Program Economics Often Work

Acme Corp:

• $100M in annual online revenue • “Unhealthy” $15M affiliate program

10% commission to affiliates 3% of affiliate revenue in fees to the network

= $1.95M or 13% of revenue

• 75% of Acme’s affiliate revenue is non-incremental• Coupon sites/low-value sources targeting existing

customers

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How Affiliate Program Economics Often Work

• Acme is actually paying $1.95M for $3.75M in incremental revenue

• 52% of sales (not 13%)

Almost $1.47M in costs are being paid out unnecessarily

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Then:

Last-in Does Not Have The Same Purpose

Now:

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Cost Center or Revenue Generator?

• 80% of the industry’s affiliate revenue is from coupon, incentive and other low-quality sites.

• Many convert at 20% or more: 10X+ times a normal site average. These numbers are achieved through targeting customers already committed to buying.

• This results in little incremental affiliate revenue to many retailers. However, there are real and significant costs: commissions, network fees, management fees, etc.

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You have a lot of players on your marketing team who are working with consultants or employees in each of these areas

How Does Double Counting Happen?

SEO Affiliates PPC

Email /CRM Display & Re-Targeting Social Media

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Total Company Revenue:

$2MSEO: $1M

Affiliates: $1M

PPC:$1M

Email / CRM: $1M

Display & Re-Targeting :

$1M

Social Media: $1M

When 1+1+1+1+1+1 = 2

Everyone is taking credit for the same sale, each channel acts like the others do not exist

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Creating the Blueprint

Identify the channels that influence customer conversion:

• SEM, SEO, Social, Affiliate, Email, Retargeting, Display, Direct Links & Unidentified

• Even more granularity needed [ex: multiple search engines, multiple retargeting campaigns, web to store, etc]

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Goal: Dashboard visible to everyone in which

ALL agree on the data’s accuracy

Creating the Blueprint

Verify disparate reporting: Every report gives different results

• Google Analytics, Bid Management Systems, ShareaSale, CJ, multiple vendors for re-targeting etc.

• Tracking on pixels, third party tags, name value pairs, long cookie durations, session based cookie durations

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Email PPC

Affiliates

Organic Search

Display & Retargeting

Social

* Incremental Affiliate Sales

What Analytics Can Uncover

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“Affiliate Revenue” is a Misrepresented Metric

• It does not describe revenue solely from affiliates – it counts revenue where an affiliate was involved in the transaction

• Healthy programs try to attribute affiliate revenue appropriately

• Unhealthy programs count all revenue touched by affiliates, distorting overall marketing picture

Organic Search Paid Search Affiliate Transaction

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Demand Generation vs. Interception

Scenario 1: Customer Buying

Commodity Product

Customer wants a toaster, they research and look for the best deal for the chosen model.

Loyalty/coupon sites can add value by affecting merchant selection.

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Demand Generation vs. Interception

Scenario 2: Customer Buying

Differentiated Product

Customer goes directly to the chosen merchant with purchase intent. They are either intercepted along the way or hop out of the cart before purchasing to look for an offer that may or may not exist.

For many branded, custom & differentiated products, coupon/loyalty sites likely do not play a role in the purchase decision.

• Forced Clicks• Cookie Stuffing

• Incorrect Offers• SEO or PPO Trademark

• Toolbars • Spyware

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Multi channel attribution allows for performance pay outs based on the value of each channel in the customer funnel.  

Valuing The Entire Funnel

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Sale! ($100)

Closing $25

Engaging$25

Introducing$50

Introducers: Content SitesBloggersShopping Sites

Engagers: Social Media

Closers: ToolbarsCoupon sitesCRM

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How would it work for a baseball team that only valued a closer?

Overvaluing Last In Is Expensive & Misleading

Starting Pitchers• Content Sites• Bloggers• Shopping Sites

Bullpen• Social Media

Closers• Toolbars• Coupon Sites• CRM

$6,000,000Last Place NL East

No Playoffs

Heath Bell

$11,000,0003rd place NL East

No Playoffs

Jonathan Papelbon

Vs.

$1,650,000Most Wins

Regular Season

Tyler Clippard

$1,570,000World Series Champions

Sergio Romo

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Who is a Value Added Affiliate?

Ability to affect a purchasing decision or vendor, not after the decision has been made

Ability to develop brand loyalty in a new audience

They have the traffic or mindshare that you want

75%+ new customer referrals

2%-3%  conversion rate

Promotion is often at the product level

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Best Practices: Finding High Value Affiliates

• Who Likes You Already • Customers, partners, social media, and reviewers• Tools: Radian 6, google analytics, CRM

• Who Should Like You• Has the traffic you want, potential partners, complimentary

products/services• Tools: SEM Rush, Alexa, Group High

• Reaching the Affiliate Community• PR announcements, conferences, and competitive research • Tools: abestweb, affiliate summit

Run an affiliate program like business development

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Quality Programs Need Focus & Talent

A quality program has a strong, cross-functional team paying attention to both quality growth and expense containment.

Expertise in wide range of areas including program strategy, program operations, value added affiliate recruitment and communications, campaign development, fraud monitoring, and analytics

Affiliate Team

Growth via content-based affiliates that are highly relevant to the merchant’s product or serviceQuality Revenue

Limit commissions to low-value affiliates, enforce program terms & conditions, and monitor affiliate fraud

Cost Management

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Affiliate Done Right

•75% average growth for over 5 years, cost % down

•Managed by a four person team each with separate responsibilities.

• No loyalty or toolbar affiliates, very limited coupon site participation with tight control and monitoring.

• Frequent, quality communications (1:1 with over 100 affiliates each week)

• Fresh content and new creative every month

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Value the Right Affiliates

1. Affiliates are not all paid equally. Focus on quality not quantity.

2. Make sure affiliates who work hard are paid properly given credit. • A mid-cart checkout overwrite system • Unique portable cookie system.

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Aggressive Recruiting & Activation

Utilize all tools to attract and activate affiliates:

• Constant focus on recruitment including non-traditional affiliates

• Conferences: traditional and non-traditional

• Competitor recruiting

• Network advertising and invitations

• Frequent targeted activation campaigns, including use of attractive prizes

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Yet Selective in Acceptance

We maintain a tight program that allows the most relevant and active partners to thrive:

• Decline nearly 50% of applications

• Ongoing policing of affiliates whose metrics are not in line with the norm

• Monitoring of affiliate marketing practices for violations of terms and/or trademark bidding

• Ask questions when don’t understand the affiliates business model

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Winning Formula

• Individual order based attribution

• Lowered commission for partners with high channel overlap and cart based clicks

• Overwrite protection for content affiliates from coupon affiliates

• Increased commission for affiliates who drive top of funnel and brand awareness

• No toolbars

= High performance and loyalty from quality affiliates

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• Trademark SEO• Forced Clicks • Trademark Domain Poachers • Trademark + Coupon PPC Bidders • Trademark PPC Hijackers • Loyalty and Affinity Sites • ISPs and their Partners

Understanding Low-Value Affiliate Tactics

Affiliates have developed a number of ways to go after a merchant’s existing traffic through demand interception.

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Trademark SEO

A significant share of users come to coupon sites through a landing page that is optimized with a merchants trademark + coupon keywords.

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Coupon Sites Using Forced Clicks

Trademark optimized landing pages use forced clicking tactics to set the affiliate cookie (often for inaccurate offers), forcing a commission.

Click to Reveal Code

Not a Real Offer

Six Month Expired Offer

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Coupon Sites Using Prohibited Codes

Coupon sites post (or allow users to post) coupon codes that are prohibited for usage by affiliates, typically because they are deeply discounted.

Valid code, but usage prevented

at checkin

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Trademark Domain Poachers

Affiliates incorporate the company trademark into their primary URL to target customers who know the brand or are in the cart

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Trademark + Bidders

Affiliates bid on the trademark plus the word “coupon(s),” targeting existing users and also driving up the company’s branded PPC costs

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This PPC ad is not from Blurb, it is from an affiliate.

This turns a high ROI brand PPC campaign into an expensive and unnecessary affiliate payout.

Trademark Hijackers

Affiliates pretend they are the company in PPC, “laundering” the original source of traffic through another thin website or blog

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This box popped up unsolicited after typing www.homedepot.com in the browser with the Upromise toolbar installed. Clicking it gives Upromise affiliate credit even though we came directly to this site.

Over 14M people have used the Upromise toolbar shown above, and millions more use the Ebates and other toolbars.

Loyalty & Affinity Sites

Large loyalty affiliates offer toolbars that, once installed, override direct visits and some search results, loading an affiliate link instead.

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All links on this page lead first through a coupon site and then through an affiliate link to walmart.com

Facebook Pages

Continuing to receive likes; Now 161

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Twitter Accounts

Active affiliate account. Sends visitors to a coupon website

Account classified by twitter as a spam account; followers still see tweets

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ISPs and their Partners

Popups on all partnered merchants.

Only visible to customers of the ISP.

Also autoredirects through affiliate link.

Nearly impossible to verify.

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Methods to Identify Low Value or Fraud

Research new affiliates and their promotional methods.

Beware of any method you cannot verify.

Look for sudden spikes in traffic, transactions or conversions (8%+ is suspicious for non coupon sites)

If network displays referring url, check this frequently with new or high volume affiliates.

Carefully review referring urls to understand how they are attracting users and how they are adding value

Compare first referrer to last referrer cookie

Beware of conversions that come through proxies or thin sites with very high Alexa rankings (no human traffic)

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Recognizing ‘Front’ Websites (Old)

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Recognizing ‘Front’ Websites (Old)

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Recognizing ‘Front’ Websites (New)

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Recognizing ‘Front’ Websites (New)

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Robert Glazer | Founderrglazer@acceleration-partners.com www.accelerationpartners.com@affiliatemgr

David Naffziger | CEO davenaff@brandverity.com www.brandverity.com@BrandVerity

Questions & Contact Info