Susie Harwood examines best practice for brands wanting to use it.
Affiliate marketing has been blighted by a tawdry and opportunistic image, tarnished by accusations of delivering low-quality, time-wasting customers.
It has undoubtedly cleaned up its act over the past few years, with many of the poor practices that plagued client programmes largely stamped out, but the model is still far from perfect. Indeed, brands are losing a significant number of sales as a result of ineffective management, according to research by affiliate management agency R.O.Eye.
The company surveyed a cross-section of the top 20 affiliates and found that a number of problems persist. One of the key issues cited was dead or old data feeds. When a customer comes across a special offer online on an affiliate site, they naturally expect to see that offer when they click through to the brand's site. If the affiliate is using old creative and the offer is no longer available, all parties lose out: the brand doesn't get the sale, the affiliate and network lose out on their commission and the customer has a bad experience.
This is most likely to be an issue for brands that update creative constantly, such as travel companies and betting sites, where odds are changing all the time, according to Alison Guise, UK managing director of digital marketing specialist Commission Junction and Mediaplex, who also cites the financial services sector. 'Tighter regulations introduced by the Financial Services Authority mean financial-services providers have to present the right interest rates,' she adds.
There are solutions to the problem. 'We regularly communicate our offers with affiliates on an individual and collective basis and do our best to make sure they know how long our offers run for,' says LateRooms partnerships and affiliate manager Duncan Barraclough.
Another option is to automate the process. Affiliate network Buy.at, for example, has a system that gives affiliates direct access to a retailer's inventory so they can get the most up-to-date product and pricing information. Brands can also dynamically serve ad creative directly to affiliates so that they can display only the current execution.
This approach can also help when it comes to brand management. Affiliates act as representatives of the brand, so it is vital that they give out the right message and that it is consistent with the brand's communications across other channels.
Gaming firm Betfair, which has just undergone a rebrand, is one company to have seen the benefits. 'Because we serve all the creative, we don't necessarily have to tell our affiliates about these changes and it means there is no chance the old brand will be used,' says affiliate manager Raminder Ball.
Some brands afford affiliates the flexibility to write their own ad copy. This can be beneficial, as they may have a different take on offers and products that generates more sales, but it is important to be clear and concise on the rules governing the practice. 'We have a tight programme - affiliates know what they can and can't do,' says Debenhams online campaign manager Joanna Stephenson.
It is also important to keep affiliates onside. They have to be attracted in the first place and can easily be lost to more competitive programmes on price. 'Affiliates need to ensure they can pull in traffic to their sites and drive sales at a profit,' says Emma Wilson, client services director at agency Harvest Digital. She recommends a tiered scheme that rewards top sellers with increased commission rates.
For brands with a diverse offering, where cost-per-acquisition rates vary significantly by product, it can be useful to set differing commission rates on this basis. HMV has just such an in-house system. 'Some products have a far lower margin, so we will pay 2% commission on video games, for example, whereas a back-catalogue CD would be anything up to 10%,' says the retailer's online marketing co-ordinator, Dan Thut.
Tracking is another tricky area. Traditionally, affiliate marketing networks have focused exclusively on online transactions. But many e-commerce firms like to give customers the option of buying over the phone, according to Buy.at's chief executive Kevin Cornils. 'They want to put phone numbers on affiliate sites as it gives them the opportunity for upselling, but it would mean affiliates wouldn't get the commission,' he says.
To accommodate this, Buy.at has a system that enables phone sales to be tracked back to the affiliate either by giving each a separate phone number, or via a code that customers are asked to give when they call.
Both LateRooms and ScottishPower have introduced phone-tracking to their affiliate programmes. Robbie Parish, head of e-commerce for ScottishPower Energy Retail, says it can help prevent lost sales. 'It's a way for us to recognise leakage and make the campaign better,' he explains.
One of the biggest growth areas in the sector over the past year has been reward and voucher sites. These affiliates can drive valuable business for a brand, but there are pitfalls; online vouchers can spread like wildfire over the internet. This is fine for brands that want to push an offer out as far as possible, but often deals sent out to an ostensibly limited number are then passed on virally.
Some affiliate sites have even been taking voucher codes meant for specific individuals and posting them on their sites, so the brands effectively have to pay twice: through commission and the customer discount. This can be overcome by introducing lower commission rates for incentive sites, as in the scheme Affilinet has rolled out for Debenhams (see case study).
However, all such problems can be avoided if clear boundaries are laid down, which brings things full-circle to ineffective account management. This can engender poor relations with affiliates, meaning they are more likely to get things wrong. Greater investment in programmes and employing dedicated affiliate managers who regularly meet and communicate with affiliates can go a long way to avoiding such a breakdown.
'Affiliates respond well to clarity,' says Barraclough. 'If we tell them exactly what they can and can't do, we can nip a lot of potential problems in the bud.'
As affiliate marketing continues to evolve, problems will inevitably crop up, but if clear rules and strong relationships are established, they should be easy to overcome. Vigilance, then, is key. As Parish says: 'If you don't maintain your programme and look after it, it will break down at some point.'
CASE STUDY - DEBENHAMS
Debenhams is no stranger to the issues surrounding affiliate marketing. It closed its initial programme in 2005 because too many partners (about 6500) had signed up, making it difficult to control.
Since introducing a slimmed-down scheme on Affilinet last November, the retailer has kept things tight by allowing a maximum of 50 affiliates and laying down strict rules; so far, it has faced few problems.
However, one issue that has surfaced is an increase in reward and voucher sites in the programme. 'They are a big opportunity; the number of sales we have coming through them is enormous,' says Debenhams' online campaign manager, Joanna Stephenson.
But these sites are also making it difficult for retailers such as Debenhams to reconcile voucher codes, meaning they have to pay twice for that sale, according to Nicky Iapino, AdLink's UK group managing director, responsible for AdLink Media, Composite and Affilinet. 'Some sites are taking Debenhams voucher codes that it has emailed to its customer database and putting them on their sites,' she explains. 'So if it offers a £5 discount, it costs Debenhams £5 for each one claimed, as well as the commission for the affiliate.'
The model of voucher sites depends on the inclusion of codes for them to attract customers, so Affilinet and Debenhams have created a system under which each affiliate is given an exclusive voucher code. The commission structure has also been altered so that the retailer does not lose out.
'We offer a lower commission rate to voucher and reward sites,' says Stephenson. 'This resolves the problem and allows us to aim the vouchers at the areas of the site to which we want to send traffic.'