by Linda Woods

I was privileged to be able to attend an outstanding conference in San Francisco recently, organized by the Institute for International Research (IIR) Online Affiliates, July 17-19, 2000. (www.iir-ny.com) There was an impressive group of speakers, most of whom have real "hands-on" experience in running successful affiliate programs, like Art.com and eBags.com; and an equally impressive audience of serious web players from significant companies like Canon and Bell Atlantic. All were assembled to share techniques and "war stories" about the fast moving pay-for-performance niche in online advertising.

If there was one single theme that seemed to be repeated throughout most of the presenters' talks it was that providing tools, resources and personalized support to a small, but committed number of affiliates is positively the best way to see significant results. There are still websites that can benefit from huge branding strategies by encouraging thousands and thousands of affiliates to sign up (like the newly re-launched altavista.com), but for the majority of commerce oriented Web sites, making sales or developing potent leads is by far, more important. It was shown again and again that by working with strong (or potentially strong) affiliates, a company can build the affiliate sales channel into a significant portion of overall revenues at a far lower cost than any other marketing media.

Starting off the Conference was Jeff Molander, VP at Dynamic Trade (until last month), who gave a very strong presentation about the effectiveness of the highly targeted pay-for-performance marketing strategies that Dynamic Trade employs. They are a 3rd party provider, but unlike the more well known services like Linkshare, Commission Junction and BeFree, they stress obtaining quality performing partners and revenue motivated marketing rather than the "come to us we have millions of affiliates for you" approach.

He quoted research showing that in 1999, only 15% of approximately $2.8 billion was spent on Performance based marketing, including affiliate programs. Yet that figure is expected to rise to 53% of the total spent by 2004. Why? Because it makes good business sense. Utilizing effective partnerships/affiliates and basing marketing spending on performance is simply a good practical business decision. Tracking technology exists that allows for even the most complex kind of partnerships, and it doesn't have to cost hundreds of thousands of dollars. So, Dynamic Trade focuses not on the promise of affiliate marketing, but the quantifiable results. They develop personalized marketing strategies for each client by targeting potential partners, signing up powerful affiliates and integrating the performance model into all aspects of the overall marketing strategy. Every company should integrate that philosophy into their marketing plan, no matter which tracking or service provider they use.

I want to digress for a moment here and mention a number of other tried and true marketing strategies that Jeff presented and were echoed by other presenters, like Denise Bovo at iHomeDecor.com. For example, never pass up an opportunity to upsell and resell. Thank you pages are prime real estate for co-promoting a partner's product/service. Here is your customer with their credit card out already, why not give them a place to jump to something else that may be of interest. How about rotating your partner sites here? Then, make a deal for reciprocity on their thank you pages.

Another old fashioned but effective technique discussed is using the shipped product to resell and upsell. Pack the box with additional offers. You can also educate, brand and cross promote here. After all, your customers are much more likely to be paying attention to your brand while they are actually touching the merchandise. Give them an opportunity to visit your site again. Coupons, gift certificates, special or trial offers all bring them back again and build relationships.

The key to using these strategies effectively is tracking and controlling the offers. Be sure to have codes in place and working before implementing. Make sure all the loopholes are closed, like expiration dates, how to use, limits or minimums, and all other rules spelled out and enforced digitally. A poorly thought out coupon offer can be posted all over the web and exploited in a very short period of time. Then there you are, fulfilling "free" orders and losing money on every one because you didn't have your order form programmed with the minimum purchase order properly embedded.

Back to affiliate marketing success stories now. I was most impressed with four of the presenters, Seth Greenberg from eHobbies.com, Stepheny Lauer of Art.com, Darcy Heppenstall of CruelWorld.com and Kathryn Wardell from eBags. These executives are totally committed to their affiliate programs and have worked hard to make them a very significant part of their company's success. These are programs that are doing it all right. Although they all have attracted large numbers of affiliates, they agree that by doing everything possible for their small number of top performers, like giving them significant personal support, frequent communications and desirable rewards for performance; they get outstanding increased revenue results.

Here are a few of the strategies they employ that are working:

Build specialty "boutiques" for niche market affiliates - All of these retailers have specialty pages designed for affiliates that carry only a portion of their product line. For example, eHobbies.com can provide a page populated with content and products only about model trains for that niche market. Art.com provides specialty galleries populated with art from a particular niche, like luxury cars for a car dealership affiliate. eBags.com has seven vertical markets with bags matching tight affiliate niches like travel, school,
fashion, sports and outdoor recreation. Merchandise for your affiliates and get creative!

Devote resources to the affiliate channel. Many sites throw up an "Affiliates" link, move someone from another part of the company give them the title "Affiliate Manager" and that's it. In successful companies, there is adequate staff to tackle; 1) acquisition marketing - targeting and identifying potential affiliates and partners and designing lucrative win-win deals for them, 2) managing existing affiliates by communicating personally with top performers, coming up with ongoing and creative promotions, handling niche needs, and rewarding successes, 3) technical assistance - assigning a person who can create, design and implement all kinds of technical needs without draining IT staff resources who really don't understand the marketing angle. Designing new banners, text links, co-branded pages, "boutiques", coded coupons, gift certificates, tracking ads and promotions, email links, special offer pages and many other merchandising needs are all needed by an active affiliate department.

Get results. All presenters stressed the importance of staying focused on results. Test, test and test. Know your market and target them effectively. Work with those affiliates who can best support your product and give them tools to sell better. Use personal contact as much as possible to promote loyalty and repeat business. Track everything. Try everything. Get results. That's the only thing that ultimately matters. It's not how many affiliates you have, it's how productive is this channel to your overall sales goals. If you help your affiliates succeed, you succeed. And, it is the most cost effective channel possible.

Stepheny Lauer of Art.com showed a very interesting Cost of Acquisition Study their firm conducted. It compared various advertising media cost of acquiring customers vs. the amount of revenue generated for every dollar spent. The results were dramatic.

How's that for ROI? Other merchants in attendance also validated these findings with their own statistics. Kathryn Wardell of eBags.com noted that 15% of their revenue is derived from their affiliate channel, and Reginald Bowser CEO of FanPowerSports reported that when he was the VP at LendingTree.com, there was a time when the affiliate program contributed 60-70% of their revenue! That's significant, folks. The affiliate channel IS an effective low cost means of acquiring customers. So, why are so many companies spending huge amounts of money on print, TV, radio and banner ads instead of investing in the human resources needed to effectively manage their affiliate programs? I really don't know. All I know is that those who invest significant resources into running their affiliate programs, get results. Those that don't, don't. That simple. And remember, it's not how many affiliates you have, it's how powerful are the ones you
have. That's the new gold standard in affiliate marketing.