You will have noticed a slight change in format. In an effort to prevent getting lost in over-zealous spam filters, The Affiliate Managers Newsletter will now be published online. You will still receive an email notification once I've uploaded the latest issue.

Without the space restrictions of email I've got a little carried away, making this issue a little longer than usual.  Although, I still haven't found time to cover some additional topics I wanted this month (such as buying into email lists on CPA, the trend of banning affiliates from bidding against brand names on the pay per clicks and Project X updates). 

However, 'paying' work demands my attention so I'll try to pick up on these next month :-)

Perhaps this is another good reason for me to follow the advice suggesting that I ought to expand on the monthly content and levy a small subscription to support a more thorough and detailed  publication. Any thoughts?

- Neil Durrant

1. Loyalty Marketing - An interview with Wayne Porter

Loyalty or incentive marketing is proving an increasingly hot topic within the affiliate marketing space, for affiliates it can develop brand loyalty and increased revenues - although it might not fit with every merchants business model.

This month I speak with Wayne Porter, to discover how affiliates and merchants are utilizing loyalty marketing to increase revenues: 

Wayne, thanks for taking the time to speak with me today. To start can I ask, what is customer loyalty?

Simply put it is the tendency of a customer to choose one merchant or product over another for their particular need. This doesn’t always have anything to do with how happy they are with a company or a website. They could be very satisfied with their experience but not loyal. Loyalty is demonstrated by action, that action is choosing a particular merchant again and again to fill their needs.

One way to generate loyalty is to offer rewards or incentives. I am a prime example of a customer who is loyal to Continental Airlines because of incentives. I fly Continental because they have a main hub in Cleveland, my main airport, so it is easier for me to get a good airfare. However I can often get slightly better fares or specials if I dig around on one of the flight comparison websites. I don’t bother- I am loyal to Continental.

I have taken my relationship with Continental one step further when I signed up for a Continental MasterCard. Every purchase I make generates frequent flyer miles I can use at Continental for flights and upgrades. If I book my flight at Continental’s website I get even more frequently flyer miles, and if I use my Continental MasterCard to book the flight my rewards can be doubled or trebled.

In this case I have actually changed my buying patterns and choice of credit card because I want the incentives that come along with my continual relationship with Continental Airlines and MasterCard. I even choose hotel partners and airport parking centers that honor my Continental program because I get more frequent flyer miles. Not only am I rewarded with free flights or upgrades but I can achieve various levels of status that give me certain perks, like boarding first or having first rights to an upgrade.

In short Continental’s program has changed my buying patterns and they have retained me as a customer. I am loyal to Continental.

So how does loyalty marketing relate to affiliates or performance marketing?

Loyalty or incentive marketing as we know it in the affiliate or performance marketing world primarily pertains to performance deals that are structured to reward a consumer for making a purchase or action at a particular site. Loyalty is usually generated by offering incentives in the form of cash back, points, miles, virtual dollars or just about anything that a customer might want. The real key to make it work is to be sure the reward for their loyalty is something they really believe such as a charity cause or it has to be an object they really desire. Money is a frequent reward because it is universally desired.

Technically this type of performance marketing works by passing a special variable that identifies the user through a standard network ad tracking link and then downloading reports that match up transactions to the user that generated that transaction. Usually some of the commission is held back for the incentive site and some of it goes to the customer.

Why is affiliate loyalty marketing gaining popularity while not always so popular with some merchants?

Loyalty marketing via affiliate channels is gaining popularity because it works! In this case performance based marketers are actually acquiring the customer for themselves. The customer does not usually return directly to the store, but to the affiliate site so they can get their reward or incentive. Most merchant’s primary goal, especially catalogers and multi-channel retailers, is to acquire the customer. Some merchants dislike this stripping of loyalty while others are fine with it. Some will adjust their commission accordingly to compensate for the fact they are not going to acquire this customer.

It really depends on the companies brand and their overall marketing strategy. Some merchants are more likely to work with a charity type of site like GreaterGood.com, BabyMint.com, or Upromise.com because there are some tangible benefits generated through perceived goodwill.

Merchants can also derive benefits on networks like Commission Junction where incentive based shopping can push public 3-month and 7-day EPC levels to more attractive levels which assist in quality force acquisition and retention.

Are there any other caveats merchants should consider when dealing with loyalty-based sites?

I touched on customer loyalty which is an important part of the stick issues but merchants should also be wary of running CPA or CPC based offers on incentive sites. A click or an action that is driven through an incentive mechanism is usually worth less, especially in the case of a click because it costs the user little effort to get the reward. 

Is EPC typically higher for loyalty/incentive sites as opposed to content publishers?

There is no doubt that loyalty/incentive sites frequently achieve high EPC and content publishers often struggle with performance marketing. The reason for the incentive site’s success is simple, the user has already decided they are going to take an action, check out an offer or make a purchase. When they hit the website they are there to generate rewards and this naturally results in a high rate of conversion and therefore very high EPC. Also some incentive sites experience higher than average tickets as consumers “Stock-up” on commodity products and claim their rewards.

What advice do you have for an affiliate who might want to get involved with incentive marketing?

The affiliate must be technically savvy, prepared to invest some money into their systems and automation is absolutely critical. We found that at many operations sites were spending from sixty to one hundred and twenty labor hours a month or more just reconciling transactions and aggregating data from solution providers. These tasks often required two people.

This was the primary reason we created TransTrack and iTrack which drastically cuts down on the rate of human error and automates the collection and reconciliation processes, especially in the cases of calculating splits, batch transactions and corrections. Most of our clients see a cost savings immediately as their systems are automated and key personal can be used to work on activities that relate directly to revenue generation like merchandising, negotiation, or copy writing. 

Sites will also have to have a good customer support team in order to deal with potential problems that might occur, i.e. dropped transactions; transactions that might not track due do to isolated technical glitches, or just customer confusion. The publisher should also control the customer base. This is one of the reasons I have found turn-key loyalty malls a turn-off. These usually work on a very high revenue split and by the time you have returned cash back to the customer and split the revenue with the provider, the affiliate is left with very little in the way of returns.

Are there any other trends AffTrack is seeing in the loyalty and incentive space?

The surprising and perhaps most interesting trend is the number of extremely large brands approaching us wanting to work in this fashion. Large merchants realize that loyalty is critical and if they can change the shopping patterns of other non-competing brands to build customer loyalty they have achieved something very powerful and compelling. In some cases large brands want to use performance marketing to work with their charity as they realize the goodwill it can generate for their brand. I have a strong feeling we will see more incentive based performance marketing in the future and from brands that will be surprising.

Thanks Wayne...

Wayne Porter is the V.P. of Product Development at AffTrack LLC. Wayne also serves as an e-commerce editor for Revenews.com.

wayne@afftrack.com
http://www.AffTrack.com
http://www.RevTrends.com

2. Pay per click bidding for new affiliates

I won't claim this to be a ground breaking idea, after all it's really rather obvious - but it's something I simply haven't thought of trying before. 

In fact, researching further, very few merchants seemed to have done so either!

Affiliates search out appropriate affiliate programs in a multitude of ways:  personal recommendations, attracted by your networks listings, via affiliate directories (see my www.affiliate-announce.com service) - while others will simply query a search engine to find a program that fits their needs.

Try opening up Overture's keyword suggestion tool and type in a phrase that describes your product while simply adding 'affiliate' or 'affiliate program'.

Here's some related search queries I found on Overture along with their current top 3 bids: