In its second-largest acquisition, Amazon buys the company for $970 million.
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Liz Claiborne Inc.’s Elisabeth.com, which sells a Liz Claiborne plus-size brand available only online and in its own specialty retail stores, makes similar use of its affiliate program through Commission Junction Inc. The brand, which debuted online in November 2000, launched its affiliate marketing program with Commission Junction last spring and since then, sales have grown significantly, says Brad Lenz, vice president of e-commerce.
“Commission Junction is online and works pretty much as an ASP for us, versus software integration into our platform that would have been required by others,” Lenz says. “The web is a relatively new channel for us. Commission Junction gave us the opportunity to launch an affiliate marketing program at minimal cost upfront, both in terms of licensing the software and integrating it.”
And at Elisabeth.com, with both online marketing resources and staff time at a premium, that was a deal cincher. “Being in the fashion industry, a third of my online offering changes every month,” Lenz points out. “I have to devote a tremendous amount of resources to model shoots and copy and images that change frequently.”
Elisabeth.com marks down regular price products within 90 days and whatever doesn’t sell goes at 25% off to bargain affiliate marketing sites at the same time the premier sites are getting new regular-price items. “It’s a lot to manage,” Lenz says. “If I decide to launch a new technical functionality, it’s not like I have a lot of people sitting around waiting to do it. Before the people who drive the business are distracted from that focus by testing and launching new business software, I have to be pretty sure of how it’s going to produce a payback.” While Lenz’s marketing manger works closely with Commission Junction on strategies to find the right mix of affiliates, he looks to Commission Junction to handle and track affiliate marketing only; other services and vendors are in place to handle and track e-mail campaigns, portal deals and other online initiatives.
Commission Junction’s pay-for-performance program remains Elisabeth.com’s lowest-cost customer acquisition strategy among efforts that include portal deals, CPM deals and rental of e-mail lists, Lenz says. Since the company pays a percentage only on sales, pay-for-performance is no cost to Elisabeth.com as there’s no charge-through until there’s a sale-and a profit margin to take the percentage out of.
For many of the same reasons, computer manufacturer and direct seller Dell Computer Corp. is shifting more of its marketing budget to its p4p affiliate program through LinkShare. The LinkShare program has driven three to four times more traffic to Dell.com this year than last year, and as the result of sales from affiliates, Dell has spent a corresponding three to four times more on p4p affiliate marketing than it did last year. “It gets us new customers we might not get through other online and offline initiatives,” says Deborah de Freitas, senior online manager at Dell’s home systems unit. For example, affiliate sites include several loyalty or affinity-based sites that reward regular customers with points, deals or contributions to charitable causes. “This lets those customers buy Dell and still shop those sites. It gives them more ways to shop,” says de Freitas.
Retailers like Dell are seeing such increases because in addition to adding new tools and services, affiliate marketing service providers have simply gotten better at their core business. They’re better at matching retailers with affiliate sites, in some cases reducing the number of affiliate links, but improving conversions from the links that stay. “There was a time when people would talk about having tens of thousands of affiliates-they’d actually announce it in their quarterly calls,” says Be Free’s Hoffstein. “But how many of them were driving anything? Now we tell people not to turn down an affiliate if it fits their profile, but to go after those that are going to drive traffic.”
Knowing what works
To clue retailers in on those sites, affiliate marketing services are tapping into an ever-richer base of historical and demographic information as well as relationships with star affiliates in their networks that they’ve cultivated over the years. And after what is now, for some, years of experience, many retailers are able to bring to the table their own sense of which affiliates will work for them. For example, prior to his arrival at SmartBargains.com last June, CEO Rosendorf was executive vice president at Barnes & Noble’s BN.com, where he created the affiliate marketing program the company launched in 1997.
It’s often the case that experienced marketers know their customers better than any vendor, which points to the underlying secret of basic affiliate marketing online. Except for the technology platform, there’s little that’s new about it; it’s simply a form of direct marketing in another medium, and the same rules apply.
Like direct marketing, affiliate marketing is an iterative process in which merchants try something, measure results, and modify their actions accordingly. If they don’t hit the bull’s eye on the first try, they try different offers and different outlets.
One could argue that an affiliate site operates like a retailer’s catalog, a place to post offers. “So what’s the difference between the offer coming to me in a paper catalog or an e-mail and me going to an affiliate site and seeing the offer?” Hoffstein says. “I still need to measure and see what works, and then modify my behavior as a marketer based on that evidence. In a catalog or a store, that cycle might take months. Affiliate marketing does the same thing on steroids.”