The case FOR Affiliate Marketing

Some major retailers/etailers leverage the affiliates value add capabilities. Take TigerDirect, who raised themselves from the BF network computer products deadpool, by the smart tactics of a AM empowered to think affiliates weren't just free branding agents. That AM was empowered to wear a sales managers cap demanding and rewarding affiliates that actually drove new customer sales. Years of seeing the blending of content with good product selection and pricing now puts them on cruise control as to their affiliate program. Why? Because their landing pages and throughout their site they have meaningful content to answer questions buyers have on display products.

Opposite end of the spectrum is Befree now CJ Boscov's program. They rely totally on driving affiliate traffic to their 800 support number or brick-n-mortar storefronts. Their site and product ecatalog information never has been more then the bare minimum shown on a price tag… LOL. The Friggin Adwhore idiots running that site think someone would by a 1.5 caret diamond ring for $14,000 without devulging the basic 3-C's characteristics of the diamond. No certificate. No description and one louse stock photo of the ring. They should be run out of the affiliate merchant space as they refuse to address the basic needs of referred shoppers. I'll be damned if I'd make up customer facing content to go with their lame landing pages. If I did then their BHO buddies and couponers would snipe the sale at the e-cash register.

Leave the brick-n-mortar branded majors to the weasels in this industry mastering SERP and e-mail spam, and having deep pocket SEO/SEM playas pushing their cookies. Put on the referral shoppers hat and view the merchant's offerings though their eyes. I tested Boscov's since last Christmas and even with http://www.GoldenCan.com showcases, they don't convert, since they do not close affiliate referrals without non-commissionable direct help.

My ABW taline for years has been… What have you done today to put real value in a click… from a shoppers viewpoint. If affiliate enabled merchants don't get this then I'll happily build a site for a competitor who values this principle.

"No doubt his sentiment is shared by many affiliates that now feel threatened by the tone of the conversations on this forum."

I don't think any real affiliates feel threatened when they read the usual doom and gloom. Jeff has a history of it going back to when he thought Froogle was going to wipe out all the mom and pops and Google was going to partner with Gator, yada, yada. But be careful, saying something positive about affiliate marketing is just baiting Jeff.

Overall merchants love affiliate marketing because they only pay for some actual performance. Great model.

Jonathan,

Nice to see something positive about the industry written up here. I agree with the thrust of your article though I'm not totally with you on two points.
1. Affiliate marketing is cheap compared to television or print ads. Moreover, you see fast, direct ROI in addition to the forgotten benefit of branding in the nooks and cranies of the web.
2. Most merchants _could not_ do it better if they tried. Content affiliates have a special ability to obtain high rankings, something not easily imitated.

Affiliate Marketing was never designed to be the most cost effective way to do business on the internet.

Guess we all migrated to the same comment. Here is the thing and where I suspect Jeff is coming from. For years affilate marketing was sold as the least expensive marketing channel. And before search, it was the least expsenive marketing channel.

Search changed the game. It created tons of volume from the channel, while at times, increasing costs for the merchants.

The problem is, the channel is still sold as this low cost, direct responce channel. That is something cateloguers understand since that is their marketing model. When Jeff writes his pieces, what he is leveraging that misconception that to be honest was sold by the industry for years to marketers.

Some of us have caught up, some of us have not. Those who have not, Jeff's message is on target.

Sal is 100% on target when he writes:

Depending on a companies stage of growth, customer base and goals, different advertising approaches may be necessary.

We all remember Marketing 101. It costs more to acquire new customers than retain existing customers.

The question is how does affiliate marketing fits into a companies overall marketing mix.

The underlying message is now your traffic and know what it is worth to your business.

That is what we are still coming to terms with in this channel.

As all all the leaders in the indutry move to the OPM route, we are losing the ability to manage this channel appropreicately from inside companies and I think that will come back to bite us. Not that people should make difference career decisions, but just we need to figure out what marketing directors are thinking and how to make a business case for the channel that we all care about.

Hello Brook

Thanks for your comment. I agree with you on both points.

My price comparison was intended only for use when measured against other online media buys – it's far more cost effective.

I think the word "cheap" is relative to the business. Depending on a companies stage of growth, customer base and goals, different advertising approaches may be necessary.

We all remember Marketing 101. It costs more to acquire new customers than retain existing customers.

The question is how does affiliate marketing fit into a companies overall marketing mix.

Thanks for the good thoughts, Jonathan. I offer some reaction:

1) Valuable content?

Top of page two in Google

http://www.fabuloussavings.com/online/us/1800flow…

Page one in Google

http://www.keywordmarketingsuperstar.com/pfaltzgr…

Page one in Google

http://www.fabuloussavings.com/online/us/collecti…

https://www.ebates.com/editUserInfos.do?signup_fr…

I could go on and on. Aside from David Lewis's very good point of "pushing negative PR" off the page (corporate hate sites, etc.) through use of affiliates who engage in brand-based SEO, I would be astonished at anyone who finds this kind of thing brand-enhancing or valuable.

2) we realise that the only option we have in the long run is to be able to generate revenues (meet a merchant's marketing objectives) at a cost lower than other marketing channels available to them

I'm confused… this is an option? I would think that this was the primary objective from the start. That stated, I see the point here and appreciate it. It's spot on.

In my experience our clients set an acceptable marketing cost threshold.

With all due respect this is rather old world, isn't it? When originally proposed, the "marketing cost threshold" was an *assumed* % of new-to-file customers, an *assumed* ROAS that was within reason an that was not complicated by other media spending (catalogs, direct mail, telemarketing, CPC media in search, CPC shopping comparison media). This is precisely what is currently being debated — a "marketing cost threshold" but this concept is moving from vague terms to specific terms.

In the past marketers, when determining what a reasonable "marketing cost threshold" was (via the process of determining an acceptible affiliate commission rate) factored in:

* Typical cost to acquire customer

* Average return rate

* Average ticket

* Product margins

That was about it. The world is progressing beyond that and direct marketers want to understand return on ad spend, customer lifetime value, new-to-file customer ratios… and they want to hold affiliate referrals to pre-defined "marketing cost thresholds."

To be honest, I'm not surprised at all that Jonathan's customers, Beth and many others aren't interested in managing to such metrics. This is being driven by hard-core direct marketing companies… not mega retailers nor small marketers of products or services. The company itself (and/or a person within the company) reaches a point where it simply wishes to have more precision with regard to *actual* (not perceived) marketing cost.

What I describe is nothing to get all crazy about… it's a maturation process of how companies define what Jonathan calls their "marketing cost thresholds."

Thanks again Jonathan.

As an experienced e-Marketing Manager working for both large and small organizations, I have both launched and scaled down affiliate marketing channels. I agree with Jeff Molander's comments regarding the future of the affiliate marketing channel in many respects.

Over the last several years the e-Commerce Marketing space has changed drastically. Organizations who have gained experience in space have a better understanding of their competitive landscape, been able to benchmark their performance, set goals and objectives, incorporate bid strategies incorporating various tools and have begun to budget e-Marketing spend wisely. This being said, they are holding their e-Marketing managers to strict ROI goals and have begun to move budgets to channels which provide the best ROI.

With rising CPC rates, "black hat" marketing practices by both competitors and affiliates, utilization of bid management tools, not to mention branding concerns; organizations have taken a serious look at their inflated PPC and Affiliate budgets and have realized the affiliate channel is no longer an acquisition channel but merely a portal in which their portfolio customers are using to obtain free shipping, coupons and special discounts.

Smart e-Commerce organizations are performing cost benefit and life time value analysis of e-Marketing channels and many realize their internal paid search channels provide a higher ROI, a better customer experience and improved branding for the organization as a whole. I envision organizations scaling down their affiliate channels to a handful of top performers if not discontinuing the channel and moving affiliate spend to their internal PPC channels.

I disagree fundamentally with you on this point, Kelly – but I suppose only time will tell

I'm however not losing sleep that Forge will be going out of business soon due to an obsolete business model!!!

Of course companies are holding their "e-Marketing managers" to strict ROI goals – that's the function of business. In every business you budget, set targets and goals and hold your executive, management and line staff accountable for the achievement of those goals.

Periodically businesses must review their targets and adjust them to suit the changing environment and value drivers in the business – again I agree.

I do not however agree that big business is going to shift away from affiliate programs.
These are mature businesses and they realize there is more to business than an over-optimised "lean to the bone" approach.
There is a delta point beyond which over-optimisation is no longer a best practice.

There's brand awareness, the ability to place ads in places you'd not be able to reach contractually, mopping up the niche markets and zero risk advertising.

I do however believe that these "big" companies will increasingly police their programs and only allow content based affiliate relationships.

Additionally most companies realize that there are specialists in this industry that they can leverage to deliver results. Our clients generally take a long term view when developing an affiliate channel.

I do agree with you that they may become smaller and more focused with fewer partners. The BizDev/Aff boundaries are being brought down every day as we do more unique deals and structure hybrid deals.

Fact is – web content is on the increase at an incredible rate. These sites are being developed to cater to an audience and the owners of these sites are looking to earn revenue. There will always be a place for performance marketing in this environment. Even if you're correct and "big" business withdraws – there are thousands of others to take their place.

Long live affiliate marketing!!!

I guess it depends to a large degree on your business model, profitabliity, market strength and a host of other internal value drivers. We have clients that continually rachet up thier campaign optimization and look for the best possible deal – and it works for them.

Jonathan,

I am in no way stating Affiliate Marketing is not a profitable channel for many organizations nor will it cease to exist. The point being, organizations are in fact modifying their business model with regard to internal vs external acquisition channels. Many are moving away from affiliate partnerships and/or scaling down their affiliate channel to those affiliates who adhere to strict guidelines such as bidding on brand name terms and promoting the organization's Brand in the best manner.

This is one of the major concerns with regard to affiliate programs. Policing the affiliate channel is labor intensive and from a resource standpoint, many businesses would rather use those resources driving acquisitions through internal means rather than the affiliate channel.

"Many are moving away from affiliate partnerships"

Hi Kelly! Hope all is well!

I'm curious, who is closing their channel? I do think people are policing more carefully, but those people where not policing in the first place and they should have.

Beth

The wisest words I've read here in a long time were posted by Kelly Cuva. Obviously recognizing the years of AM's allowing, and recruiting, sleazy Blackhat lazy automated cookie stuffing affiliates has sunk into the real merchants mindset. Those merchants and their victimized family members see the wrting on the wall as the Google their company brands and cringe.

Quote: … "Over the last several years the e-Commerce Marketing space has changed drastically. Organizations who have gained experience in space have a better understanding of their competitive landscape, been able to benchmark their performance, set goals and objectives, incorporate bid strategies incorporating various tools and have begun to budget e-Marketing spend wisely. This being said, they are holding their e-Marketing managers to strict ROI goals and have begun to move budgets to channels which provide the best ROI.

With rising CPC rates, "black hat" marketing practices by both competitors and affiliates, utilization of bid management tools, not to mention branding concerns; organizations have taken a serious look at their inflated PPC and Affiliate budgets and have realized the affiliate channel is no longer an acquisition channel but merely a portal in which their portfolio customers are using to obtain free shipping, coupons and special discounts.

Smart e-Commerce organizations are performing cost benefit and life time value analysis of e-Marketing channels and many realize their internal paid search channels provide a higher ROI, a better customer experience and improved branding for the organization as a whole. I envision organizations scaling down their affiliate channels to a handful of top performers if not discontinuing the channel and moving affiliate spend to their internal PPC channels."

Those major multi-channel merchants need to fire the AM's responsible for the pollution of their trademarks and brands. Sever all ties to the network run AM firms, ruining any chance for real value add content affiliates playing by the rules, to earn a commission. Take their AM chores in house with a real responsible and empowered employee to weed wack rogue affiliates of any flavor.

Look at those pathetic spammy pages Jeff pointed out. Really look at them and then read again Kelly's observations. Then explain why some adept AM couldn't even justify paying for PPCSE traffic as a second URL promotion landing keyword traffic on http://www.ecomcity.com/fine-jewelry.htm ….after weed wacking the cookie stuffing and cookie washing clowns they have attacking that pages traffic.

My sentiments exactly Beth.

I'm sure there are *lots* of companies that had inadequately managed programs that are shutting them down because they've lost control of them.

That's as a result of poor planning in the first place and not defining the business rules upfront (or having competent management with experience in the channel in place who could guide them through the minefield).

Od course they're going to be inundated with all the "bogey" affiliates – it's not the fault of these affiliates (ethics aside). They weren't told they are not allowed! So inevitably there's a lash-back and the program is consigned to the dust bin.

The days of reading Shawn's (excellent) book and thinking you're ready to be Director of Affiliate Marketing are gone!

Affiliate/performance marketing is NOT declining – it's increasing in popularity (look at the growth in the networks and software providers) – but instead of being assigned to junior management or new hires with no experience in the field – it's being executed at a high level within organizations.

These companies turn to OPM's (like us) to develop and execute long term strategies to grow their performance channel.

So in short, "many" might be moving away from affiliate partnerships – but many more are moving towards it with well planned out strategies that benefit them and their affiliates.

[/end diatribe]

"Many are moving away from affiliate partnerships"

And you can say many are moving towards it. Bloomingdales will be starting one shortly at LS. Pretty big merchant. I see more popping up everyday. Affiliate marketing is still relatively new so there are kinks to be worked out. A lot of merchants still haven't learned how to work the channel effectively and for those that abandon it, you'll see a lot more coming back in the future. I'll be sure to post the ones that do

Sorry but I met with Bloomingdales on Monday and they're pretty wise for a Linkshare merchant. Wiser now that we spoke about the realities of affiliate marketing that Kellie points to.

I'll never understand why some in our industry start accusing those of us who suggest that direct response and multi-channel ROAS measurement is some kind of laughable pipe dream. Last I checked Nielsen was buying up companies that measure the Web.

These are mature businesses and they realize there is more to business than an over-optimised "lean to the bone" approach. There is a delta point beyond which over-optimisation is no longer a best practice.

No offence, Jonathan, but I would enjoy understanding the logic here. I'm not sure where you're coming from. Perhaps someone can give us over-optimisers an example of how learning the ROAS of one marketing channel versus another is, at some point, a waste of time?

Good discussion all!

The problem isn't the affiliate marketing model. Pay only when there is performance, can't get much better than that. The problem is we have a lot of people running affiliate programs that just don't know what they're doing, still learning. Still learning how to work the model. I login into LS and there are big brands galore. Big brands that have been there for years and will continue to be there and other networks. And usually with the bigger brands the affiliate program is just an afterthought. If they payed a little more attention, really studied the model, they can improve.

Imagined doom and gloom.

Pick some categories and think of the biggest merchants:

Office supplies, what comes to mind? Office Depot, Office Max, Staples – All have affiliate programs
Department store type merchants – Walmart, Target, Kmart, Nordstrom, JCPenney, Sears, Macy's ……
Sporting Goods – Footlocker, The Sports Authority, Finish Line, ESPN ………
Computers – Dell, Gateway, HP, CompUSA …….

Could do this all day long, pick a category, any category, big brand merchants everywhere with affiliate programs.

As far as PPC bidding you seem to think all that affiliates are doing is TM bidding. Merchants sell products. Millions of possibilities right there.

Affiliates and PPC. People spending their own money to market a merchant. And a merchant only has to pay if they succeed.
Affiliates and PPC vs. Inhouse PPC or SEM team. No contest. Why? Affiliates do PPC because they want to make money. So they're going to have some nice targetted campaigns.

As far as programs today. Of course they should look at it and make sure they're getting some value out of it. I don't see a problem with that.

I mean you can look at the stats for a few big brand merchants and try to come to some sort of conclusion. But there are thousands of merchants out there. I can pick a few merchants who are doing great. So I should come to a conclusion based on such a small sample? Of course not.

An oldie but goodie for Jeff:

http://www.clickz.com/experts/search/results/arti…

Basically what good marketers already know. Dominating the space.

Indeed, Trust…
I find that Fred's recommendations speak well for themselves. First, he has financial gain in mind when encouraging merchants to not allow affiliates to play in natural search.

Second, any merchants that believe his "various forces impacting an affiliate search marketing strategy" are realistic, unbiased and well thought-out… more power to them.

Merchants I come in contact with have progressed beyond embarrassingly simplistic success measures like Fred's… i.e. "the more real estate you own the more qualified clicks." Merchants, today, care about things like how much they're investing and what the return is — crazy, I know!

As for Kelly… well, there you have it. She won't give us a list of merchants. She, too, must be full of hooey because she won't put herself at professional risk. Such is life here in the realm of text-based discussions on the Web… a realm where it's easy to call someone a hoax, out-of-touch or a self-serving money grubber because they won't martyr themselves to prove a point that 90% of the industry already understands.

This is in no way saying ALL affiliates are "bad" but the handful of the bad apples can make many organizations question the entire portfolio all together.

Maybe someone will listen to you, Kelly. They sure tend to tune that out when I say it

Hey Jeff, you old over-optimizer, you!

You're putting words in my mouth….

"Perhaps someone can give us over-optimizers an example of how learning the ROAS of one marketing channel versus another is, at some point, a waste of time?"

I never said waste of time. I said you reach a delta point beyond which over-optimization was no longer best practice. To clarify – I related this only in the context of tightening up on affiliate program payouts.

I'm a great believer in comparing the ROAS of marketing channels – it's a business imperative to improve profitability!

We've just patented a new business methodology that allows us to actually do this to multiple affiliate networks running the same campaign in real time (now I'm going to have you seeing red I know, LOL).

I think that most of us are actually trying to say essentially the same thing.

My point on over-optimization relates to merchants that take a short-term view and try to squeeze every ounce of profitability out of the affiliate channel. Affiliate channels were not developed to be the most "lean-to-the-bone" & profitable channel. It's meant to be relatively risk-free to the merchant – and for that the merchant must be willing to pay a "risk premium". This is why we work with our merchants – big and small – to develop their acceptable marketing cost threshold. The ideal number they're happy to pay for acquisitions / sales or leads that'll let them sleep well at night knowing they've got a channel they can bank on for X (whatever their X might be)

We do our research upfront to set payouts, in line with market expectations, rather than try to ratchet profitability out of the affiliate program by tightening up on affiliate payouts once the program's running.

We do optimize ROAS by working on improving conversion & retention – as these can have as much if not far greater of an impact on the ROAS number as the amount you pay for the advertising.

Am I rambling or making sense? Jon

Don't give me names, give me the number of merchants you base your conclusions on. Out of thousands of merchants with affiliate programs, you look at ….

"Affiliate marketing is not relatively new"

Yes it is. Affilite marketing as we know it today has been around for only 10 years. And that was with only a few merchants. Some have just started recently, some are planning to start, so it is new to them. And like I said previously a lot of the problems since this is relatively new, is there is not much training on how to do this, so affiliate managers have been learning with lots of trial and error. And this will all get better as time goes on.

"the kinks that need to be worked out are how affiliates are finding new ways to work around or defy the guidelines in which smart organizations have clearly defined in the initial sign up process"

"Again, one of the major concerns with many affiliate programs revolves around the labor intensive process of policing affiliates and their "black hat" tactics of driving traffic and/or stealing traffic from other affiliates."

Yes, those problems need to be worked on. And yes the networks usually don't have a merchant's best interests at heart. So what do you do? Give up on the model? No, you fix the problems, you train your affiliate managers, hire some extra help.

It seems you guys like to focus on the negative but how about looking at some successful programs, merchants that love what they're getting out of affiliate marketing, write some on that. Why not? Other programs can learn from that since that's whats lacking. Knowledge of how to run successful affiliate programs where the merchant is satisfied with what they're getting out of it. Would you agree with me that there are plenty of merchants out there that feel that way?

And Jeff, just for me. I want you to prove me wrong that you're not all doom and gloom on affiliate marketing because that's what I get from reading all your posts over the years. Can you do this: Affiliate marketing is great for merchants and list some reasons why.

Deletions? Seems 2 posts disappeared. One was my last one, not sure whose the other was. Why.

Jonathan,

Yes I too see that my post was deleted for some reason, therefore, let me repost….

Beth and Jonathan,

Nice to hear from the both of you two as well!

Beth Quote:
"I'm curious, who is closing their channel?"

(Response): I would rather you contact me directly (Kelly@CuvaConsulting.com). In this day an age; I do not feel comfortable sharing actual company names in online forums.

Jonathan Quote:
"Affiliate marketing is still relatively new so there are kinks to be worked out"

(Response): Affiliate marketing is not relatively new and IMOP the kinks that need to be worked out are how affiliates are finding new ways to work around or defy the guidelines in which smart organizations have clearly defined in the initial sign up process. Again one of the major concerns with many affiliates revolves around the labor intensive process of policing affiliates and their "black hat" tactics of driving traffic and/or stealing traffic from other affiliates. This is in now way saying ALL affiliates are bad but the handful of the bad apples makes many organizations question the entire portfolio all together.

When organizations hire "Networks" with a revenue share model, they have an understanding their network is looking out for the organizations best interests. In MANY instances this is NOT the case. With the rev share "Network" model, affiliates and the networks are making revenue based off of referrals/conversions, therefore, is it REALLY in the network's best interest to police affiliates on the behalf of the organization which has trusted them to do so? I think not…The responsibility of policing is being placed on the shoulders of the internal Affiliate marketing manager who should be focusing on providing affiliates with the most up to date banners/promotions/offers to assist the affiliate in doing their job which is to driving converting traffic and increasing online acquisitions.

Again – I am in no way stating the Affiliate channel is doomed…just making a point that organizations are becoming more savvy with respect to their channels and hiring experienced e-Commerce managers who are proving to management they can provide a better ROI and improved branding via internal means.

Best Regards,
Kelly

We're being hit hard by spam bots this weekend in comments. We may lose a few real comments in the clean up, sorry!

Jonathan Post:
"It seems you guys like to focus on the negative but how about looking at some successful programs, merchants that love what they're getting out of affiliate marketing, write some on that."

Kelly Cuva Response:
I can understand your opposition to a "Corporate" position on the matter of Affiliate Marketing. There are always positives and negatives with various marketing channels – many of which I have outlined in my previous posts. Not all affiliate marketing programs are "bad" but making a point – organizations are evaluating marketing budgets and moving online spend to the best performing channels; which in many cases is the internal PPC channel.

As an experienced e-Commerce Marketing Manager with 13 years of "hands on experience" working for both large and small organizations and an MBA in e-Business, I am more than open to sharing my opinions and insight. However, I feel this on-line discussion has begun to be an unprofessional one in which I would rather have an off-line conversation to share my "Corporate" insight. Feel free to contact me off-line for further insight on this topic. I can be reached at Kelly@CuvaConsulting.com.

When did it become unprofessional? When I disagreed with you. And you still didn't answer on how many merchants you base your conclusions on. I can understand not giving the name, but the number shouldn't be a problem. Unless it proves my point that it's very small, then I can understand you not wanting to provide that info. Was it a big sample?

Let me try a very simple example:
Golf clubs. Lots of merchants sell golf clubs. Golf merchants, sporting goods merchants etc.

Let's pick one:
TaylorMade – R7

Now, this is all very simple. The goal of a merchant is to sell stuff. They start affiliate programs to help them sell more stuff. So as a merchant selling that TaylorMade R7 club wouldn't you want affiliates sending you those sales or would you rather those sales go to your competition.

Jeff or Kelly, explain that one to me.

Sorry… and, Jonathan, I'd like to point out something rather obvious but perhaps not fully appreciated. We (you and I) tend to work with different merchants (fundamentally). It's no wonder that we have fundamentally different perspectives coloring our viewpoints. Overall, I think your clients have more to gain and are able to take greater risk.

To this point, look at the success of companies like Overstock.com and, to a large degree, SierraTradingPost.com, BlueFly.com, Backcountry.com et al. Their success has been built on taking risk — affiliate marketing to a large degree. This cannot much be argued.

THERE! I've done more than tell you why affiliate marketing can be a gem… I've pointed at succesful companies employing the best practices that are filled with risk. Companies that may not have been successful if it weren't for their affiliate approach.

Let's pick one:
TaylorMade – R7
Now, this is all very simple.

I suggest to you that it's not that simple in the eyes of a bottom-line focused marketer. Not all marketers (most) are bottom line oriented. Most are paid to 1) move the needle and 2) spend budget. That's how they earn their keep and many don't care much to do more with stretching their budget.

Some DO.

Those that do are exploring Mercent, ChannelAdvisor, etc. OR they're using Overture or Coremetrics to understand ROAS across multipe strategies. They're witnessing channel cannibalization between affiliates and their search strategies (read: seeing wasted budget).

Yes, it can be simple (this is why I initially joined up with James Crouthamel to build an affiliate network called Performics… it was simple for marketers to say yes to). No, it cannot remain simple for if it does it invites competitors to do more with less (budget) and win based on the bottom line.

Also… let's not forget that certain company up in Michigan that's building a solution that caters to those not willing to ignore the spreadsheet. They see the demand too.

"We (you and I) tend to work with different merchants (fundamentally)."

We work with the same, but in different ways. I have the biggest brands out there to the smallest mom and pop.

As far as my club example, still have no idea what you're talking about. Are you actually against the example I gave? You think merchants shouldn't have their affiliates spend their own money to send traffic and sales to them? Do you think it's better if they sent it to their competition?

Jonathan… Okay, thanks for clarifying. I understand you point better now (mainly its context). It’s not so radical after all

>>>>>>My point on over-optimization relates to merchants that take a short-term view and try to squeeze every ounce of profitability out of the affiliate channel. Affiliate channels were not developed to be the most “lean-to-the-bone” & profitable channel. It’s meant to be relatively risk-free to the merchant – and for that the merchant must be willing to pay a “risk premium”.

In my experience merchants are not optimizing due to short term views; rather they’re doing this considering long-time issues (ROAS, customer LTV, etc.). That stated, I think we have a fundamental disagreement… that’s all. That being I am more inclined to suggest that nothing is risk free. To your other point, I am more likely to suggest that, for some, the inherent risks you describe as needing to be accepted (and I agree) are simply too much to bear. Example: Ross Simons has different cost/economic dynamics than Ice.com. This is why (as I’ve said in the past) Overstock.com can take risks that traditional retailers cannot. They younger the company the more they can participate without many of the risks.

Switching gears and without being combative… I’m only going to say this one time here at Revenews and I’m glad I’ve got the chance to do so (so thanks, Jonathan).

People like Jeff Molander and Kelly Cuva are constantly being painted as negative energy machines when, in fact, we merely DISCUSS some of the cons of affiliate marketing. Yes, we discuss them over and over. Yes, we discuss various parts of the model that don’t work perfectly. Yes, we quote merchants themselves (BirthdayExpress, Signals/Wireless/Art and Artifact/What on Earth) who are willing to come forward and discuss the issues that drive behind-the-scenes decision-making about affiliate programs. These decisions are driven by perceptions that stem from how merchants find themselves interacting with affiliates. Some drain the tub and lose the baby while others try and take a more balanced approach.

And, yes, we discuss them for our own personal gain!

People like us are experienced… just as MarketingSherpa’s staff and founder are. Candidly speaking (and this is not aimed at either Jonathan or anyone on this thread), I think that Kelly (very recently) and I (also very recently) have grown tired of being labeled and challenged in a way that seems less than productive (on blogs or boards). We are more inclined to have the conversations at conferences, on phone calls, in board rooms, etc. among people who don’t take our acts (discussing the intricacies of problems that exist) and paint us as biased evil doers who seek to destroy or create negative impressions of affiliate marketing.

We are experienced across multiple retailers. I suggest that anyone can be experienced by speaking with catalogers and/or multi-channel retailers. You can participate in conferences or conference calls (speaking of, why not click and give that one a listen… are they being overly negative or merely describing their affiliates?).

Jonathan, you’re rivaling that famous Porter entry with all these comments. Congrats!

Jeff, you've found me out! The only reason I'm keeping this thread alive is to try and outdo Wayne

Jeff, to your point made to Jonathan (trust): -that's not me by the way – at least I don't think its me but I'm very confused by now LOL.

I value your and Kelly's dialogue – it may not be popular with everyone but it certainly is worthwhile listening to and gives a valuable insight into what (some) big business is thinking. I believe that was what Revenews is supposed to be about… so everyone – let's keep it professional

Is affiliate marketing the panacea? No, I don't believe it is. But for a significant number of merchants it can add value. I do know that amongst my client base it's a viable part of their strategy. Should it be the only strategy or an absolute must for EVERY company to launch one – of course not!

As you said, developing a inclusive strategy is more intricate than just slapping an affiliate program into a client. It's about determining the target market & how to reach them, financial & brand risk model, budget, required reach, ROAS requirements, consumer buying behavior, relative competitve strength etc. (just to name a few).

I advocate ROAS measurement across all channels as it enables better business decision making. As a company that "sticks to our knitting" for now we're only however focused on managing and measuring the performance marketing aspects of our clients campaigns, where you've transitioned to a higher view within the organization.

I think that in all likelihood there are FAR MORE similarities in our approaches to business consulting than opposing views. We benchmark PPC, SE, media buys, hybrid deals and affiliate marketing against each other with our ForgeInsight business methodology. (more about that in a totally new article I think LOL)

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Just to stick it to you one last time though

You said "No, it cannot remain simple for if it does it invites competitors to do more with less (budget) and win based on the bottom line."

Would you care to expand on this please Jeff. I don't want to shoot my mouth off at one statement before understanding the context within which you wrote it.

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Hey, maybe we should hold a conference call on this subject, get Jim to moderate it, put a firm agenda together and actually discuss this in more detail – I'm loving it – but then again I don't get out much…..

You said "No, it cannot remain simple for if it does it invites competitors to do more with less (budget) and win based on the bottom line."

In brief, those who are interested in measuring ROAS across marketing channels (and doing the math rather than just assuming that affiliate marketing is the most effective channel because they just assume so or based on its premise of "pay only on performance" — which is completely false e.g. cookie stuffing, e.g. adware, e.g. multi-tiers of affiliates with affiliates http://www.clickz.com/news/article.php/3605991) will win based not on number of transactions or leads achieved but through profit dominance.

As Webtrends and others continue to report, MOST marketers don't practice measurement beyond CTR and conversion let alone the efficacy of a keyword (all the way down to its ability to turn inventory on SKU's), % of new customers through affiliates or ROAS across multiple marketing channels).

What I'm suggesting is that those who use less (budget) to do more (marketing, hence sales/leads) will win. Any fool can blow through a budget and move the needle. Hence, any fool can use an affiliate program to generate leads/sales. It takes brain and man/womanpower to do it in a profitable way… and I respectfully disagree with those who suggest that we can assume profit (don't need to track beyond clicks and conversions; don't need to eliminate adware and/or tiers of affiliates with affiliates, etc.).

Finally something I can agree with you on:

"which is completely false e.g. cookie stuffing, e.g. adware, e.g. multi-tiers of affiliates with affiliates http://www.clickz.com/news/article.php/3605991) will win based not on number of transactions or leads achieved but through profit dominance."

Step 1, keep them out of your audioblogs.

Trust:
iGive isn't adware. All downloads are not created, distributed or used equally although TopMoxie seems to enjoy setting them up equally — in that their clients don't always understand how they operate.

Then their clients shouldn't distribute something they don't understand how to operate. Of course not understanding might be considered blame shifting. I don't know how it works, it's not my fault, but please download our money saving software so we can target the merchant domain with money saving deals that you might already have from the newsletter you just received from the merchant. General statement towards adware. Don't see the value they bring to merchants.

Jeff – to your comment on what I can only define as "finesse vs. brute force marketing spend"

I've sat inside a business where for 2 years I've been on the other end of the spectrum. My team spent 900K – $1.2M monthly driving acquisitions across paid media, search, adware, affiliate, offline, CPA TV and a number of other channels.

I understand and agree with your point the ROAS optimization and "fine edge of the sword" approach, doing more with less.

In my case however where I was tasked with essentially and acquisition channel and we could clearly identify customers for life very few of these post-sale cannibalization problems occurred.

Our retention marketing and acquisition channels worked well because our business methodology enabled us to identify and flag customers for life. Perhaps that should be a starting point for more businesses.

Furthermore, again only speaking from personal experience, we definitely wanted to spend our money wisely – but we never lost sight of the fact that acquisitions drove initial value in the business.

After extensive testing we adopted the "marketing tolerance level" that I so love to speak of and which I've found to work well with many of my clients.

We'd refine and optimize constantly to drive maximum value across all the channels – but we made sure that we never ratcheted to the point where we were unable to acquire new customers competitively.

EDIT:

but that's only one example – I understand that there must be as many business models as there are online businesses – which is why I love having this conversation!