E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
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Other marketers are also putting more emphasis on affiliates, says Kerri Pollard, general manager of Commission Junction. “Commission Junction is seeing a greater investment from marketers in their affiliate channels, evidenced by increased affiliate commissions and more consumer promotions. We believe these investment dollars are being diverted from other, less cost-effective and less measureable channels,” she says.
Collins notes that it isn’t the first time affiliate marketing has survived-thrived, in fact-in a down economy. Collins says online marketers turned increasingly to affiliate marketing in the downturn of the early 2000’s because spending was based on performance rather than impressions. “At the time, companies were folding but I didn’t see many affiliate managers being laid off,” he says. “And so far today, I’m not aware of any cutbacks or layoffs in any affiliate marketing programs, or programs being affected in any other way.”
While any affiliate that produces traffic and sales earns commission and other rewards, it’s generally a small minority that performs well enough to gain access to exclusive incentives and tools.
At Petco, for example, the affiliate program that includes about 1,500 publisher sites generates about 20% of the online retailer’s traffic and sales. But 85% of the results come from 2% of the affiliates, and it’s those highly productive partners that get most of the retailer’s attention. “The time we spend with top affiliates is in direct proportion to the amount of revenue they’re producing,” Georgoulis says.
Ice.com late last year launched a new feature so far available to a few dozen top affiliates that lets the online jewelry retailer easily incorporate affiliate-specific messaging on pages on both Ice.com and sister site Diamond.com, both participants in LinkShare Corp.’s affiliate network. This ranges from a simple welcome message-“Welcome, (affiliate’s name) shoppers,” for instance-to placing the affiliate’s logo on a page or even co-branding a product page with an affiliate.
Only three or four affiliates have been given custom, co-branded product pages at Ice.com and Diamond.com, says Paresh Vadavia, affiliate program manager for the e-retailer. Some 15 to 50 have pages with the affiliate’s name welcoming consumers clicking through from their sites, and about 10 have their logos displayed on the merchant’s page when consumers click through from the affiliate site.
“With a lot of retailers, that affiliate messaging is not there,” Vadavia adds. “It solidifies the relationship and reassures shoppers they’re still shopping with the affiliate.”
Another way to take advantage of the shopper’s relationship with an affiliate is to move the entire buying experience to the affiliate site. Instead of just displaying a banner ad for martini glasses from Swank Martini Co., affiliate Whattodrink.com displays the products for sale and lets the shopper make the purchase on its site. That makes for a faster purchase than clicking on a banner ad and going to the Swank Martini site
The purchase on Whattodrink.com, which does not have its own e-commerce functionality, is made possible by a data feed from Swank Martini and the KB store creator application from Kowabunga, a provider of software and services for managing affiliate and other performance-based online ad programs. The application credits Swank Martini for the sale and Whattodrink.com for the commission. Conversion rates on affiliate sites that use the KB store creator are 5% to 20% higher than simple banner promotions, depending on the type of affiliate site involved, the quality of its creative resources and other factors, says John Vehlewald, division director at Kowabunga.
With top-producing affiliates pushing thousands of dollars in sales to merchant partners each week, it’s critical that merchants be able to track what’s coming in from which affiliates to ensure that credit goes where credit is due. Retailers also want to identify where volume is dropping off as well as up-and-coming affiliates who may merit their increased attention.
Vehlewald of Kowabunga says affiliate network platforms differ in their ability to provide highly detailed information about affiliate performance that can be important in helping a merchant distinguish between top performers and also-rans.
For example, a merchant may see that an affiliate is driving a lot of sales because it earns a large commission check each month. But the merchant also needs to identify which sales come from customers that had come to the merchant’s site through its own paid search efforts and then hopped over to an affiliate site to get a discount. Without that information, the merchant could be paying twice for that sale, once through its paid search campaign and a second time in the form of a commission to the affiliate.
“Transparency becomes a huge issue,” he says. “It must be accurately tracked to help merchants make better decisions about their ad spending.”
Another task facing merchants is to recruit affiliates that can show the potential of growing into top producers. Affiliate networks can supply merchants with reports on the performance of affiliates in their networks, making the network the first place the merchant can look for new affiliate relationships to cultivate.
In addition, affiliate networks often have information about some affiliate sites not in their networks from discussions with those affiliates or research, says Pollard of Commission Junction. For a fee, Commission Junction also will recruit prospects and run reports to identify out-of-network affiliates that fit a particular merchant’s profile. Web measurement services such as comScore Inc. also can provide merchants with information to help evaluate affiliates, Pollard adds.
Though the affiliate space has evolved rapidly, one feature of the best-producing affiliates has stayed the same-their success rests in large part on building key relationships with a select group of merchants. And the most successful merchants have done the same with top-performing affiliates.
A good relationship may even trump the size of the revenue share a merchant offers when it comes to winning the loyalty of a top affiliate, says Vadavia of Ice.com.
While offering incentives such as customized content, exclusive discounts on products and higher commissions for its top producers, Vadavia says, “The most important thing affiliates are looking for is what relationship they have with you. If they are making $10 from us and $15 from the next merchant, they may not go with that merchant because they have a good strong relationship with us and they are happy with us.”