Retailers shift their ad spending from TV, radio and print ads to digital ads.
It takes a strong blend of art and science to find and develop the right web affiliates.
Patagonia Inc. is a company that has literally traveled the globe to build up its brand as a high-end if quirky provider of high-end apparel and gear for outdoor sports and recreation. And while it likes getting referrals to Patagonia.com from affiliate web sites, it won't do business with just any affiliate.
"The most important criteria is relevance, that the affiliate is appropriate for the Patagonia brand," says Mark Shimahara, Internet marketing manager.
Yet while Patagonia is choosey about its affiliates, leaving the affiliate business a small part of its overall online marketing efforts, the company nonetheless is excited by the growth affiliate marketing offers. "In the last year it has been our fastest-growing area of online marketing, and is an opportunity area for us," Shimahara says.
Rates and cookies
The big challenge facing retailers looking for affiliate marketing partners, however, is sifting through the thousands of affiliates looking to send traffic to merchants for a commission. These include bloggers and operators of informational, enthusiast, comparison shopping and rewards sites, among others. In addition to figuring what commission rates to pay, retailers also have to decide on the length of time they let an affiliate get credit for a referred customer.
Although affiliate commission rates are not usually disclosed publicly, they typically run from about 3% to 8% at big online retailers like Amazon.com Inc. and Rakuten Inc.'s Buy.com, to as much as 30% to 50% at strong niche retailers looking for customers, says Ken Weiss, who has operated affiliate sites with ads from Amazon, Buy and others.
When it comes to the length of time retailers allot to software cookies that extend credit for sales to affiliates, the larger retailers also tend to be on the more conservative end, Weiss says. Some sites set their cookies at only one day, which means that when a consumer clicks a link on an affiliate site to land on a retailer's site, the affiliate earns a commission only if the consumer buys something from that retailer within 24 hours.
But most retailers set their cookies from 15 to 45 days, with some going as high as 180 days, says Weiss, whose primary affiliate site now is MensHealthCures.com, a provider of men's health information.
Setting terms on rates and cookies usually depends on an online retailer's average conversion rate, says Oliver Roup, founder and CEO of VigLink, which helps affiliates connect with online retailers. As a general rule, retailers with higher conversion rates can pay lower commissions, he adds. "If your average conversion rate is lower than your competition's, you'll likely want to increase the commission percentage you offer affiliates," Roup says.
Once terms are worked out, merchants face the task of finding the right affiliates and building effective relationships with them, experts say. Many retailers join affiliate networks like Commission Junction, LinkShare and Digital Window, enabling them to place ads on many affiliate sites, though it's still up to the retailers and affiliates to forge working relationships.
Roup suggests attending affiliate industry conferences, such as Affiliate Summit, LeadsCon and AffCon, for the chance to meet face to face with affiliates of all types and sizes. Another approach, he adds, is to check the affiliate leader boards of competing retailers. When retailers kick off new affiliate marketing promotions, they often announce them on web pages that reveal a leader board of their strongest affiliates. Such pages can often be found by searching for terms like "affiliate leader board" or "jv leader board," Roup says. (In the latter term "jv" stands for joint venture.)
But just finding what appears to be a strong affiliate doesn't ensure it will perform, experts say.
"There really aren't definitive criteria to determine how well an affiliate will perform, their site's traffic or their ranking within an affiliate network can only tell you so much," says the affiliate manager at a large Top 500 online specialty retailer who asked to remain anonymous. "We've seen affiliates who have modest traffic at best, and later become super affiliates simply because they realize how much they can earn from our program."
The specialty retailer, which works with Digital Window's Buy.at affiliate network and maintains a list of more than 10,000 affiliates, has found that offering attractive commission terms helps make some affiliates more productive.
Indeed, Weiss notes that he will play up content on his site with prominent links to retailers that pay the best commissions.
But effective affiliate marketing requires a steady effort to help affiliates, the specialty retailer says. That has meant, for example, providing some affiliates with higher commissions on certain promotions, and providing links to specially designed landing pages likely to appeal to an affiliate's visitors.
Building the brand
But affiliates don't necessarily have to provide the most traffic to be a valuable marketing partner to a retailer. Patagonia, for example, finds affiliates most suited to its branded image by working with Avantlink, an affiliate marketing network that specializes in connecting affiliates to retailers of outdoor sports and recreational gear. "It's important for us to work with affiliates that represent our brand," Shimahara says.
Patagonia has found social media sites such as blogs and other content sites where consumers share information on outdoor life to be particularly effective at acquiring new customers and also engaging and retaining customers over an extended period.
One such affiliate that has worked particularly well for Patagonia is Trailspace.com, a content site about hiking, camping and other outdoor activities. Patagonia's own web site, Shimahara says, likes to build on its blend of product quality and a "quirky" approach to showing unique content related to outdoor lifeÑsuch as reports of unusual trips its product testers have taken through icy gorges.
The home page of Trailspace recently featured an unusual backpacking wood-fired stove designed to quickly boil water. And just below that display were entertaining videos of autumn kayakers in Maine and hikers in Spain. Alongside these presentations were links to outdoor apparel and gear on Patagonia.com. "Trailspace does a good job of communicating these opportunities," Shimahara says.