Important News On Affiliate Programs

CDNow Increases Their Affiliate Commissions Based on Sales Generated

CDNow recently announced that affiliates who sell more than $2,500 of product in a month will receive up to 20% commissions. If you sell less than that, they offer 10% commissions. This kind of scaleable affiliate program is crucial, because your best salespeople should reap the benefits of their efforts.

Online Marketing Insanity or Good Business:
What is Your Loss Leader? Reel.com gains 300,000 Customers By Losing Money

Reel.com is a site offering videos. To build instant market share, they offered the Titanic video for $9.95, losing money on a product that retails for $19.95. Is this online marketing insanity?

If you look at it like most Internet businesses, in terms of one product sales, it is insane. If you look at it like Reel.com, it is their loss leader to build market share. They have sold over 300,000 videos, and an estimated 60% of those buyers are women.

Women control 80% of buying power in most U.S. households. Online, most sales are dominated by men. Reel.com has found a product women are interested in and has a database with 300,000 plus buyers. They can turn this database into gold.

Don't think so? Hollywood Entertainment in Oregon does. They put $100 million into this company that lost money selling its first product. They know market share when they see it.

The morale of this story is simple; your first product sale is not the most important one. Your back end and ongoing sales are most important. And if you are an affiliate, consider the products you offer as "loss leaders", or small profit generators. Build your list and sell more expensive products by using affiliate programs to measure what people want to buy, and give them more of what they want.

The power is all in the list. Reel.com could go out of business tomorrow and be able to open the next day, because it has 300,000 buying customers. If you don't have a list, you don't have a business.

The Little Affiliate Who Beat Amazon.com At Its Own Game

I recently interviewed a pet-related Web Site owner, who had close to half a million unique visits to his Web Site a month. He has been an extremely successful Amazon.com affiliate, selling hundreds of books a month.

He realized that 15% wasn't that great a deal, so on a whim he contacted the leading publisher of the books he was selling. This distributor told him that Amazon.com had a deal, but if he wanted one himself, his volume justified it.

The Web Site owner will now be selling direct to his customers, eliminating Amazon.com. After all, a direct connection and full margins beats paying a middleman. Most sites would not generate the kind of volume to do this deal, but it shows that the Internet model is penetrating the distribution networks.

CNET's Shopper.com; A New Model for Affiliate Programs?

CNET has developed an interesting approach at http://www.shopper.com What they did is list 62 computer retailers. They keep a database of over 100,000 products. Buyers select a product and compare price, shipping, and availability. When interested, they click a "buyinfo" button.

Each retailer pays a per inquiry, or lead cost, per click. This pricing is different than flat clickthroughs, because the customer being sent there is assumed to be an interested buyer, so lead prices differ depending on product, profit margin, amount of sales to be likely be generated, etc. Since the buyer has gone through the process of selecting a product and price, the assumption is that they are more likely to buy.

CNET's program is an interesting model for affiliate networks. Merely posting a banner ad and measuring clickthroughs is valued at anywhere from 1-20 cents a clickthrough, because this is not targeted, and you don't know if people are interested. CNET can charge much more for qualified leads.

Qualified leads are what affiliate networks are all about. By building up a consumer buying behavior, they can charge more per lead.

Affiliates should take this same strategy when integrating products into their Web Sites; by giving information which promotes a buying behavior, your sales will likely increase. And for those providing affiliate networks, shouldn't this strategy be part of your program, encouraging your affiliates to do more than just post a banner ad at their Web Site?

Unreasonable Affiliate Expectations?

It is amazing how much complaining Amazon.com is getting from its affiliate network. Actually this is a good sign for Amazon.com; one way to measure your success is when people criticize you. If you do not get criticism, you are likely not reaching your optimal market share. This is a simple law of averages; when you get popular, a small percentage of people will not like you, and may even attack you.

Recently many people have attacked Amazon.com online. But are these affiliate expectations justified? Many affiliates generate a lead for another Web Site, and do nothing else. Good marketing results means following up and servicing the customer. If they affiliate took the time to do this, they would still reap many more sales for everything they offer. Yet too many just send a customer to another Web Site and forget about it, then complain that they don't get paid again and again.

If Amazon.com does all the work on a continual basis, then should its affiliates get paid for every purchase a customer makes, if they just send them there once? Perhaps a new model is developing; affiliates who do continual marketing with another Web Site get paid for each resulting purchase, while those who are simply lead generators get paid once.

One of the funniest things about Amazon.com's complaints are the basic economics. You sell a book at $20, you may $3. That's tip money. Is it Amazon's fault, or mine as the affiliate, for not understanding I'll have to sell a ton of books to make any money?

After all, making money is not what affiliate programs are all about. I sell 100 books a quarter for Amazon.com via one of my Web Sites. These purchases show me what my customers are interested in buying and I adapt my product line subject to their interests.

I see Amazon.com's program as paid market research; if you see if as a central revenue source, it's unlikely you will be very happy. Find higher profit margin items if you want to make money.

P.S. Amazon.com is improving; my sales have tripled in the last quarter because of their tracking. I'm only getting 5% of the sales, but at least I'm getting something. I knew this was happening when a guy bought a book about Prostate Cancer at my history site.