No more auto-pilot for affiliate programs, retailers say
Affiliate marketing is coming under more intense scrutiny as merchants begin to understand the costs of maintaining affiliate marketing programs, a panel of speakers told the Direct Marketing Association’s Annual Catalog Conference meeting in San Francisco this week. “Affiliate marketing was presented as a relatively risk-free customer acquisition and marketing model,” said Rick McGrath, director of e-commerce partner development for auto parts merchants J.C. Whitney Co. Inc. But it’s not risk-free, he and other panelists told attendees in the session “Advancing from Affiliate Programs to a Comprehensive Performance Marketing Model.”
McGrath said that marketers must pay attention to how affiliates use their brands online, whether they are paying for traffic that they might be getting otherwise and whether their partners are beneficial to their brand and to the online customer experience. And that all means an in-house affiliate manager who will pay attention to how the affiliate program is operating, even if the company is outsourcing network management. “Many merchants are running on auto-pilot, letting the affiliate networks run their programs for them,” he said. “But even if you have a network provider, you need to have someone inside minding the store.”
AffTrack, which tracks affiliate marketing results for companies, recently completed analysis of the affiliate marketing experiences of its clients, analyzing $750 million worth of transaction that have occurred this year. It found that conversions through affiliate programs increased 120% from Q4 2001 to Q4 2002. The improvement in performance underscores the importance of managing affiliate programs more closely. “The risks are clear,” said Jeff Molander, president of AffTrack and moderator of the panel discussion. “There are the costs of customer acquisition and of customer retention, and there are the brand issues and control over the partners.”
In spite of the new challenges about managing affiliate relationships, affiliate marketing remains an important part of the online landscape, attendees heard. At hardware retailer Brookstone Co. Inc., for instance, affiliate marketing accounts for a large proportion of new customers, Steve August, director of marketing and customer analytics, said. “90% of the customers we get through affiliate marketing are new customers, customers we haven’t seen in any of our other channels,” August said. “It has been of significant value to us.”
Further, August said, Brookstone experiences directly how catalogs and the web work together. “When we mail a catalog, we see a spike in affiliate activity,” he said. “We mail a catalog to someone who has never heard of us, then when they go to a site that they’re comfortable with and see the Brookstone name they shop us from that site.”
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