The web-only e-retailer of home furnishings has been on a fast growth trajectory, with web sales reaching $1 billion in 2013. Wayfair has raised ...
In a world where bigger often is viewed as better, some online marketers have taken this approach to populating their affiliate marketing programs. If they know they’ll pay no commission fee to an affiliate unless a click-through from that affiliate’s site actually produces a sale, what’s the harm, the rationale goes, in signing up as many affiliates as possible?
The answer to that question isn’t as obvious as it may seem. Some experts say keeping an affiliate program wide open is a strategy that’s riskier than, and at the very least not as rewarding as, limiting and defining affiliates in a retailer’s program.
“I’ve preached for years that people should focus on quality over quantity, but I still see too many e-retailers focus on getting tens of thousands of affiliates in their program without any apparent concern for quality,” says Shawn Collins, an affiliate program consultant and co-founder of the annual Affiliate Summit Conference.
Come one, come all
Collins and others cite a major drawback of a “come one, come all” affiliate program as a potential loss of brand control when marketers don’t have the time to keep up with every affiliate site on which the brand might appear. With different types of affiliates producing under different circumstances, categorizing affiliates and adapting offers accordingly may make more sense for marketers.
That’s tough to do when affiliates number in the thousands-one reason full-service affiliate networks have emerged. Yet, odds are marketers who leave all their affiliates in the same bucket are leaving money on the table, some experts say.
On the other hand, simply cutting out affiliates or barring program entry just for the sake of getting the program to a size more easily managed isn’t necessarily the best approach. Dean Rist, director of direct marketing at iRobot, which manufacturers and sells room-roaming automated vacuum cleaners, says he sees no downside in retaining most affiliates that sign up for his program, even ones that aren’t active.
“They’ve raised their hand and shown a degree of interest in your brand,” says Rist, who has been using the affiliate marketing network of DoubleClick Performics Inc. for two years. Rist sees inactive affiliates as a kind of lead generation program. “If I have to generate more revenue and boost the program, this is the group of people I am going to try first,” he says.
Advocates of cleaning up overgrown affiliate programs and those less willing to chop are after the same thing: better program performance. So the real question, experts say, is not so much a generic one on the merits of a larger versus a smaller program, but on the break-even between program size and the time and resources an individual marketer has to actively manage a program.
And marketers can’t afford to forget that managing an affiliate program isn’t just about recruiting the greatest number of affiliates or finding those that are the best fit; it also is about working with affiliates to identify and provide tools and incentives that keep them working on the marketer’s behalf.
“It’s important not only to focus on recruiting, but also after they come through the door, to have a plan to keep them active and retain them. So you should have different processes in place for educating affiliates and supporting them. If you get to a point where you can’t do that, then obviously you have too many affiliates,” Collins says.
Experts say the key metric in right-sizing an affiliate marketing program is not the number of affiliates that have signed up but the number that are active, meaning they’re driving visits to the marketer’s site, and the number that produce, meaning they’re driving sales. Those numbers will be fractions of the number constituting a marketer’s entire pool of affiliates.
The frequently cited 80/20 affiliate marketing rule-80% of a marketer’s sales will be produced by 20% of affiliates-may be closer in some cases to a 90/10 breakdown, industry veterans say.
Chris Henger, vice president of affiliate marketing at DoubleClick Performics, provides this rule of thumb based on the experience of some 250 advertisers using the vendor’s affiliate network: about 35% of affiliates approved for a marketer’s program drive visits, and of that percentage, about 35% produce sales. Henger contends these ratios likely will be higher if a retailer is pursuing a very small program-fewer than 100 affiliates-and a very selective affiliate strategy.
Frequently, long-inactive affiliates come to light when there’s a change of management at a marketer or a program passes into the hands of a new affiliate network vendor. Henger says there’s always value in growing a program’s affiliates in a controlled manner but also in cutting away dead wood.
“The primary reason you clean up and contract the size of a program is for your ability to devote time and energy to the right affiliates,” he adds. Beyond the trigger of organizational changes, DoubleClick Performics recommends cleaning up affiliate marketing programs and deactivating inactive affiliates at least twice a year to keep program management efforts centered on affiliates actively engaged in the program. For some affiliates, deactivation has the effect of jarring them into re-registration and action, experts say.
Other affiliate networks such as ValueClick Inc.’s Commission Junction also recommend removing from merchants’ affiliate programs affiliates that haven’t produced a sale in six months. “There is no point working with dormant affiliates,” says Melissa Salas, director of marketing at Buy.com.
From the perspective of having formerly managed an enormous program that retained dormant affiliates in the hope they one day would produce a sale to now managing the current Buy.com affiliate program with Commission Junction that culls inactive players, Salas prefers the latter model. Scaled to support three tiers of affiliates, the current model provides ample opportunity for every size affiliate who really wants to participate in the program to do so, she says.
“We have the staff to manage these super, middle and lower tier affiliates and provide the tools necessary for each to succeed in advertising Buy.com,” she says.