June 3, 2004, 12:00 AM

Affiliates may be partners—but they still need monitoring

Affiliate web sites have become a major source of sales and new customers for online retailers. But affiliate marketing sites can also pose threats to a retailer’s brand and Internet search strategy if the retailer does not keep an eye on its affiliates.

Internet Retailer

Affiliate web sites have become a major source of sales and new customers for online retailers. But affiliate marketing sites, which host links to retailers and earn a commission on each sale that takes place when someone clicks from the affiliate site to the retailer’s, can also pose threats to a retailer’s brand and Internet search strategy if the retailer does not keep an eye on its affiliates.

That’s the message Frederick’s of Hollywood and SeaEagle.com delivered to attendees at the Annual Catalog Conference in Chicago last month. “Affiliates are outside sales people, helpful in getting new customers, but you have to consider your brand equity,” said Danielle Savin, vice president and general manager of the direct division at Frederick’s. “What does the affiliate do to your brand?”

For instance, Frederick’s avoids affiliates that operate as discount sites to avoid building a reputation for Frederick’s as an off-price retailer, Savin said. She noted that 5% of Frederick’s direct sales are through affiliates and that 75% of affiliate-generated sales are new customers. Jeff Molander, principal of consulting firm Molander & Associates and moderator of the session that featured Savin and John Hoge, vice president of SeaEagle.com, online and catalog retailer of boats and marine supplies, noted that he has seen more retailers paying closer attention to how affiliates play up their brand image, discouraging affiliates from overly promoting discounted prices.

Another concern in affiliate marketing is what affiliates can do to a retailer’s cost of engaging in search engine marketing, Molander said. Particularly nettlesome, he said, was the practice of some affiliates to outbid their retailer partners on keywords or on the retailer’s own name. Molander said he is seeing more retailers insisting that affiliates not include the retailer’s trademarked terms in the affiliate’s Internet search marketing strategies.

Got to pay attention

While much of the affiliate sign-up and sales commission processes are automated, affiliate marketing management is no wind-it-up-and-let-it-run operation, attendees heard. Getting the most out of affiliate programs requires strong relationships with top affiliates and closely monitoring those that may harm a retailer’s brand, Hoge said. About half the time SeaEagle spends on its affiliate programs is in monitoring the 5% of affiliates who put SeaEagle’s Internet marketing programs at risk, while it spends the other half on building relationships with its best affiliates. “We need strong relationships and trust with affiliates,” he said. Hoge said SeaEagle pays 12% commissions on sales from new customers and 5% for repeat customers.

Hoge said he routinely checks search engine Overture, which is owned by Yahoo Inc., to see how much affiliates are bidding on SeaEagle’s preferred keywords, including its brand name. “As long as affiliates’ keywords appear below ours, that’s a benefit to us,” Hoge said. “But we say that affiliates can’t outbid us for our key cost-per-click words. If they try to push us down in search results, we tell them not to.”

He added that the Google search engine doesn’t provide as much visibility into what others are bidding on keywords, but that he’ll monitor Google search results for SeaEagle’s key terms and contact any affiliates that appear too high in listings.

Both SeaEagle and Frederick’s said they actively assist their affiliates in improving promotional activity. SeaEagle offers cash prizes to affiliates that work to increase sales through such steps as better site placement of SeaEagle product links, promotional pop-ups, targeted e-mail campaigns and in-store signage.

Frederick’s encourages affiliates to participate in special promotions. “If we do free shipping, we let the affiliates know so they can promote it also,” Savin said.

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