Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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To keep its percentage of active affiliates-those who actually drive traffic and sales-at its current rate of 22% to 23%, Overstock does regular housecleaning. After an affiliate has been inactive for a set period, the company will e-mail some suggestions on getting started and offer contact information at Overstock for affiliates with questions. If Overstock does not receive a response in 30 days, it sends a second message. If it still has not received a response 90 days later, it removes that affiliate from its list.
Overstock also pays keen attention to the number of repeat customers it gets from the same affiliates, responding to a concern shared by many program managers about the risk of paying repeatedly for the same customer instead of adding that customer directly to their own base. Schwegman says Overstock offers assistance in driving new traffic to affiliates that are producing a high rate of repeat customers.
“Any sale is a good sale, but if I’m giving up the profit on that sale every single time and that customer develops no loyalty to Overstock, the lifetime value of that customer is not as great at that of a customer that we acquire through the affiliate program and then market to later directly,” he says. “It depends on where the loyalty lies for the end user. We take that into account when we negotiate terms with affiliates.”
Whether managed in-house or out of house, whether retailers use a full service solution from a network provider or a software product suite to find solutions for themselves, affiliate programs rank high among online marketers as a way to seek out new customers.
But the early-on strategy of simply making links available and waiting to see which affiliates put them up has proven about as effective as throwing darts at a list of affiliate partners.
Online retailers today know a winning strategy takes more-more effort to find the biggest or best fitting affiliate partners and more work to support them and the program, whether they put in the time directly or arrange with a provider to do so.
“There are a lot of different philosophies about how to make the magic happen,” says Collins. “I’d just encourage people to do their due diligence before signing on with anyone.” l
Experience counts-and you get what you pay for
Retailers who contemplate hiring staff to take over responsibility for affiliate programs vs. hiring a solutions provider may have more difficulty than they expect finding qualified personnel at an affordable price, says Shawn Collins, affiliate manager of ClubMom.com. For one thing, the discipline is new so experienced managers are rare. For another, they cost. Collins says he’s seen affiliate manager positions in major metropolitan areas listed for as little as $40,000 a year. “You’re not going to get a person who’s been in the industry for even a year to work for that,” he says.
Collins cautions that the inexperienced manger can be almost as detrimental to an affiliate program’s success as understaffing. “A mistake companies make is to pluck a kid right out of college and tell him to run the affiliate program,” he says. “If you get someone who doesn’t know what they are doing, or doesn’t put in the time it takes, the program becomes stagnant.” Over time, Collins says, he’s learned to identify high-producing affiliates by networking with other managers, attending industry conferences and watching numerous industry message boards.
Companies that retain management of their affiliate programs internally should be prepared to ante up for job experience. “Companies are shooting themselves in the foot if they are not willing to invest in an experienced person,” he says. “Then they wonder why the model doesn’t work.”