The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
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Lovette at Commission Junction says the search engine marketing landscape has been volatile over the past few years, partially as the result of changes in retailers’ policies. “This is precisely the reason we encourage affiliates to diversify,” she says. If affiliates are mainly focused on search engine marketing as the major way to drive traffic, she adds, a policy like Amazon’s will mean a substantial loss of revenue from those accounts.
From a retailer’s perspective, one argument for allowing direct linking from keywords purchased by affiliates is that it extends the retailer’s own search marketing efforts. But in Collins’ opinion, direct linking as a subset of affiliate search marketing offers little to retailers.
“The whole purpose of affiliates should be to add some value to the relationship. If they are just inserting themselves where somebody is already trying to buy that product anyway, then I don’t think they really serve any function,” he says.
There is no single right answer on whether it makes sense for a retailer to turn off commissions to paid search affiliates who direct link. Whether or not they drop commissions on sales that originate with an affiliate’s direct link off a purchased keyword, as Amazon and others have, just about every retailer has the same impetus to reduce costs and drive greater performance out of their affiliate programs, and they’re finding many ways to do it.
Some retailers balance cost and benefit by allowing affiliates to bid on long-tail terms-keywords that are less frequently searched for, less competitive and less costly. For instance, Nordstrom might prohibit bidding on “Nordstrom,” but permit affiliates to bid on phrases like “Nordstrom high-heeled summer sandals.” The approach pushes the cost of buying and managing an expanded range of keywords to the affiliate, Lovette says, while giving the retailer added advertising exposure.
Too many coupons
And with shoppers scouring the web for deals and promotions these days, retailers also must be careful to balance what they give away to affiliates with what they get from the relationship. “Everyone is going overboard on coupons,” Georgoulis says. “We have to be careful not to train our customers to always expect such deep discounts.”
But those are exactly the offers affiliates want from Petco because they convert well. Petco handles this by giving top-producing affiliates deeper discounts, and even in some cases exclusive discount offers, but for a shorter term.
Georgoulis adds Petco also is monitoring carefully the commissions it pays affiliates on the sale of low-margin products. “A percentage point here and there makes a big difference on our end, so we definitely keep an eye on that,” she says.
Whatever approach retailers choose on managing affiliates and paid search, it should represent a consistent strategy that can withstand shifting trends, Kowal says. “There are some brands that jump in and out with affiliates. Those are the ones that generally have the most trouble because affiliates don’t know what to expect,” he says. “You can be successful with search affiliates or without them–you just have to make sure you have a comprehensive strategy around that.”
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