While many--maybe even most--online retailers hire outside companies to manage their affiliate relationships, Odimo Inc. says that’s a short-term solution not befitting the strategic importance of affiliate relationships. Speaking at the eTail 2003 East conference in Boston this week, Michael Dell’Arciprete, Odimo’s vice president of marketing, said Odimo, whose flagship brand is Diamond.com, prefers to create relationships directly with its affiliate partners because that gives the company more control over marketing and accountability. “When you set up an affiliate arrangement in-house, they become your affiliates,” he said. “When you use a third party, you do not have direct impact on the relationship with the affiliate. So ends the third party management agreement so ends the affiliate relationship.”
Odimo was forced to deal with the in-house/outsource dilemma when it acquired WorldofWatches.com 18 months ago and Ashford.com five months ago and had to decide whether to kept their outside affiliate contracts or bring them into Diamond.com’s in-house program.
Dell’Arciprete agrees that affiliate management companies help a retailer create an extensive affiliate network quickly and that they provide fast access to the best affiliate sites. “The advantage of outsourcing affiliate marketing is quick access to key affiliate marketers,” he said. “That’s important because you can get to best affiliates and that gives you immediate leg up; the top 10% of affiliates account for 75% of online sales.”
In addition, affiliate networks can be sprawling behemoths that are difficult to manage, a headache that affiliate management companies are specifically set up to deal with. “It’s a time-intensive process to manage arrangements once you have them set,” Dell’Arciprete said. “The bigger the program, the harder it is to manage.” Particularly, he said, keeping an eye on fraud and managing the financial aspects, as well as dealing with the turnover of affiliate managers, are vexing problems.
But retailers can benefit by taking affiliate management in-house, he said. For one thing, direct relationships with affiliates allow a retailer to coordinate marketing programs. “Before we brought it all in-house, our promotions for the sites and our affiliates’ promotions bore no resemblance to one another,” he said. “Before, there were generic offers through the affiliates, but not timely promotions that were working on our own site. Now we have the same creative for affiliates as we do for our site.”
“The best perspective on affiliate marketing is to think of your affiliates as a team of commission-based sales representatives for your commerce site,” he added. “You pay them nothing unless they do something that creates sales at your site.”
Odimo also keeps its affiliates engaged and motivated through monthly newsletters and a quarterly forum for affiliates to express concerns and recommend new programs. It follows up the forums by providing positive reinforcement to affiliates. “After these forums we send them a follow up newsletter that says here are the changes we made as a result of the forum,” Dell’Arciprete said.
It also keeps affiliates engaged by offering tiered incentives, so they can earn higher commissions as they create more sales. And it offers bonuses to affiliate sites that present all three Odimo URLs.
Dell’Arciprete cautioned his audience, though, not to underestimate or give short shrift to certain aspects of managing affiliates in-house. “The time drain is in fraud prevention,” he said. “It’s a pain to analyze the returns and the fraud and to net them out,” that is, subtract any commissions from affiliates’ compensation for such transactions. “For some people, it’s not even worth it. But for me, when you consider that we have $6,000 tickets, it’s a must.”
Furthermore, he urged retailers to constantly analyze its affiliate relationships and make sure they are recruiting the right partners. “You have to know your audience and avoid a shotgun approach in signing up affiliates,” he said. “Go for partners that make sense for your market.” For example: Odimo has an affiliate relationship site with the web site of the men’s magazine Maxim to promote WorldOfWatches.com, which has a largely male audience “Never let the program go on auto-pilot,” he said.
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