Ten tips for running a successful affiliate programme November / 2011
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Introduction Running an affiliate programme means entering into a partnership with a large number of different distribution partners. Since being popularised by Amazon, at the time ‘merely’ a bookseller, the affiliate channel has been characterised by its high degree of innovation and constant change. Various online business models such as price comparison websites and reward systems have refinanced themselves in their development phase through revenues from affiliate partnerships. Partners have now outgrown affiliate marketing, at least in certain aspects, and new business models have replaced these elements. It has become more difficult for advertisers and programme operators to maintain a clear over view and evaluate which partners may have the best potential. There is also the need to identify the rogue element, that may be making money without actually providing an advertising service.
Here are 10 key questions (and answers) that you should consider before starting an affiliate programme. These can be used to get a good overview of the challenges and opportunities involved.
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1. What can affiliate marketing Do for you? Affiliate marketing? What’s that? Simply put, a publisher (this can be any operator of a website) places advertisements on its website and is paid a commission for each successful customer referral. But successful affiliate marketing is much more than this, it is an established channel for developing long-term distribution partnerships online. Websites offering a wide range of content such as, price comparisons, online catalogues, couponing, discount portals, reward and cash back sites, can successfully market products across numerous industries and reach a broad spectrum of target groups. Bargain-hunters, shopaholics, customers who really do their research to compare prices before making a purchase, can all be found on the diverse portals of thousands of publishers who could successfully market your products online. And the best part of affiliate marketing? Each successful order is remunerated on a CPO basis only.
Affiliate marketing – the principle
Agency Merchant (customer, advertiser) Success factors: - strategy - market knowledge - understanding of the customer
Affiliate networks Success factors: - traffic monitoring - own tools - multi-channel analysis
Affiliates (Publisher, Partner) Success factors: - Personal contacts - Large network - Trusting relationship
Buyer
€
€ €
Source: QUISMA
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2. How can you help achieve success? Having the right contacts to create successful distribution partnerships offers the greatest potential in affiliate marketing. But the merchant (supplier of the product), you in this case, can also help make an affiliate programme successful. Five things are needed in particular to establish longterm (or even shortterm) partnerships to successfully place your brand on many different publisher portals:
• a likeable and well-known brand that can promote sales in the affiliate area.
• an interesting product range facilitating strong sales in the B2C area in • •
•
particular. high-conversion, customised advertisements giving consumers strong incentives to buy. attractive commission rates which motivate publishers to advertise your brand prominently. Your agency can advise you when setting up a strong commission model, which should be individually structured according to the particular industry, e.g. on a percentage or absolute basis and possibly with different commission scales. and last but not least, your willingness and flexibility to implement customised technical and strategic solutions, such as creating exclusive landing pages to promote individual measures.
A competent affiliate agency working in partnership with you, can advise you on all of these aspects. However, even the best agency needs your cooperation for the constant optimisation of your affiliate programme and best presentation of your shop on partner websites. When working towards a successful affiliate programme, your service provider will ask you about things such as coupons, special consumer offers and optimised advertisements, depending on the industry in which you operate. You will need to be flexible to adapt to changes in the landscape. But your efforts will pay off. Your affiliate agency will help you to develop an affiliate programme through long-term management of publishers and constant optimisation of the programme. You will ultimately be rewarded with significant increases in sales.
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3. Where are the potential pitfalls and how can you avoid these? What is the best thing about affiliate marketing? The variety! Widely diverse publishers can address your different target groups through numerous customised measures. And you can choose the publishers with whom you wish to work. But watch out, it can be difficult to closely monitor publishers when working with a large variety. You do have the opportunity to work with thousands of publishers, but we must admit that they don’t all play by the rules. Brand bidding, click spamming and fake sales are unfortunately not unheard of in affiliate marketing, although they are not commonplace either. The first two may result in partners supplying traffic which would have come to your website anyway without any intervention on their part, while fake sales only cost you administrative time and money. These kinds of risks can be minimised as there are various ways to prevent publisher fraud, such as checking SEA of the affiliates on a daily basis, analysing view and click sales trends and regularly validating all orders.
Breaches can be detected immediately using this approach, and publishers can be warned and ultimately excluded from affiliate programmes at any time. You are then left with the publishers who will co-operate honestly with you and you will only have to pay commission on orders that really generate sales for you.
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Affiliate marketing fraud – the principle
natural surfing behaviour
Affiliate Click-Spamming: Buyer surfs the sites of registered affiliates out of interest. The affiliate (in the background) opens the merchant’s click link every time the page is visited.
A fraction of the buyers visit the merchant’s shop subsequently on their own initiative and buy there. The sale is attributed to the affiliate in this case.
Brand Bidding: The affiliate bids on Google, e.g. on the merchant’s brand.
The affiliate links directly to the merchant’s shop via his site. The sale is attributed to the affiliate.
Merchant (customer, advertiser)
Buyer sales generated without actual advertisement contact.
no online contact
WWW
Fake Sales: The affiliate generates sales on the merchant’s site or triggers tracking without there being genuine transactions.
Source: QUISMA
4. What do post-view partners offer you? Post-view (PV), based on performance marketing, is a simple means of accessing high quality websites which usually permit CPM based display advertising only. This is realised via the ‘traffic broker’ affiliate segment. These partners buy advertising space on high quality websites at their own risk and control affiliate banners via these. A sales relevant cookie is set when the corresponding advertisement is shown in order to compensate the partner for its increased risk. This means that simply showing the advertisement counts as commissionable contact in this instance. Technology There are essentially two technical scenarios: Static pixel integration By opting to allow QUISMA to fully manage your online marketing (therefore allowing our pixel on the order completion page), you can implement post-view quickly and without additional effort thanks to our tried-andtested 1-pixel technology.
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Dynamic pixel integration You control the online marketing channels via a cookie trigger, a ‘high-traffic landing page’ (HTLP) will have to be set up. As these triggers cannot be activated by simply showing advertisements and require a specific action (e.g. a click), this action is generated ‘artificially’ by calling the HTLP. The page itself is empty and is always invisible to the website visitor. The HTLP is only opened within a 1x1 pixel, which is opened in addition to the PV advertisement. If the advertisement is clicked, the usual post-click tracking takes over. The HTLP also acts as a click buffer. If hundreds of thousands or even millions of PV advertisements are shown each day, the same level of artificial clicks could lead to performance problems if these were directed to the online shop instead of the HTLP.
Pro & Contra Advantages The clear advantage of post-view is the possibility of accessing high quality sites for a minor outlay, without having to pay the high CPM prices which would otherwise apply. It is also practically an indispensable resource for merchants from Austria and Switzerland, as Austrian and Swiss visitors to German websites (cross-border traffic) can be shown advertisements from their own country using geo-targeting. Disadvantages Setting a cookie when an advertisement is shown is the essential criticism of post-view as it cannot be proven in the event of a sale whether the advertisement was really crucial to the sale or if it would have taken place anyway or if the cookie was only incidentally set during surfing. However, this risk can be lessened by, amongst other things, a reduced cookie window. The prioritisation of post-click over postview cookies and, not least, the Code of Conduct of the BVDW (German Association for the Digital Economy), which prescribes the sizes of advertisements usable for post-view and their positioning in the visible area of websites. There is also the possibility of agreeing a test period (of at least six to eight weeks) with a selected post-view partner to test the opportunities and performance.
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5. What can coupon partners offer you? The affiliate marketing publisher segment that has experienced the greatest growth is the coupon portals. This is because consumers are increasingly using coupons to save money on their purchases. Coupons are used by sellers to acquire new customers, build loyalty on the part of existing customers and increase order frequency and sales per order. A good coupon portal offers a wide selection of coupons from various partner shops. All relevant information must be displayed clearly. The benefit offered by the coupon, the coupon code itself, the validity of the coupon and information on any prerequisites or restrictions regarding redemption of the coupon.
Possible drawbacks:
• The consumer is encouraged through constant discount and coupon campaigns to wait for special offers before buying.
• A redeemed coupon always means a lower margin for an online shop. • Deadweight or free-rider effects: many advertisers are now questioning whether sales generated via coupons might not have been placed without these as well
• Unwanted coupon distribution from other channels, e.g. CRM.
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However, these can be countered using the following solutions:
• Reduced commissions for coupon publishers. • Making coupons dependent on conditions, e.g. exclusivity for new customers.
• Individual codes via CSV lists or exclusive codes with publisher names. • Besides a separate landing page for coupons from CRM, these should also be linked to individual parameters, e.g. an e-mail address and be usable just once (unique coupons).
• Coupon selection taking the average shopping basket value into ac-
count. Percentage coupon value: average shopping basket value somewhat lower. Absolute coupon value: average shopping basket value somewhat higher. This allows advertisers to actually increase the value of the shopping basket / sales.
The advertiser should fundamentally consider in advance whether coupons suit the marketing concept in general and whether the desired marketing and sales goals can be achieved using these. It’s clear that many opportunities of the affiliate programme will go to waste if coupons are generally disregarded. Great consideration must always be given to any decision to use coupons in an affiliate programme as afterwards it is very difficult to go back on this. Many advertisers believe that coupon portals primarily benefit from deadweight or free-rider effects without performing any true advertising service. However, given their widespread awareness of coupon portals, consumers often search specifically for attractive coupons on such portals before making a purchase. Advertisers that are not featured on these and do not offer coupons may end up being left out of the decision-making process. By offering targeted coupons, clearly communicating the guidelines, making the best selection of serious publishers and constantly monitoring these, problems can be avoided and the effectiveness of coupons increased. Retargeting and social media are sure to also become more significant in the future in this context as the spread of coupon promotions is now strongly driven by recommendations in various networks.
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Direct effect of coupons on sales figures
coupons
200 150 100
sAles
50
01.07.2010
08.07.2010
15.07.2010
22.07.2010
29.07.2010
05.08.2010
12.08.2010
18.08.2010
25.08.2010
31.08.2010
Source: QUISMA
6. What can retargeting partners offer you? 98% of all shop visitors leave without buying anything. Before a customer makes a purchase, he also checks four competitor websites on average. These facts must be taken into account when planning an advertising budget. Retargeting works and is primarily helpful in perceptibly reducing acquisition costs for orders and using allocated funds more efficiently. The more relevant an advertising message is to users, the greater the chances that they will perform the desired action. The powerful targeting tool known as retargeting is based on this concept. User retargeting works as follows: If the user has already performed a particular ‘action’, personalised advertising can be displayed to them based on this. Products which users may have viewed in an online shop without buying, for example, might be displayed to them later again in the form of an advertisement.
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This may involve displaying the identical product or promising alternatives. Cross-selling is also possible with retargeting. If users have already bought a particular product, then products matching their purchase and interests can be shown to them when they next encounter the advertisement. As users have already shown that they are interested in these products, the likelihood of a successful sale is correspondingly high. The conversion rates increase by double-digit percentages.
The advantages of retargeting in affiliate marketing: Simple: Retargeting affiliates can be integrated into an existing partner programme. Flexible: Using a container solution, affiliates can be switched on or off after one-off pixelation of the websites. Further changes to the website source code are no longer required. No financial risk: Remuneration is performance-based, so the merchant has his advertisements shown on AGOF sites under CPO terms (AGOF = German Working Group for Online Media Research). Wide reach: Different affiliates have different advertising space inventory at home and abroad.
Retargeting in the affiliate channel means the effective reactivation of valuable traffic and resulting conversions without financial risk with a performance-based remuneration model.
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Principle Re-Targeting
The user visits the advertiser’s website and leaves it again.
The user visits other websites with advertising space linked via the affiliate.
The user sees a banner from the same advertiser there and clicks on it.
The user is sent back to the advertiser’s website and buys the product.
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Retargeting works: conversion rates increase by double-digit percentages Source: QUISMA
7. How can you implement mobile marketing using affiliates? Every fifth Internet user in Germany now uses his mobile phone to surf the Web. And users that access the web do it very regularly. The great popularity of such end devices means that you are faced with the challenge of how best to integrate the mobile Web into your promotional activities. There are basically two types of publishers for mobile marketing. The first are operators of mobile sites, similar to those already known from the stationary Internet. Nowadays, these mobile sites are very similar to normal websites in their design thanks to increased processor power and higher screen resolutions. The second are publishers who use their own apps to make partners aware of what they are offering. These apps are sometimes also natural extensions of the business models of affiliates, such as in the case of special coupon apps. There is also an emerging sphere of activity for traffic marketers in the mobile area. Both the mobile platforms of large content providers and their apps can accommodate advertising messages. These providers are also driving the development of new forms of advertising. On a mobile phone, these can include advertisements which initiate a call on being clicked, which can then be assigned to the affiliate channel. Click-toSMS and Click-to-Email are equally conceivable on smartphones. It also makes sense to use targeting here. The targeting should be adjusted to the same degree that usage behaviour differs from the PC to the mobile phone. It goes without saying that geo-targeting is the most promising approach, because you may reach the customer directly at the point of sale. Mobile marketing has its strengths and greatest innovation potential here. Furthermore, relevance and context targeting is also worth implementing, owing principally to the restricted advertising space. If there is only room for one advertising message, then it should be thematically relevant. The circumstances of use (e.g. time of day) and connection speed may also be important factors that should be taken into account.
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Mobile marketing is currently trending towards clickbased remuneration on the marketing side. However, the strong focus of certain apps on action generation suggests that lead or sale-based marketing will become more established in the future.
8. How can you benefit from social media in affiliate marketing? In times in which test reports, customer opinions, product evaluations and recommendations are becoming increasingly important (such as Google’s introduction of ‘+1’ as a response to Facebook’s ‘Like’ button), there are several crucial questions for advertisers as to the opportunities and risks associated with integrating social networks into marketing activities. Therefore, regardless of the fundamental decision for or against social media marketing and the function of this channel chosen, there must also be discussion of whether it is desirable to cooperate with social media partners in the context of an affiliate programme. We recommend defining binding guidelines following a detailed evaluation of the pros and cons for one’s own affiliate programme so as to rule out unwanted activities by corresponding partner websites from the start. The opportunities normally offered by social media affiliates include placing advertisements on social networks, adding affiliate links to the corresponding profile page which will forward the consumer to the merchant and advertising one’s own Internet site.
The following points are important to keep in mind and respect the risks for the merchants: It must be possible to clearly differentiate between the merchant’s official websites or pages and those of affiliates (such as fan pages, groups, profiles, etc. in social networks) and this should be obvious at all times to third parties so as to protect the brand. It’s worth remembering here that merchants do not have any direct influence over the content published on social networks if they do not manage those pages themselves. Neither can the merchant control how criticism is dealt with in such an instance, so a certain degree of trust is 14
required in the relevant social media affiliate. In addition to this, there should be a clear rule in respect of the linking of advertisements on Facebook, similar to that for SEA affiliates.
These are the opportunities for you as a merchant: Numerous social media platforms offer their services free of charge, such as Facebook, Twitter, numerous blogs, etc. The resulting cost benefits (in comparison with domains which must be paid for), together with the promising referral marketing model, offer a valuable starting point for the successful marketing activities when implemented well. The social plugins offered by Facebook, which can be integrated in many ways into websites, are useful for achieving attractive reach. By publishing comments on a user’s Facebook profile page, which can then be seen by his contacts, the viral effects important to referral marketing are generated. This crucial advantage can lead to more ‘qualified’ traffic and an increased number of sales / leads on the corresponding websites.
In conclusion: It’s not possible to give any general recommendation regarding cooperating with social media affiliates as this cooperation always depends on the service / product to be advertised, the significance of the brand image that is to be protected and the reliability of the partners involved. Emotional products / services are usually particularly suited to advertising in social networks; an especially crucial role can be attributed to referral marketing in this instance.
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Members of social networks in Germany 60% 45%
30% 15%
51 %
0%
27 %
23 %
19 %
9
%
Wer kennt wen Stayfriends Xing VZ-Netzwerke
6
%
Google+
6
%
5
% Lokalisten
5
%
My Space
3
% Jappy
9. Important to keep top of mind when running an international programme? Looking beyond national borders and establishing an affiliate programme in international markets as well is a very attractive proposition for many merchants. Therefore, it often makes sense for advertisers offering a range of products or services in different countries to use affiliate marketing there to build up a base of distribution partners as quickly and simply as possible. However, it should always be kept in mind that each market has its own characteristics which must be taken into account when starting a programme. It makes little sense to simply copy a purely domestic programme and there isn’t much promise of success either. The first stumbling blocks lie in the network selection and they don’t end there. Further pitfalls can be found in partner selection, commission models and advertising tools:
• Even though many of the large affiliate networks are set up interna-
tionally, there are still a great number of small local networks in each country which shouldn’t be overlooked either. Regardless of size, however, it’s essential that the programme be managed by a contact familiar with the given country’s particular circumstances who can help with partner queries and new acquisitions. 16
Members of social networks in Germany (as a percentage of Internet users) Source: BITKOM / Forsa, basis of 1,023 Internet users aged 14 years and older, 2011
• In respect of partner selection in particular, there are country-specific
influences which must be incorporated into the planning. For example, post-view partners represent the strongest publisher segment in Switzerland and should not be overlooked if you are to be competitive.
• In addition to this, there is no way of getting around having to adapt
advertisements and commission models. Besides obvious modifications, such as the language and currency, certain trends in other markets must also be noted and taken into account. While Flash advertising is rarely used in German affiliate programmes, for example, it’s an absolute must in other markets.
If these kinds of market influences are taken into account, there’s no reason why a programme can’t be successfully started in other countries. Ultimately, the only question is how best to manage a global programme. Besides centralised account management from one location, there is also the possibility of having a locally based account manager for each country. The latter is particularly worthwhile when markets differ greatly. This can be seen in the following example: An affiliate marketing concept with local account managers was developed for an international cable network operator and telecommunications provider. These account managers are responsible for the programme in one or several countries and handle all operational and strategic tasks. Besides the individual management of the different countries, global reporting and meetings complete the concept. Account management example
Global account management Tasks: Creation of global reports
coordination of global presentations and meetings
Management:
By a global account manager with direct customer contact
Local account management Germany
Tasks:
Creation of local reports operational and strategic account management (e.g. publisher
management, etc.) Management: By a local account manager in each case
Switzerland/Austria Poland Czech Republic Hungary
Source: QUISMA 17
10. Where are the potential data protection problems? Besides general legal issues of data protection associated with selling over the Internet, a challenge which may have increasing relevance in the future, has been identified over past months in the area of affiliate marketing (the problem described below is also relevant to practically all kinds of online advertising). The assessment of the ‘Düsseldorf Circle’ (the supreme data protection authorities for the non-public sector in Germany) on ‘Data protection friendly analysis methods for Internet audience measurement services required’ forms the backdrop to this. Based on this resolution, operators might have constraints placed on the tracking of their online activities by the data protection authorities in the relevant German states. The resolution covers the following points:
• Data subjects must have the opportunity to object to the creation of their profiles. Such objections have to be implemented effectively.
• It is not allowed to merge pseudonymised user data with data about the holder of the pseudonym. These data have to be deleted if their storage is no longer necessary for creating a user profile or if the user has demanded their deletion.
• In the privacy policies on their website the operators have to indicate
clearly that pseudonymised user profiles can be created and that there exists the possibility to object.
• It is only allowed to collect and process a user’s personal data without
his consent as far as this is necessary to enable the use of telecommunications means and for billing purposes. Any processing beyond these purposes requires the data subjects’ consent.
• Due to the possibility to attribute these data to persons, the analysis
of the user’s behaviour by using complete IP addresses (including a geo-localisation) is, therefore, only admissible after a deliberate, explicit consent. In case no such consent has been given before any analysis, the IP address has to be curtailed in a way that any possibility to attribute data to individuals is excluded. 18
While some of these aspects are more or less easy to implement, the requirement to shorten the IP address poses a major obstacle in terms of the tracking required for performance-based advertising measures. This is because the network pixel (as a third-party provider) may not be opened from the customer’s computer if this requirement is observed, as the network would then receive the customer’s full IP address. However, the network cannot find its cookie without the IP and therefore cannot identify the affiliate which should be rewarded for the advertising service. One possible solution to this conflict would be to conclude an order data processing agreement obliging the parties to adhere to these guidelines. However, these kinds of agreements involve wide-ranging monitoring and control obligations which in affiliate marketing would then radiate out to all networks and possible direct cooperations. QUISMA is now offering its own in-house solution specifically designed to counter this problem. This basically involves saving all cookies centrally to QUISMA servers. When the pixel is opened, QUISMA can check whether there is a corresponding cookie (e.g. of an affiliate network) on the cookie server. The corresponding action pixel can then be forwarded to this network, without the network now receiving the user’s full IP address and with QUISMA only saving this in a shortened form.
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Summary / conclusions 1. Opportunities? Opening-up a large quantity of good quality, longterm cooperations with a sales focus and exclusively CPO-based remuneration. 2. Your input? Your products, good name, attractive remuneration and some flexibility. 3. Risks? Will be minimised by your agency! 4. Post View? Offers major opportunities if clearly regulated and sensibly managed. 5. Coupons? Essential in retail, on the rise in other industries. 6. Retargeting? A useful complement to your affiliate activities. 7. Mobile? Still in its infancy on a CPO basis. It’s worth being ready, gathering experience. 8. Social Media? Potential may exist if an open and serious approach is taken. 9. International scope? Promising if planned and organised properly. 10. Data protection? React quickly to legal rulings using flexible technology.
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