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Part 4
Customer Acquisition and
Merchandising:
What You Must Know To Open Locked Doors of Profits
With Your Affiliate
Program
"The only purpose of advertising is to make sales...Treat it as a salesman.
Force it to justify itself. Figure its cost and result. Accept no excuses."
Claude Hopkins, Scientific Advertising
It is not easy to cut through the bull of affiliate programs and get to the facts.
Too many programs are making the same mistakes, and making the industry look bad.
On top of this is the ignorance of many companies of how to put their affiliate
programs into action. Imagine sitting in the corner of some big company, with a book
and the goal to sign up tons of affiliates. Your goal is to build a business, but
management is looking for quick fixes.
As they say, no one got fired for buying a banner ad, but affiliate managers are
stuck out on an island. Affiliate programs should be part of an overall, integrated
Internet marketing initiative encompassing banner advertising via CPM and revenue
share, email marketing, search engine positioning, and every other form of
advertising a company undertakes.
In this issue, we explore what is working and what is not, by focusing on the two
most important factors of affiliate marketing; customer acquisition and
merchandising. As they say, the rest is commentary.
Peace,
Declan
Customer Acquisition: What Does It Cost And How Much Will You Earn for the
Lifetime of that Customer?
Most affiliate programs today are tracking impressions, number of affiliates, and
overall reach. Yet the real goal is to add value to other Web Sites so they won't be
able to go on without working with you.
This is not a lofty goal, but one that takes time; in setting up an affiliate
program, you are looking at a long term solution. Unfortunately, your management is
fed quickie reports on advertising with little or no view of the long term.
Here's the partners ActiveMarketplace tries to empower with its affiliate
program:
- Revenue Partners (Affiliates) Provide Response Driven Space and Earn
Commissions
- Product Partners Pay For Advertising and Get Buyers
By merging strategic relationships with a state of the art technology that
instantly, and effectively, merchandises a Web Site, ActiveMarketplace aims to do
what few companies on the Internet are doing...making sales while minimizing
advertising costs.
In today's Internet Market, three key benchmarks must be achieved:
- CPC: Your Cost Per Customer can run anywhere from $50-$120, and
more, on the Internet. Reduce that below $30 with performance driven advertising,
including affiliate programs.
- RPC -- Revenue Per Customer: Maintaining momentum and ongoing sales
means knowing the value of your long term customer. What is the lifetime buying
value of your customer? (Hopefully more than the $30 it cost you to get them!)
- Customer acquisition is the ultimate Internet goal. What does it cost
to get your customer, and how much revenue does that customer generate? Most
Internet businesses do not measure these factors; those who do not will lose
money...guaranteed.
It is simple. Launching your online initiative requires performance based
advertising. Here's what you have to choose from:
A. CPM Advertising: CPM means cost per thousand impressions; if you buy
100,000 impressions at $1 CPM (don't laugh, this is what most folks end up getting),
it costs $100 CPM. Extending your brand and value proposition, you pay big dollars
to be in front of many viewers. The price is high and sales are often low. While
extending your reputation, you also pay too much for space that can be negotiated for
better performance.
B. Clickthrough: Pay for qualified leads for longer purchase decisions.
Clickthrough marketing generates traffic to eventually convert into sales.
Clickthroughs can run 5-10 cents for simple traffic to $5-$10 for qualified leads
driven by forms and extensive information.
C. Revenue Sharing: The purpose of good advertising is to generate a
sale; just buying banner ads limits your effectiveness. You can brand and decrease
your advertising costs by mixing in a Revenue Share/CPM model that makes sense for
both parties. Take dead ad space and make it perform with the right merchandising
for the right products.
Define your cost per customer acquisition and apply it to the best avenues of
advertising. In today's market, it is tough to go out to powerful Web Sites with a
revenue share only approach. Merging revenue share with your ad buys will decrease
the CPM dollars you spend, by transferring up to 75% of the normal cost to
performance based advertising.
It is simple; you can cut your ad buying costs significantly and target paying
25% of the CPM rate. The rest should be based on performance of that ad within the
network.
If you can get revenue share deals only, great, but the reality of the Internet
market is a hybrid from of CPM and revenue sharing via affiliate programs. It is
becoming the model of advertising buying on the Internet.
Quick Start Campaign for Customer Acquisition
ActiveMarketplace is able to get the most value out of CPM, ClickThrough, and
Revenue Sharing by turning existing banner ad budgets to performance driven,
e-commerce systems powered by affiliate programs.
ActiveMarketplace quickly tests products, banners, and overall Internet
advertising for less than the price of a banner ad campaign. Here's how we do
it:
- Showcase a product to our network of resellers. Our affinity websites and
ezines appeal to women, music lovers, book buyers, WebMasters, and apparel shoppers.
- Establish margins that are workable for all parties. Less than 10% margins
won't motivate your affiliates, so determine a few products that you can give higher
margins on. Supply them with products they can move and mine the back end for the
repeat buys per customer.
- Take a portion of your banner budget to negotiate CPM advertising with
engagement partners who will consider revenue share after a sellthrough rate has been
proven.
- Determine if product can be moved on the Internet through focused niche
channels. Use media dollars to find 2-4 high profile niche sites that are developing
a million page views per month.
- Create ongoing relationships with Revenue Partners, while attempting to
convert paid banner ads into revenue share for a long term campaign.
- This is a focused, hard-hitting campaign designed to maximize reach while
identifying new venues for ad placement with a combination of CPM deals and revenue
share. We continually look for new channels of customers in areas which generate
loyal, repeat visitors.
Notice that we refer to Affiliates as Revenue Partners; it is our goal to have
them make sales. That is the chief purpose of ActiveMarketplace; often affiliate
programs aim to generate sales off of other Web Sites one time. Repeat sales should
be the target for both you and your affiliates.
Customer Acquisition: The Real Secret is the Margin
Acquiring customers should be the focus of your affiliate program. Now look
around the Internet at some of the crazy margins being offered affiliates:
- Dell, 1% margins
- Travelocity, $1 per ticket sold
- Amazon, 5-15% per book...most often 5%.
These kind of tip money affiliate programs are better for branding than sales.
Which is likely the purpose of all three. Dell, Travelocity, and Amazon have such
powerful brands and market share that their affiliate programs are merely ways to
spread the logo a bit farther.
Not many companies can live with affiliate programs driven by branding; branding
is the job of banner ads. Lead generating and traffic are the job of clickthrough
marketing. And for generating sales, you have revenue share.
If your affiliate program aims to create sales, the margin should be part of your
customer acquisition cost. Pricing a lead product or loss leader to drive your
affiliate program should lead to higher margins for affiliates, and more sales for
your company if you bank on the repeat buy.
Your Lead Product
Marlon Sanders of HigherResponse.com uses his introductory product to build
rapport with his new customers, while rewarding his affiliates more than 50% margins.
Digitally delivering the product, Marlon delivers virtually all of his profit to his
affiliates.
The result has been robust sales, with a healthy back end product which grows from
the initial purchase. If Marlon had no back end, this effort would be worthless.
But his integration of affiliate programs into his lead product system leads to
profitable affiliates and more sales for his higher priced product.
By empowering your affiliates to sell more, you can incorporate your customer
acquisition costs into your margin. Create the sale to create a buying customer;
your repeat business is what you bank on, your long term revenue per customer.
If you don't know the Revenue Per Customer during their lifetime, start
researching. Many argue that no one knows this figure, except companies that figure
this into their equations from the beginning. If you don't plan for it, you'll never
get it.
If you are selling the majority of products to people who will really buy only
once, you have a very tough business to keep going. Repeat business is the key.
For an example from the affiliate's perspective, Register.com is a business built
on a simple, "free" lead product; registration of domain names with Network
Solutions. Register your domain and you get taken through the process; the only fee
you pay is to Network Solutions for the domain name you choose.
Register.com uses that affiliate program to acquire customers; what better
targets for Web hosting and related e-commerce services than someone who just bought
a domain?
The Birth of Performance Based Internet Advertising, The Death of Advertising
Agencies
A funny thing happened on the way to Internet advertising; people never really
bought the ads.
Some Web Sites sell their ad inventory. But not most; search around the Internet
and the herd mentality is amazing. Yahoo and AOL sell bundles of advertising at very
high prices; outside these sites, and the top ten players, things get a bit thin in
the advertising budgets.
In a recent Forrester Report, executives were asked what types of Internet
advertising they favored. At the top of the list were banner ads; at the bottom of
what they liked were affiliate programs.
They were then asked what types of Internet advertising performed the best. Now
banner advertising was on the bottom, and affiliate programs were on top.
So while executives like banner ads, they know that affiliate programs work best.
The transition of these figures can't be ignored. If you are managing an affiliate
program, your management likely doesn't understand or even like what you
do...meanwhile the banner ad folks get the glory.
After all, people don't usually get fired for running a bad banner ad campaign;
everyone assumes that banner ads don't work. But affiliate programs gain the most
scrutiny, because they are expected to make money.
The irony is that few of the big advertising agencies have adopted affiliate
programs; their main job is shifting checks from the buyers to the sellers of
advertising space. I-Traffic has been an exception, yet its business is still run by
ad agency folks who don't understand the power of performance driven advertising.
Which leads to the interesting transformation happening at ActiveMarketplace. By
specializing in affiliate programs, we focus on performance. Taking this approach
out to a market spilling over with unsold ad inventory, negotiating better CPM rates
and integrating revenue sharing via affiliate programs is standard practice.
We integrate our banner ad budget, our opt-in email budgets, and all other forms
of advertising buys with revenue sharing. In combining these aspects,
ActiveMarketplace finds itself in a potent position to offer performance based
advertising through affiliate programs.
If you don't think this is important, think again. A recent inquiry at our office
for ad space began with the company bragging about financial sites that generated 50
million impressions per month. The salesperson then bragged that DoubleClick would
pay 10 CPM for their ad space.
Problem is, DoubleClick only paid if it sold the space, and then it was 30-60 days
before they would see payment. The financial site ad manager then made the offer of
buying any portion of that ad inventory for $2 CPM.
Here's the key; we offered to buy a certain amount of banner ad inventory and be
given an equal amount of impressions for revenue shared advertising. We would get
twice the inventory for half the price, $1 CPM.
These kind of deals are reshaping ad buying online; if your affiliate program
does not integrate all other aspects of advertising at your company, you are missing
out.
Give me a call at 530-873-3637 or email declan@activemarketplace.com if you
would
like to learn more about performance based advertising.
Double your ad power and trim your budget; these are the real strengths of a good
affiliate program.
http://www.RonScheer.com
Contents
A close look
at the verbal
and rhetorical
style of a
master of
Internet sales
Who's Declan
Dunn?
Informality
and tone
Readability
and sales-speak
Use of persuasive
language
Getting real
Conclusion
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Web copy:
Write like you mean it
or, How to write like Declan Dunn
By Ron Scheer
Declan Dunn is a widely recognized and frequently quoted authority on Internet
marketing and sales. He is an accomplished writer on the subject and has his own web
site at www.activemarketplace.com.
He has a style of writing that is often clearer and more persuasive than any of
his peers. How does he do it?
After an analysis of an article that is currently posted on his web site, I've
determined a number of characteristics that are distinctively his. If you wanted to
write like him, you would bear in mind the following:
1. His style has an easy informality. It makes him sound friendly,
unguarded, relaxed. These characteristics are expressed through:
- Frequent use of contractions (don't, didn't, I've)
- Conversational phrases (expressions more often heard in speech than seen in
print)
- Occasional slang
- Starting sentences now and then with a conjunction (And, But, So)
- Referring often to "you" and "I"
2. He can skillfully modulate his tone. This is something that really
separates him from his imitators. "What's tone?" you may ask. Tone is attitude. You
can "lighten up," "get serious," or shift gears in any number of ways. A key result
is to hold the reader's attention by avoiding monotony.
In the 2,875-word article I reviewed, Dunn shifts tone several times. He begins
with:
- A dramatic opening in which he discloses some uncertainty ("I'm scared to write
this article") and portrays himself as a lone voice whose opinion contradicts the
"experts," followed by:
- Common-sense talk, an earnest and confident expression of his beliefs and advice,
stated clearly, and using words matter-of-factly, for their literal meanings,
followed by:
- A comic story about his failed attempt to buy a computer system, using a slangy,
self-deprecating style, followed by:
- More common-sense talk, illustrated by another long example from his own
experience, this time using a lot of emphatic words to express conviction and strong
feeling, followed by:
- A quick 2-paragraph wrap-up, in no uncertain terms, ringing home his point like a
smartly hammered nail.
Contents
3. His style is highly readable. It makes use of:
- Wide variation in sentence length (from 2 words to 48 words)
- Getting sentences off to a fast start by typically starting with the main subject
and verb;
- Maintaining a strong energy level, by using action verbs (rather than "is,"
"are," "was," "were," "be," "been");
- Using mostly short words and short sentences, which score well on readability
tests (average sentence length, 16 words; Flesch reading-ease score, 68.6, which is
well within the comfort range of 60-70)
4. He avoids sales-speak. In the article I studied, he rarely did any of the
following:
- Make absolute statements (always, never);
- Use intensifiers (very, really)
- Use sales jargon
- Use numbers or statistics
- Ask rhetorical questions
- Use emotionally charged and manipulative language
Contents
Use of persuasive language
This absence of sales-speak surprised me most. Marlon Sanders, another expounder
of Web sales methodology, has a list of 12 words uncovered in a Yale study as the
"most persuasive in the English language." Dunn rather neglects them.
Here are the 12, plus three more that Sanders recommends. In parentheses after
each word is the number of times Dunn uses it in an article of 2,875 words.
you (48)
easy (5)
free (5)
results (4)
secret(s) (4)
new (2)
save (2; once in a negative sense)
money (2; used with negative connotation, as in money misspent)
love (1; used ironically)
discover(y) (1)
guarantee (1)
health (0)
safety (0)
proven (0)
reveal(s) (0)
Dunn refers to "customers" and "people" many times but never calls them
"prospects." Only twice does he call them "prospective customers." He never uses the
phrase "sales pitch"; instead he refers to the "sales process."
Words seldom used. There are a large number of words you are accustomed to
seeing in content about sales. Dunn uses each of the following words only once or
twice in this long article: power, opportunity, success, profit, solution,
convince, should, problem, benefits, essential, real world, and
compelling. And the one time "compelling" is used, it's with a negative
connotation. That's a total of less than 0.7% of all the words in the article.
Words avoided. There is a much larger group of traditional sales terms and
jargon that Dunn does not use at all: capture, seize, force, law, formula, hot,
button, grab, compel, seduce, must, unique, realistic, selling, proposition,
potential, famous, tested, classic, potent, competitive, advantage, appeal, minimum,
maximum, maximize, attention, lose, mistake, unstoppable, rocket, at last, like it or
not, in my humble opinion.
The vocabulary of the customer. Instead, Dunn uses a vocabulary that
customers would use (who see themselves as "people" and not "prospects"). He uses
words for their literal meaning, not the special slant that sales-speak gives them.
And the effect in the article is to illustrate his point, that customers should be
allowed to come to you on their own terms and that your job is to listen to them,
communicate with them in a language they understand, and provide the "results" they
are looking for.
The only sales jargon Dunn uses is a word of his own invention: "targetcasting,"
which he carefully defines. It represents his philosophy of permitting customers to
target themselves instead of being made targets of, by sales and marketing
communications.
Contents
Getting real
Dunn's strategy as a communicator is to present himself as a three-dimensional
person. Instead of the soap-box oratory and sermonizing that even the best known
sales experts are capable of, Dunn is like a one-man stage performance, by a gifted
actor who writes his own material.
Starting with disclosure. The opening sentence hooks you: "I'm scared to
write this article."
It's a brilliant tactic. Why does he want us to believe he's scared? Is it stage
fright? Does he know something we don't know? It's an immediate dramatic situation,
it seems very personal, and it appeals directly to our curiosity.
It turns out that what he's scared about is not very clear. But in the opening
paragraphs, he presents himself as a lone voice about to express an opinion that
contradicts all the experts. He casts himself as just an ordinary guy, like the rest
of us, who is using common sense -- something we all have. He's inviting us all to
identify with him -- little guys in a world with more than its share of
self-proclaimed gurus, wizards, and experts. And it works.
Just the facts. The common sense talk that follows is easy to absorb
because (a) he has our attention, and (b) what he's saying is not loaded with
rhetorical tactics that make us feel inadequate, dumb, or anxious. It's just plain
talk with no unsubstantiated claims like "Discover the secrets that will make your
revenues SOAR 278% in the first week!!"
When you appeal to common sense, there are no secrets. And when Dunn eventually
gets around to talking numbers, they are based only on a one-time experience, when
c|net picked one of his sites as Best of the Web. He reports, "The traffic to this
site has tripled, email inquiries multiplied by literally 10 times, and I got a
month's worth of traffic in one day." He implies but never claims that you would get
the same results.
Comic relief. After several paragraphs of common-sense talk, Dunn gets
personal again. But this time it's a more comic self-disclosure. The story he tells
of taking a friend's advice on buying a computer system aspires to writer/actor
Spalding Gray. The language and tone shift, and we see another side of him. Watch the
attitude of helpless frustration showing up in the italicized words:
"Good advice? I didn't think so when, after six weeks of searching, I
gave my money to some guy from New York selling an Acer computer (with
my entire schtick) for a good price. He sent me this
cruddy-looking box that was barely held together by tape. I got scared reading
about the BIOS threat on my warranty (I think it is some form of germ warfare). I
knew it was a bomb when I plugged it in and that stupid monitor just kept blinking at
me for two hours, through manuals, confusion, and frustration. Left with
nothing but a dumb, gray box blinking at me, I returned it
immediately.
Dunn does not use language like this anywhere else in the article. And it's
not because he's telling a story. He tells another story later on, with a very
different tone. It's a success story, and the scale of the success seems to have
taken him by surprise. He reflects that surprise with a new vocabulary of emphatic
words: incredible, literally, like wildfire, tremendous, enormous, and
stunningly.
Contents
Conclusion
The lesson to be learned from all this is that Dunn succeeds because he is able
to present himself through words and shifts of tone as a whole person, with a range
of human experience and a rich emotional life. We are disarmed by this revelation and
suspend our disbelief as we do in the theater.
He gains credibility without using the manipulative, button-pushing language of
his imitators, who talk about persuasive sales techniques but come across in print as
one-note, tub-thumping, cardboard-flat characters.
If you want to write like Declan Dunn, it's simple. Watch your language, forget
all the laws and secret formulas, and learn how to be real.
Jump back:
Who's Declan Dunn?
Informality and tone
Readability and sales-speak
Use of persuasive language
Getting real
Conclusion
For permission to reprint this page, please contact ronscheer@ronscheer.com.
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Declan Dunn's Report from Web
Attack
Free Publicity and Dennis Rodman: The Real Power of the
Internet
The other night I sent you an email telling you how Dennis Rodman is a featured
part of the excellent Web Attack conference held this week in San Francisco.
Most of you responded like I was nuts, like Dennis Rodman knew nothing about the
Internet. And you could not be more correct. What Dennis Rodman represents is the
brand. If Dennis Rodman didn't change his appearance, none of you would care about
him. He'd be another basketball player.
But he is a brand; you should have seen the media clamoring, taking pictures, for
a guy who was there maybe 10 minutes.
Sitting in a room of 1000 people, most of whom spent $795 (and more) to see this
two day event, you begin to understand the brilliance. It is not about the Internet
experts, or even Dennis Rodman.
It is about media, publicity, the press, and the brilliance of Michael Tchong's
marketing mind. He has brought together some of the leading players on the Internet,
and in the beginning was Dennis Rodman.
Rodman drove into the show on a Harley, opening the morning with some brief
comments about his future in basketball and a few jokes. Yet there is much more to
this story; first, he allowed Tchong to use the Rodzilla image (it looks like
Godzilla and Rodman owns it; if Tchong used Godzilla to symbolize this radical
event, he'd be sued). Secondly, the media was omnipresent, waiting to take pictures
of the opening of this event.
Dennis Rodman brought thousands of dollars worth of publicity by driving in for
about ten minutes. And that is the brilliance of a good marketer.
Those who look at the literal value of Dennis Rodman think it's insane. Those who
understand the power of branding know that Dennis Rodman was a wise, cost effective
choice.
Before We Begin, A Revelation About Affiliate Programs
Before I share some information from this conference, let me touch on an issue
concerning affiliate programs that became apparent to me on this trip. Many
companies are wasting their efforts on affiliate programs. They are basically using
them as a cheap place to put banner ads which don't work.
Understand that the problem lies not in the banner ad, but in the usage of that
banner ad space. The problem is not with banner ads, but in putting the right
creative mix into that place.
Many affiliate programs stick some poor schmuck, with no experience, into a dark
corner and hope that something happens. Most companies just end up doing the same
old thing, posting banner ads and wasting the value of their affiliates.
They could be turning this into value by being innovative, but it seems that most
are happy to be doing the same thing. In that lies the seeds of failure.
Those who forget the past are doomed to repeat it. The old way of doing banners
ads does not work; we must all begin redefining banner ad space.
To take a peek how we are redefining this space, visit My New Banner Tips Page and check out the ways
we are pushing content onto sites via banner ads.
I'll let you know how the testing goes, but I can tell you this for certain; if
you do not redefine the way you deal with banner ads, your affiliates will suffer.
Banner ads are drawing a 0.67% response rate according to Jupiter Communication's
latest report.
You have to change the way you are doing business to succeed. Affiliate programs
are a complete integrated marketing solution. Instead of relying on only banner ads,
be sure to instill opt in email marketing, clickthrough, qualified leads, and
content-like banner ads.
Even affiliate programs can't rescue the old way of doing banner ads.
The Conference
This conference is an amazing gathering of 1000 plus marketers, presented in a
unique style where speakers can't drone on about statistics or themselves. They have
to get to the point, have to share data (Tchong is adamant about stats, the best part
of the conference), and must be relevant. Participants get to vote on selected
questions Tchong poses between speakers by picking up a device that allows you to
vote. We voted on everything from text based email vs. HTML based email to game show
questions about important Internet statistics. The best part are the short, quick
presentations that Tchong encourages; each speaker gets 10 minutes. That's it.
The features today ran the gamut from email marketing to offline branding and ROI.
The offline branding was particularly amazing.
Those companies that can afford to advertise on television get a tremendous return
on their investment. Traffic increases and people remember. The remarkable logic of
this is so simple; most Internet surfers who see a company on TV figure this company
is big enough, and well funded, to be worth checking out.
Another great idea for Internet offline marketing was shared by Eisner
Interactive; they are hired by their clients to promote the Internet in offline
media. So they research the daily habits of the target customer and put the unusual
advertising in front of their customers, where they are in the real world.
For example, they have people holding signs in the subways of New York; commuters
are on their way to work, and on the way to a computer, so they put the message in
front of them minutes before they get to a computer. This was for TheStreet.com.
Eisner has also put hitchikers, dressed in odd white costumes, on commuter highways.
Passers by see the Web Site URL and check it out at work.
There were so many speakers, from ZDNet rep Jesse Berst's funny and interesting
twist called "spiral marketing", where you integrate all forms of marketing into one
approach, to the permission marketing approach of companies like YesMail.com.
What became apparent is that the Internet is becoming a heavily funded,
competitive marketplace. Those with deep pockets will try to bury those who don't.
There's so much valuable content at this show, I would have to write pages and pages
to simply share what is happening.
This conference reminds me of how important it is to step out behind the computer
and meet with real people doing real things. I got two to three new ideas myself
just today that will literally change the way I do business -- it is all about being
inspired.
Tomorrow I speak on a panel with MyPoints.com, LinkShare, Sharper Image, AdWeek,
and Impulse Buy Network. Yours truly is the smallest of these players, but I plan to
make the biggest impression.
Tune in tomorrow night and I'll share the story of how the small guy gets to the
top of the Internet game by being real sharing common sense. And having fun.
The real secret is to enjoy what you are doing, and never compete with others.
Test, test, test. Everything else is commentary.
The challenge to us all is to keep improving; this market is being driven by many
brilliant minds, like Michael Tchong people who know the value of a good brand like
Dennis Rodman.
People who take a chance and are not afraid to be different.
Like Apple's ads say, think different. Until later, take care.
Peace,
Declan
Where Do You Go After Banner Ads:
Measuring the Impact of Affiliate Programs: The Real Goal Is Increasing CPM, Not
Replacing It
How do you build reach quickly with little investment on the Internet? Art.com,
recently bought for close to $200 million by Getty Images, draws about 60% of its
income from affiliate programs.
Art.com is part of a quiet revolution on the Internet aimed at raising CPM at Web
Sites. Everyone from Dell to Priceline are trying to reduce their customer
acquisition costs with affiliate programs.
Affiliate programs are at the forefront of performance-based Internet marketing
that increases CPM. Instead of paying for the ad, you pay for the results generated
like sales and clickthroughs.
Affiliate programs are simple; virtually anyone with a Web Site or ezine can
market another company's products or services to their existing traffic. The Web
Site markets and the vendor fulfills the sale. The most famous example is
Amazon.com, which pays other Web Sites per book sold; other programs pay per
clickthrough, per lead, or on a hybrid model mixing actual sales with minimum
advertising buys.
By reducing the cost of advertising, affiliate networks are working. Here's
how:
- ActiveAffiliates: About 50% who sign up actually post ads. Many programs
allow affiliates to buy through their links as well, forming buyer's clubs to
increase sales.
- Sales: Between 1-33% of affiliates will make sales in most programs.
- Total Sales From Affiliate Programs: Estimates range up to 60% of total
sales.
- Cost Savings: Affiliate programs can lower customer acquisition costs by
gaining access to existing traffic and paying for advertising based on results.
Why is this powerful marketing tool such a secret? Many successful companies keep
the statistics private to protect their best sellers. Here's what the best affiliate
programs do to succeed.
Affiliate Programs: What Works
In Context Marketing: Art.com
Art.com created single product Web Pages and storefronts for insertion in other Web
Sites. Art.com becomes part of the Web Site, instead of an outside advertiser. In
March 1999, Art.com founder Bill Lederer shared the results; $20 million in sales.
About 60% of that comes from his affiliate network.
Advertorials/Endorsements: ActiveMarketplace.com
ActiveMarketplace.com sent one email to a influential affiliate prospect; he read
the book, "Winning the Affiliate Game", liked it, and endorsed the training to his
ezine list of 6,000. The results: 227 sales X $67= $15,209 in sales within 3 weeks
, at an 8% visitor to sales ratio (sellthrough rate). His CPM was higher than a
banner ad would have generated. Remember, this was just one affiliate.
Niche Distributor Networks: Outpost.com
Outpost.com created a Macintosh affiliate storefront and tapped into a distributor
network for a supposedly small, niche market. In February 1999, Outpost.com revealed
the most successful affiliates in its network. Five of the 7 sites, generating
$15,000 in gross sales each, were low traffic, Macintosh focused, Web Sites.
Lead Products: Register.com
Register.com offers free domain name registration services and gets paid a commission
by Network Solutions for the "free" referral. The affiliate product is a lead item
for Web hosting and e-business services. Register.com then emails the domain name
owner to offer all the services anyone with a domain name would need. The power is
in the lead product.
Affiliate Programs: What Doesn't Work
Same Old Banner Ads
Affiliate programs are a way to increase CPM and fill dead ad space with
results-based advertising. But affiliate programs who fail to use direct response
banner ads suffer the same fate as any banner ad. The key is in improving the
creative and putting in a simple call to action for one product.
Low Margin Products
Imagine going out in the brick and mortar world and inviting someone to sell your
$200 product and paying them a $1. Affiliates are the sales force, an asset; many
companies pay pitiful margins, rarely write checks, and then wonder why their
affiliate program is flopping.
Counting Affiliates Like Hits
Many programs brag about the thousands of affiliates they have. Meanwhile they do
nothing to with them. Having lots of affiliates is good, but having plenty of good
selling affiliates is even better.
No Guidance, No Training, No Activity
After you sign up with many affiliate programs, you never hear from them again.
Sales training is critical to success. Without training, affiliates will do
whatever they want, wasting time and money.
Shopping Cart Mania: Buy 1,000 Products Please!
Some affiliate programs drive people to a shopping cart filled with thousands of
items. The overwhelming volume of choices undermines sales.
Amazon.com's success came from recommended, single products. The endorsement of a
Web Site, and driving the consumer to a single purchase decision, is still one of the
best methods of selling in affiliate programs.
Affiliate programs are reshaping banner ad space and Internet merchandising.
Getting people to buy the first time is the real key, then you can send them to your
shopping cart. If done correctly, a company can reduce marketing costs, test
quickly, and set up a vast network of affiliated sites for little investment.
Art.com is the first proof of this system and how effective it can be.
ReveNews Report On WebPosition's Affiliate Program
Missouri-based software consulting and development company FirstPlace Software was
founded in 1991, but is best known online for their WebPosition software released in
June, 1997. A ZD-Net "5 star" software tool, WebPosition was the first software
product to help Webmasters analyze, track, and improve placement in the major
Internet search engines. Their affiliate marketing program (which pays 15% to 40%
commissions to affiliates and dealers) has been a major contributor to the growth in
distribution of their software tool.
With a product aimed squarely at the online marketing niche, ReveNews knew that
FirstPlace Software President and founder Brent Winters would have great marketing
advice for affiliate program participants:
ReveNews: How does your affiliate program fit into your overall marketing
plans?
Brent Winters: Before we even completed the development for WebPosition, I
knew that a strong affiliate program would be a critical component to our success. We
now have over 6,000 affiliates comprising 23% of our total sales. Our dealer program
comprises another 15% of our sales, with most of our dealers having started out
originally as affiliates.
RN: How much commission do your high-producing affiliates generate?
BW: Our top affiliates do over $1,000 per month in commissions, although we
have online dealers that do several thousand or more in commissions each month.
However, most average less per month, depending upon how prominent they want to
advertise their referral link and how much traffic they get to their site.
RN: What types of websites show strong results participating your program?
BW: Websites that cater to Webmasters, marketers and businesses do the
best. However, sales come from all types of sites, since anyone who has a Web site is
a potential customer for WebPosition. Many studies have shown that software ranks
among the hottest selling products on the Web. Therefore, the popularity of the
product being sold should be a big factor in any affiliate program you look at. For
example, you won't get nearly as good of results referring people to a site that
sells gardening tools, unless of course you have a site about gardening.
RN: Among your affiliates, what's the most overlooked method for increasing
sell through?
BW: The single most effective way to increase sell through we've found is
to follow up with the prospect via an email to lend assistance and to make special
offers. This literally doubles sales. Luckily for our affiliates, we have a system
that does this automatically for all of their referrals that download the WebPosition
trial. We also follow up with newsletters and other advertising to increase sell
through -- it doesn't matter when the customer buys: once we've flagged the person to
the affiliate, they'll get the commission for it.
The number one problem I've seen among our affiliates is that they simply don't
make the effort to be successful or to follow through. Many will fill out the sign up
form (which is free), receive their referral link, but then never take the step of
putting the link on their site! There is nothing more fundamental about being
successful in business than plain old-fashioned initiative.
RN: What are some of the techniques used by your high-producing affiliates?
BW: I think many of them simply work hard at publishing their referral link
in a number of places: their Website, newsgroups, discussion lists, email signatures,
etc. Many simply give their testimonial in a discussion list of how they've found the
product valuable, and find they pick up increased business that way.
In addition, many of them use WebPosition itself to optimize their rankings on the
search engines. That increases traffic to their site significantly, which follows
through to increased affiliate sales. Since WebPosition can bring free, targeted
traffic to just about any Website, there's no way the affiliates can lose money.
RN: What advice would you give one of your affiliates if they don't
generate any sales commission in their first few months?
BW: Referrals will download our product and try it out for up to 30 days.
We find that well over half our sales come in after 30 days, despite follow up emails
and offers. We send out a monthly newsletter so that the prospect is repeatedly hit
by our "message". Whether the referral buys the first day or 6 months down the road,
our affiliates still get the commission (as long as they remain an active affiliate.)
It pays to stay in it for the long haul, and commission generally grow over time.
Many people expect instant riches from affiliate programs, but I don't care what
people say, it just doesn't happen. Participating as an affiliate partner should be
just one piece of your marketing mix. The beauty of affiliate programs are they
require little or no effort on the part of the affiliate to get started, but can
produce a boost in income. In our program, we also refer people back to the affiliate
in a follow-up email, so it's a "win-win deal" -- they can try and get some affiliate
revenues, plus sell them their own products and services.
This article is copyright (c) 1998 by ReveNews.com. All rights reserved.
Links To Sales Content on this Web Site Copyright Declan Dunn and ADNet
International, Inc., 1999 (All Rights Reserved).
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