August 28, 2008, 12:00 AM

Rewards and Relationships

The rewards that keep top-producing affiliates working - for you.

Ravenwood Marketing isn’t an online retailer, but it’s partly responsible for hundreds of thousands of dollars of sales each week for many online merchants. Ravenwood is a so-called superaffiliate, a web site that pushes a high volume of qualified traffic to online merchants, accomplishing that through efforts that go well beyond simply pasting up links to merchant sites.

Ravenwood focuses on paid search. Its partners are very large merchants and other online marketers whose keyword programs on search engines may cover a million words or more. On that scale, it’s beyond merchants’ abilities to maximize the potential value of each keyword, so Ravenwood does some of that for them. It bids actively for paid placement on keywords, perhaps as many a 100,000 or more of a merchant’s million terms, creates copy that compels shoppers to click on these links, and in so doing takes on some of the risk of paid keyword clicks that don’t convert.

Ravenwood gets a commission from the merchant when a referral drives a sale or lead. It drives referrals effectively, having been profitable in the paid search arbitrage businesses since it launched six years ago, according to Dan Murray, Internet search strategist. In return for driving high sales and leads, it gets incentives and rewards from merchants that an Average Joe affiliate never sees. These include advance notice of key promotions, confidential marketing information, and commissions above and beyond what merchants list on their rate card.

Those are just some of the benefits that merchants use to cement relationships with top-performing affiliates. In an economic climate in which both consumers and marketers are looking to squeeze as much value as possible out of every dollar, pay-for-performance affiliate marketing, in which merchants most often pay on sales rather than on clicks, is claiming more of marketers’ attention. And to turn the heads of the best affiliate producers-and keep them in the fold-retailers are offering a broader and more innovative variety of incentives, promotions and tools, and higher rewards for delivering.

Affiliate marketing is light years away from its early days when a content site-for instance, one launched by a woodworking enthusiast to post furniture-making information-might put up a link to a seller of woodcrafting tools. Plenty of such enthusiast sites exist today, driving small amounts of traffic to e-commerce sites. But alongside them, other sites have turned affiliate marketing into a serious business in which companies like Ravenwood can make a significant difference in an e-retailer’s revenue.

“Ten years ago, affiliates were largely personal sites where the operator would just put up a banner. These days it is a lot more sophisticated, with affiliates coming in many flavors,” says Shawn Collins, president of Shawn Collins Consulting and a specialist in affiliate marketing.

Because of the growing role of affiliates, it’s important for an online retailer to understand what will make a successful affiliate invest more in driving traffic to one retailer’s site versus another’s.

What affiliates want

At the top of affiliates’ wish list are offers not widely available elsewhere, because those are the offers that will produce clicks and purchases. “The least useful promotions are ones that offer no real value to our members,” says David Lewis, CEO of deal-finder site Cashbaq, a member of the Commission Junction affiliate network. “Offers that are available on the store’s web site all the time shouldn’t be promoted as a hot deal.”

Top performers are seeking-and getting-special content to use, exclusive offers and coupons to put up, tools such as widgets, and even co-branded landing or product pages bearing their messaging on the merchant’s site. Some get summit meetings with individual merchants to plot strategy. On occasion, they get clearance to bid on the merchant’s trademarked terms in search engines, something merchants usually prohibit in order to control how their brand is presented and because consumers who type in a retailer’s name likely will find their way to the retailer’s site on their own.

Typically, that privilege supplements the retailer’s own ongoing paid search bidding, and it’s attached to conditions, such as setting bid ceilings to keep the price of trademarked keywords from getting too high, prohibiting the affiliate from bidding on particular search engines, or restricting bidding on trademarks to a limited time.

Why would a retailer let an affiliate bid on the retailer’s trademarked brand? “If an affiliate is doing a big paid search campaign, they may be bidding on hundreds of thousands of keywords and they’re losing money on some. By giving them the brand to bid on, merchants are giving them some high-converting terms to balance that off,” Collins says.

Affiliates and the economy

Merchants have come to view affiliates as a key online marketing channel. 79% of online retailers participate in affiliate marketing and 64% say they’ll place increased priority on affiliate marketing this year, according to a survey by Forrester Research Inc. In the same survey, online retailers reported that affiliate programs accounted for 7% of their new traffic, placing it third in effectiveness below search engine marketing and organic search, and above such tactics as banner ads and comparison shopping engines.

The merchants spent on average just over $700,000 annually on affiliate programs-the third-highest spend after portal deals and paid search. And they reported spending on average $12 to $24 per order in their affiliate marketing programs, making the tactic less expensive on average than all others except for new portal deals, search engine optimization and e-mail to the house list.

The weaker economy is encouraging some retailers to invest more heavily in their affiliate programs. “Affiliates are a higher percentage of our sales than in past years,” says Stacey Georgoulis, affiliate and partnership marketing manager at Petco Animal Supplies Inc., which uses the Commission Junction affiliate network. “This is most likely due to the current state of the economy, which has resulted in a high consumer demand for and interest in discounts, coupons, rewards and points programs, all of which are big drivers in our affiliate marketing initiatives.”

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