But losses mount for the home furnishings e-retailer that went public in October.
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“We wanted to get the program up quickly, and we wanted flexibility,” Patrick says. “Under the agreement, we can run other affiliate programs.” In fact, Chadwick’s also has an affiliate program with Commission Junction. “And it’s monthly, with an easy termination clause so if it was not working out, we could move onto something else,” he says. Since much of the technology to administer the program resides on Performics’ server, implementation required only adding code to the Chadwick’s site for integration. The cost - basically, time for Chadwick’s IT department - was less than $2,000, he estimates.
Is it new-or not?
Part of the value that an affiliate-management provider brings to the ad process is that it helps the advertiser determine which sites to target, then ensures that the affiliates are doing their job. “We rely on the affiliates to make sure that the traffic they deliver is targeted. Performics works one to one with its affiliates to make sure that happens,” Patrick says. “They go out and sell the program to the affiliates. An affiliate has only a finite amount of space and attention to give to a universe of merchants, so Performics’ job is to make sure the right affiliates allocate a higher proportion of their attention to us rather than to someone else.”
Pleased with the numbers, Patrick is nevertheless wrestling with the question of how much business driven through the deal is incremental rather than from customers Chadwick’s already has. “It’s the $100,000 question,” he says, one that other web merchants are trying to figure out as they evaluate such programs. Indeed, it’s a gray area. No universal standard quantifies how many rebuys it takes to make a site visitor into a loyal customer.
“Our clients recognize that the first time someone buys, it doesn’t necessarily make them into a lifetime customer. The acquisition process is longer than one sale,” Bergin says. “There are reasons people defect, and there are places for online service companies like ours that keep bringing them back to a site. In theory our job is to bring the retailer new customers. If the customer starts to type in the URL directly it becomes the marketer’s responsibility to continue to mange that relationship.”
Bottom line: until customers get to that point, online marketers will embrace pay-for-performance deals as a cost effective way to get them there. And as tracking and targeting become more sophisticated to produce even more accountable results, they’ll be doing so in increasing numbers, supporting Forrester’s projections of a boom in online marketing deals over the next three years. “None of our clients has reduced its marketing budget,” Bergin notes. “This economic climate has been a great way to raise the profile of pay-for-performance marketing.”