September 30, 2003, 12:00 AM

The balancing act in affiliate management

(Page 2 of 3)

Quality vs. quantity

“I’m bigger on quality over quantity,” says Collins. Though he concentrates on a smaller top-producing group within that affiliate pool, he tries to have at least some personal contact with every ClubMom affiliate. The payoff is in affiliates’ loyalty, he believes. “There are those that run programs with better offers out there, but we do offer top service and we help teach affiliates how to succeed. So a lot of affiliates stay and promote our site out of loyalty,” he says.

That also personally benefits Collins, who had performance incentives incorporated into his compensation after he’d been with the program for a year. Collins estimates that perhaps only a quarter of affiliate program managers have a program performance element in their compensation structure, but it’s something he encourages companies looking for affiliate program growth to consider. “If you achieve the numbers that they’ve set, it makes it a lot more comfortable for the company to pay the extra money,” he says.

In addition, he maintains, companies benefit from additional staff. “Companies that manage their affiliate programs internally would be surprised to see how much more could happen if they would just add one more person to the team,” he says. “If they never dedicate the resources, they many never know how prosperous their affiliate program could be.”

But staffing up isn’t always the answer. It was just such a dilemma as Collins describes that recently led online apparel discount retailer ClassicCloseouts.com to turn virtually all the day-to-day management of its affiliate program to Commission Junction Inc. after a year and a half of trying to operate the program internally.

“We had up to six people working in-house to run the affiliate program,” says Daniel Greenberg, the company’s executive director. “We’ve hired seasoned Internet professionals; we’ve hired qualified but untrained people and tried to train them; we tried untrained people working under professionals. We couldn’t find the proper set-up to justify the expenses we were incurring in that department.”

Managing breadth

The problem was that the strength of an affiliate program can also be its greatest drawback: the breadth of advertising exposure that thousands of partner sites can bring to a program, balanced against the cost of maintaining those relationships. “We realized doing it in-house wasn’t going to be cost-effective on our end because we couldn’t figure out a way to do that,” Greenberg says. To solve the problem, ClassicCloseouts assigned that responsibility to Commission Junction, whose affiliate network it already had been using under its earlier efforts to manage the program in-house.

Under its new agreement, ClassicCloseouts has what Greenberg estimates is 40% of one affiliate manager’s time at Commission Junction and about 10% to 15% of as many as three others. Greenberg himself spends a few hours a week overseeing the program and monitoring results, while his designer staff of three and his programming staff of three are available to push banners, copy and other creative elements through to Commission Junction or address affiliate integration issues as needed.

Greenberg says it’s too soon to assess how much time the new arrangement, barely two months old, will require of his programmers and designers. But he’s prepared to hire extra capacity in those departments if program results justify it.

Greenberg, who estimates that under the earlier arrangement affiliate sales represented only about 5% of annual sales that are forecast at about $10 million this year, would like to see that number increase to 20% or more. “It’s up to Commission Junction to really go at it,” he says. “There’s really no limit.”

Overstock took a different tack to boost its affiliate program results, deciding last year to pull most of the hands-on management of its affiliates in-house and switching network providers. Since it added dedicated affiliate managers and switched to LinkShare’s network, affiliate program revenues have soared. Schwegman credits LinkShare with a large measure of the success of Overstock’s affiliate program. “Because of the power of LinkShare’s network we are able to acquire somewhere between 1,000 and 1,500 new affiliates per month. We now have about 28,000 affiliates,” Schwegman says. LinkShare also tracks affiliate transactions for Overstock and helps affiliate managers identify new business opportunities.

But after also initially using complete program management services available from LinkShare while it accustomed itself to the provider’s platform, Overstock staffed up internally and resumed more of the day-to-day handling of its affiliate program, with LinkShare’s ongoing support. Schwegman estimates that Overstock’s affiliate program gets perhaps 50% of a dedicated rep’s time at LinkShare. In addition to supplying regular reports and performance tracking, LinkShare takes on such tasks as getting answers to questions not readily available from its regular reports to Overstock. “If we get a bunch of golf gear, we need to find some high-powered affiliates that skew toward golf equipment,” he says. “LinkShare will help us identify a set of specific affiliates and work with us on those leads.”

For the rest, Schwegman has segmented Overstock’s affiliate base into four groups and assigned an in-house manager to each one. One affiliate manger handles the top 100 accounts; another handles those affiliates that are technically savvy and adept at integrating various product data feeds offered by Overstock; one works with affiliates that are coupon and discount sites; while the fourth handles the others. “We look at the affiliate channel as a sales channel, not just an advertising and marketing channel,” Schwegman adds. “So we typically pay lower salaries and higher commission.”

With nearly 30,000 affiliates through LinkShare, Overstock has made the decision to save itself time by auto-approving all new affiliates. “There is no possible way at the level we are now that we could manually approve every affiliate coming in unless I doubled my staff. So when affiliates get auto-approved, the second they generate any revenue or any significant traffic, we take a closer look at them and decide which of our four groups they belong in,” he says.

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