Too Much?

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.

Activity

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.

Ample opportunity

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.

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“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.

Others have found success with a different approach. Rist has gone after dormant affiliates who registered for a program but never took any further action by offering them something extra. For an affiliate program he managed in a previous position with an audio equipment manufacturer and marketer, for example, Rist says he generated an incremental $400,000 out of registered affiliates that had never put up a link to the marketer’s site by offering them a higher share of revenue to participate through the holidays, a peak sales time.

“You don’t ever want to leave rocks unturned,” he says. “But you don’t what to put a huge amount of effort into it, either.”

The rules for optimizing an affiliate program can change as it matures, and veteran affiliate marketers say this is where working to cement relationships with those who’ve emerged as top producers, rather than simply maximizing program sign-ups, gets important. One way Jos. A. Bank Clothiers Inc. keeps driving results from its 7-year-old affiliate marketing program with DoubleClick Performics is to give top-producing affiliates special commission incentives to secure prime placement of links and offers on those affiliate publisher sites.

Jos. A. Bank also gives top producers access to more detailed information on upcoming events and offers. The strategies have helped grow affiliate sales on JosBank.com by an average of 40% a year since 2001, the retailer says. “We wanted an affiliate marketing program that would engage consumers, expand our online presence and drive long-term growth,” says Pete Zophy, divisional vice president of e-commerce.

Luring producers

Consultant Collins says selectively offering incentives such as a higher commission or special deals or tools to work with is a good way to lure better producers. Some retailers, for example, will lift their ban on search engine trademark bidding for a small number of chosen affiliates.

“They don’t want affiliates that are simply going to bid on the terms, but there are some affiliates that will do a whole campaign around it,” Collins says. “These affiliates are taking a money risk with a search campaign, and they are doing a lot of hands-on work. The idea is this incents an affiliate to do some of the work on a campaign for you.”

At Drs. Foster & Smith’s 1-year-old affiliate program with network provider LinkShare Corp.—the e-retailer’s first foray into affiliate marketing—the emphasis so far has been on growing the program. To date, Gordon Magee, Internet marketing and analysis manager, has had little concern about vetting or limiting what’s already developed into a program with about 1,800 affiliates. “Part of the value of having a partner like LinkShare is that they screen affiliates for you,” he says.

While he doesn’t rule out special incentives for special affiliates, the program has done little of that so far. “It’s been more about getting our name out in the marketplace and developing relationships with affiliates,” he explains.

Magee also believes that short of any special incentives, affiliates already benefit from the site’s high conversion rate, which he describes as “well into the double digits. We don’t think of affiliate marketing as a one-way street, where we keep offering things to get positioning. We believe there is genuine value for the affiliate simply because our conversion rate is high,” he says.

Special incentives

Where special incentives may most likely come into play for the pet products retailer in the future is with a particular category of affiliates: loyalty sites that offer shoppers something retailers can’t offer themselves. The college savings program at UPromise.com provides one example of that model.

“For us, affiliate marketing has really been a customer acquisition approach. But over time, companies whose brand name is reasonably well-known will have less need for affiliates to get them new customers,” Magee says. “Yet shoppers go to those loyalty sites regularly, and if you’re not there, you won’t get their purchases.”

In settling on the right size and incentives for their affiliate program, experts say marketers should consider the type as well as the number of affiliates. Whether the sites are loyalty and rewards sites, search specialists, community and content sites, or any other type of affiliate publisher, Henger says marketers need to understand an affiliate site’s business model and how it generates traffic to decide whether it’s a fit.

“If you’re a marketer that appeals to all of those types of sites, you are probably going to have more affiliates in your program than someone who says, for instance, that they don’t want a lot of search specialists because they have their own strong search engine optimization program,” he says.

Another factor in calculating an affiliate’s value to a marketer’s program is whether key competitors are linked on that affiliate’s site.

As both affiliates and marketers get more sophisticated, new metrics for quantifying affiliate value are emerging; for instance, lifetime value metrics on the type of consumer an affiliate delivers. But whatever the depth and detail of that assessment, one rule of affiliate program management remains the same: the top-producing affiliates—by whatever valid measure a retailer employs—should get most of the retailer’s attention.

“That’s the single most important thing in growing an affiliate program, even beyond incentives,” Henger says. “Figure out who your top producers are, and then give them your energy.”

mary@verticalwebmedia.com