Coupons Anyone? Why merchants should not resist

Jul 15, 2005
by

[A discussion on the AffiliateManager.net forum on coupon vs. incentive affiliates triggered this blog]

Some merchants just don’t see the value of using coupons to drive sales.  They either don’t want to cheapen their brand – or fear that they’ll create a culture of discounting their products.

As you know we manage affiliate programs.  Coupons are a vital part of any program we run. 
Initially some merchants resist offering coupons, but once we show them that it’s potentially a great vehicle for new customer acquisition they tend to change their perspective.  I say potentially – because there are always exceptions to the rule.

Using a coupon site like FlamingoWorld as an example. We offer a coupon on a loss leader product. FW posts the coupon and refers the new customer. Once the customer has made their first purchase it should be the retention marketing department’s business to get repeat orders from the customer.
Flamingo World has done its job – they referred the first sale.

One snag though – very often we come across companies [gasp] without an internal marketing retention engine! They genuinely believe that by adding an affiliate program the sales and repeat sales will magically appear :-)   I’m constantly amazed that new online businesses (and even some established ones) don’t implement 1–2–1 or retention marketing plans until prompted by consultants.  One would think that every business plan would include at least a retention marketing strategy.

It takes more detail to explain to merchants but essentially we show them:
1. Affiliate introduces prospective customer.
2. Really good affiliate creates positive first impression and starts customer interaction to facilitate sale.
3. Clever affiliate owns the relationship (and secures long term commissions from even cleverer AM :->)
4. Merchant is responsible for repeat purchases.
5. Clever Merchant builds an internal retention engine to communicate with customers, build brand interaction/ recognition and drive repeat purchases.
6.Merchant makes repeat sales and pays affiliate ongoing commissions
7. Affiliate smiles, AM smiles and Merchant smiles.

Now, what drives repeat purchases? Special offers, limited time offers, incentives, special deals – call it what you want – but it boils down to discounting. (okay before you all flame me – again – i know there are some exceptions :-) )

Once this is explained to merchants – very few continue to hold the position that advertising on a coupon or incentive site is a bad idea.

Comments appreciated, posted and acknowledged :-)

About Jonathan Miller

I’m the CEO of Forge Media Investments Limited and its Online Marketing subsidiaries including the Forge Outsourced Affiliate Program Management & offerforge.com Affiliate Network.

I’m more talent scout & ambassador than Business Manager. I do strategy, high level planning & client engagement. I love getting my hands on a project, working with clients to figure out what they need then letting my team get on and do it.

I love finding new businesses for us to grow & opportunities for us & our clients to capitalize on.

I’m well known in Performance Marketing circles and judging by the fact that I keep getting invited back, seem to be rather an engaging, or at least a passable speaker.

I live in Johannesburg with my wife, 2 daughters and assorted pets! I travel relentlessly between our markets in the US, UK and South Africa and consequently my kids often refer to me as stranger ;-(

You can find Jonathan on Twitter: @JonathanAtForge .

Filed under: Affiliate Marketing
  • http://blairaffiliates.blogspot.com Chris Park

    "What drives repeat purchases?" You're well on your way, Jim, but don't stop there.

    Repeat purchases are a form of customer loyalty, and customer loyalty can be achieved in more ways that just discounting. First-class customer service, punctual shipping/delivery and product quality/price also contribute to customer loyalty.

    It's a combination of all of the above, along with value-added incentives, that drives repeat purchases/customer loyalty.

  • http://NoCookie patrice

    I think that some merchants may take you to task for #6. In your opinion, where do you draw the line, if anywhere, on ending the affiliate commission on repeat purchases? Is what you're referring to your cookie duration?

  • http://www.team-affiliate.com Jonathan Miller

    Thanks for the comments Chris & Patrice.

    I agree with both your statements and know there are exceptions. Of course there are many influences that determine consumer purchasing behavior, including product suitability, satisfaction levels, necessity, status value, usability and many other factors.

    Price / Incentive however is certainly one of them – and especially in the online business model price and continued incentives seem to play a big role. In the online gaming industry, for instance, an inordinate amount of time is spent on retention marketing to drive share-of-wallet increases. A tried and tested method is to continually reward the consumer for doing business with the merchant. They ALSO employ all the "soft touch" methodologies we learn in business school – but the reward model is by far the most lucrative across the spectrum. There are of course exceptions to this model as well – but I'll leave that for another post :-)

    Patrice, regarding point #6 – I'm wearing my affiliate manager hat there. Each product would be different and depending on the nature of the product (long vs. short repeat purchase cycle) the ongoing commissions would differ. I was referring to cookie duration. I typically imagine myself in the affiliates shoes and try to put together a deal that'll ensure they earn a healthy CPA – something I'd be willing to work for if I was the affiliate. I then recommend a cookie duration to match that.

    This could mean an upfront high revshare for a lower lifetime or the reverse (again depending on the reorder cycle, product profitability, purchase size and a number of other metrics (hmm – another post lurking in there :-)

  • http://www.mastermcom.net Fred Conquest

    Sounds to me that the purpose of all this retention garbage is to shaft the affiliate.

    The affiliate brings in the customer and the their is a fight over who does the customer belong to…if your affiliates are your partners then both own the customer if you will…

    In over 10 years of marketing online, the number of really honest merchants is a drop in the bucket…

    how many send the affiliate the name, email address, a description of what was bought, the time and price for every purchase for every affiliate?

    Seems to me if you are a sales rep for any offline company which is what affiliates are you get those stats as par for the course.

    There may be a ton of so-called reasons why a merchant would not want to spill the data, for selfish reasons, but if you are afraid of your affiliates which most merchants seem to be, then there are millions of dollars that you are leaving on the table because you listen to 20 something clueless kids who can deal with machines and not with real people.

  • http://NoCookie ric James

    did you bother to read the column? His position is in favor of the affiliate. Don't you get it? Retention = more sales = more commission. any good affiliate know s that – or do you think he's going to come back to your site every time? he doens't purchase from us – so i'm all in favor of the merchant selling to him again and giving me more $ – damn side better thn the onetime sales.

  • Jonathan Miller

    Hi Fred – I'll answer your questions where I'm qualified :-)

    [Sounds to me that the purpose of all this retention garbage is to shaft the affiliate.]

    Fred, i don't understand your statement. Don't you want the merchants to keep selling to your customers? If they do you keep earning commissions – surely that's a good thing? Now I know that every merchant has a different cookie life – but i'm all in favor of loooong or infinite cookie durations to really help the affiliate earn.

    In point 3 in my article I mentioned: "3. Clever affiliate owns the relationship (and secures long term commissions from even cleverer AM :->)"

    In a comment on the artile above I wrote: "..typically imagine myself in the affiliates shoes and try to put together a deal that'll ensure they earn a healthy CPA – something I'd be willing to work for if I was the affiliate. I then recommend a cookie duration to match that."

    i don't consider that shafting an affiliate – we try to create a fair compensation plan that works for both parties.

    [In over 10 years of marketing online, the number of really honest merchants is a drop in the bucket...]

    That's why it's important to find people you can trust. Evaluate the programs on untrusted platforms with no track history – affiliates need to do their due dilligence.

    I've walked away from far more programs than I've worked on – purely because I did not like the business model or ethics.

    [how many send the affiliate the name, email address, a description of what was bought, the time and price for every purchase for every affiliate?]

    our sales programs share transaction ID, product description and purchase amount as a minimum. All good programs do.

    How many share personal info on customers? not many I agree. Affiliates are not employees and not beholden to employee contracts – which means that unscrupulous affiliates could wreck merchants businesses with access to all that data – not to mention the fact that it would violate the consumer's trust and may break privacy laws.

    Having said that – I know that there are plenty of affiliates with access to that data. If you build a long term relationship with a merchant and they depend on you – you can at least ask them for that data.

    [...you listen to 20 something clueless kids who can deal with machines and not with real people. ]

    I wish I was 20 something and knew what I know now :-)

    Seriousely, Fred – I do understand your position. Many affiliates find themselves in the same place.

    I recommend you find some good programs managed by ethical AM's and try to establish one-to-one relationships with them.

    I just love it when a new affiliate phones me or one of my team to discuss a program PRIOR to joining.

    We'll give you the real deal. As an outsource AM company we manage dozens of programs and know that affiliates – not merchants – are our bread and butter. We cannot screw an aff over – because he may be in 5 or even 10 of our programs – and we'd lose a valuable partner.

    Call me on 1-800-841-1369 or take a look at http://www.team-affiliate.com/clients.html

    All my best

    Jon

  • http://www.mastermcom.net Fred Conquest

    It was dark thrity when I read the blurb…obviously my brain failed to register it was coming from the affilliate side…and the typos are inexcusable…but overall the nature of the game is everyone for themselves…how long it will survive is anyone's guess…1996 to 2000 were pretty good…2000 to 2002 were the pits, then things got a bit better. But over all it has been getting worse since March 2003…not in terms of traffic or viability of products or services, but in merchants going out of their way to shaft affiliates.

    Why should anyone join any affiliate program unless the merchant is willing to pay them upfront or a per click against commissions?

    Considering Linkshare and Performics have shafted affiliates in the millions since this game all began, maybe people have just wised up…I still maintain, that CJ could have been bigger than Google if they didn't listen to that Declann Dunn twit about going strictly to CPA. What does Google do that any ad network does not do. They index more garbage that's all…in the net game the guy with the most eyeballs wins…you can't erase the fact that revenue from page views must exceed cost of page views or you are a dead duck as soon as your capital runs out…or you can steal the page views from affiliates.