Shop.org Blog

Fundamental elements of the customer-marketer relationship are changing faster than retailers can adapt. In fact, they’ve already changed! While it seems obvious most of us are only beginning to appreciate something important: How customers interact via the Web with a brand is an experience.

Ok… seems obvious but let’s frame it in a new light that may strike you as a little odd:

At a very high (basic?) level Web retail is not about clicks, conversions, optimization… it’s not about the numbers or the metrics. It’s about your ability to create hunger, desire or capitalize on a human being’s latent intent. It’s about stimulating, comforting, rescuing and helping (etc.).

The Web is inherently interactive and increasingly social. This sounds trite and simple but it cannot be under-stated.

Recently, I suggested that authentic digital experiences must be the future of online customer acquisition and challenged the affiliate and search marketing industries to step up to the plate. This week I’m qualifying the opportunity a bit more since some are a bit skeptical. I’m also explaining why it’s urgent to start making change.

Retailers are continually hearing the mantra: “Participate and have a conversation with customers.” Why? It’s because of this newly realized element of interactivity among Web users. The power of this element is breathtaking when one considers its raw EXPERIENTIAL power… the Web’s ability to make humans feel a certain way.

According to Keller Fay Group (2008), Americans have 3.5 billion brand-related conversations per day. With a population of 300 million, that means the average American engages in over 10 such conversations per day.

We know that 8 out of these 10 is likely more influential than any advertisement or paid sponsorship. Why? Because nearly 80% of consumers trust recommendations from friends, family, and trusted sources over any form of advertising.

What are you doing to foster such conversations under your umbrella?

Perhaps you don’t see the opportunity clear enough. You may ask, “why should I bother to foster conversations?”

Here’s why: By providing customers and/or prospects with access to trusted recommendations (and other forms of authentic, relevant, engaging content) marketers stand a better chance of winning their business.

Customers are finding new ways to participate in various online activities. Sure they still love search, but they’re rapidly finding more social and participatory elements such as product reviews, product design suggestions and a new thing called “crowdsourcing” (more on that in weeks ahead) to be helpful and even fun. Remember fun? It’s powerful stuff!

The world belongs to companies that can…

1. Identify the right micro-verticals where consumers engage deeply
2. Activate new or existing consumer communities that welcome their participation
3. Make the ‘network effect’ work for them through syndication & aggregation
4. Think the way industrial designers think about ergonomics – in our case it’s form factors of media consumption

So says Jeffrey Rayport, founder of Marketspace LLC.

So how can one become one of these companies?

As new customer behavior patterns emerge new marketing practices are needed to capitalize on them. We need to create them. Customer acquisition and retention cannot survive on traditional strategies like affiliate and search marketing alone. Intercepting customers during buying processes is no longer enough.

What are these new strategies? Some call it “conversational” marketing. Whatever name you give it, this emerging practice area is all about joining in with customers – listening to them and interacting on a more intimate level.

Quite literally this translates into socializing with customers and prospects – a skill set that is a bit foreign to most marketing departments (beyond traditional market research). After all, we’re not formally trained in good listening skills or prone to making altruistic gestures. Rather, marketers expect measurable return on investment (ROI).

Some retailers will be satisfied with following the crowd, others blaze trails. This begs the question: Can you afford to wait to implement pioneering and innovative digital marketing strategies, or will you help lead the charge?

The best way to answer this question is to make sense of and prioritize these emerging, digital acquisition and retention strategies. Your decision should ultimately be based on your market’s active use of digital technologies. If a social, experiential marketing approach is right for you, begin testing now. Eventually you can vet strategies to decide which are worth continued investment.

Before all else, the key to success in today’s digital, multi-channel shopping world is a bold, new mindset. This way of thinking is what feeds new decision-making and creative strategy development processes. I admit… I’m making it sound pretty easy so we’ll get into the details on HOW to do actually dip toes in the water (safely) and experiment with social marketing in weeks ahead.

Successful, Daring Marketers are Focusing on Authentic Forms of Persuasion to Win & Keep Customers.

Customers today have access to so much content — and have so many ways to gather news and information — that the likelihood of your corporate message penetrating the clutter is virtually nil. Instead, if you engage the audience in a conversation and learn what the social community is looking for and concerned about, you might be able to persuade them to hear your message.
In other words…

“There is no market for your message.”

David Weinberger at the 2007 New Communications Forum

Let’s take a big step back for a moment and realize how selling on the Web is quickly becoming less about marketers’ supply meeting up with customers’ demand, and more about customers themselves actively bringing their demand toward supply. In fact, they’re CREATING supply in many cases… and taking action to monetize that supply in a niche community setting.

Given the Web’s increasingly social nature, today’s customers are bypassing “interceptive” strategies like search and, yes, affiliate marketing. No, affiliate marketing isn’t dying or threatened but it IS challenged to change. How? Affiliates are challenged to do more than just shuttle traffic and get ‘in between’ demand and supply. Affiliate networks are challenged to house more than just ‘helpful interceptors.’ Marketers expect networks to provide value-added resellers. Or as blogger, David Lewis refers to them, “value added pre-sellers.”

Getting back to the consumers… they’re increasingly choosing a variety of non-traditional paths to discover products and services – faster and easier than ever before. Says Jupiter Research:

Social and community sites affected the purchase decisions of 51% of online shoppers aged 18-24. This is far beyond any other age group, which averaged less than 26%. A total of 36% of online shoppers influenced by social/community sites said they buy offline even though they use online social/community sites to make their decisions.

So what’s a savvy marketer to do? The answer may seem radical. Today’s marketers must help customers find, consider and purchase products and services by creating authentic digital experiences. That’s the new twist – and it’s not just a load of hyped-up social media spin.

This new paradigm will be fueled by the recently announced Data Portability Working Group. This consortium of unlikely partners (including Plaxo, LinkedIn, Google, Sixapart, Facebook and Yahoo’s Flickr) are banding together to ensure users of the “social Web” can have power over the data they’re putting out there. By making sure social media sites and services are interoperable the user experience becomes simple, the social information portable and shared. It’s the first step toward providing marketers with a serious “social marketing platform.”

How exciting is that?!

You’ve likely read that New York Governor David Paterson has signed legislation that will require out-of-state Internet merchants who have on-line affiliates located in the state to collect sales tax from customers there.  The requirement, which goes into effect on June 1, was included in the state budget passed by the New York Legislature this April.  The tax would be turned over to New York State and is expected to generate $50 million a year in added revenue.

This blog post is intended help online retailers better understand online retail tax and the issues related to this development.

Summary
States are eager to collect tax revenue from out-of-state sales - this is only being amplified in today’s down economy.  Whether you support the collection of out-of-state sales tax or not - the New York law, which will likely be emulated by more states, is a worst-case scenario.  Not only will all retailers now be required to collect sales tax, but the cost burden for the collection process rests 100% with retailers.  The Streamlined Sales Tax Project, which Shop.org’s parent organization, the National Retail Federation, supports would reimburse all retailers for the cost of collection.

Background and History
Under a 1992 U.S. Supreme Court ruling, merchants cannot be required to collect sales tax from a customer in another state unless the retailer has a “physical presence” in the customer’s state, usually defined as a store, office or warehouse. With more than 7,600 state and local sales tax jurisdictions, each with varying rates, lists of taxable items and definitions of items, the court reasoned that a retailer otherwise couldn’t be expected to know how much tax to charge.

Streamlined Sale Tax (SST) Takes Shape
NRF and a number of state governments responded to the 1992 ruling by drafting the Streamlined Sales and Use Tax Agreement. The spirit of SST is to make collecting sales tax as easy and inexpensive as possible.

Implemented by about two dozen states so far (but, not by New York), the agreement sets uniform definitions of taxable items, provides retailers with software and databases to tell them how much to charge, and sets up mechanisms to facilitate collection of sales tax across state lines. Legislation is pending in Congress that would let states that participate in the agreement make collection mandatory regardless of physical presence.

When the federal SST law passes, SST will offset any burden by reimbursing ALL sellers for the cost of collection, require NY to simplify its sales taxes before it can force out-of-state seller collection, provide protection from aggressive audits, eliminate penalties for honest mistakes in collection, and eliminate nexus as a standard to overcome the constitutional hurdle.  Yes, SST will take another year or two to fully achieve, but the long-term results are reliable, fair and better for retailers.

How the New York Law Effects SST
The New York law, which was supported by bricks-and-mortar bookstores who feel that the current sales tax collection system puts them at an average 6-10% non-negotiable price disadvantage, takes the position that affiliate sellers located in New York constitute a “physical presence” on behalf of the out-of-state seller.

Some on-line retailers, Amazon.com to start, have filed suit against New York on the grounds that an affiliate does not constitute a physical presence and that the New York law would therefore violate the 1992 Supreme Court decision.  We expect to see more states take this approach – particularly in a sluggish economy when states are seeing revenue sources such as property taxes shrink.  This will lead to more legal challenges.

NRF and other supporters of sales tax simplification are concerned that the New York law’s emphasis on physical presence could undermine efforts to make physical presence a moot point.

While NRF sees this as an interesting approach, New York’s expansion of their physical presence definition of nexus to include “affiliates” – a term left undefined in the budget bill – is a short-cut attempt to generate revenue that provides no protections for sales tax collectors, contrary to the SST effort.  A quick comparison between the New York Approach and SST to consider:

The New York law is being challenged in court on constitutional grounds, and while it may generate some new monies for the state, it will be costly to collect, and New York auditors will have to be aggressive to get it.  By expanding the physical nexus term, the law radically expands the authority of the NY sales tax regulators.  It provides no simplifications to the sales tax system, and no protections for businesses either NY-based or out-of-state.  Likewise, there is a big question about how much if any new money this will raise for the state, so what net gain is there for in-state retailers or the NY budget?

No one likes taxes.  Not paying them, and certainly not collecting them.  But whether you like taxes or not, they are necessary funding source to provide fundamental public services.  So assuming sales tax collection for all sellers is not a matter of if, but when – perhaps it is best to focus on how it is best done.  NRF believes that SST is the better approach to fair, burden-free tax collection for all sellers.

Maureen B. Riehl is Vice President, Government and Industry Relations Counsel for the National Retail Federation.

Should your company be involved with multiple affiliate networks? Why or why not?

If so, how does it work technically — from a tracking, reporting and optimization perspective?

I recently asked these questions to a group of veteran online affiliate marketing experts and got some surprising answers. Some were strongly ‘pro’ and others were firmly ‘con.’

One participant ended up confessing, “I wouldn’t advise it… in my personal experience and from what I’ve seen with merchants that I have worked with… it’s not worth the extra effort. It’s not worth the dilution of your reports.”

In on the discussion were:

Donald Schamber, Online Marketing Manager, Vistaprint.com
Carolyn Tang, Client Services Dir, Shareasale
Jonathan Miller, Founder, Forge Corporation
Jamie Birch, Dir, Affiliate Marketing, Converseon (formerly of Coldwater Creek)
Chris Sanderson, Managing Partner of AMWSO

I’m pleased that some of the most experienced affiliate-focused retailers and industry veterans around participated. Some described their successes while others their failures. The conversation was part of a live Webinar this month and had some valuable take-aways.

Notably, the group did not include the affiliate/publisher-side perspective which is an important one and leaves room for discussion. That stated, we did briefly discuss the recent entrance of AffSpy.com — a tool-set aimed squarely at affiliates but one that sheds serious light on the wasteful spending of some advertisers leveraging multiple networks.

The Issues
Simply stated, there are two primary concerns for retailers when swimming in multiple affiliate network ponds. These are:

1. Proper attribution of the sale:
   Avoiding duplication of ‘counts’ or ’scores’ among Web marketing channels (affiliate, search, email, etc.)
2. Proper payment:
   Avoiding duplicate payments to affiliate networks (in scenarios where customers ‘touch’ multiple affiliate sites or cookies)

ShareaSale’s Carolyn Tang, who ran the Orbitz.com affiliate program for a few years, suggests that Web marketers are maturing as they adopt Web analytics packages.

“In the past the emphasis has definitely been on duplicate reporting… on (avoiding) having to pay multiple times on a single transaction. Obviously, this is not very cost-effective,” says Ms. Tang.

Yet as retailers put more analytics and reporting tools in place, she says they’re focusing more-and-more on correct attribution of the sale. In their quest to understand (tactically) which marketing strategies are working better than others it’s becoming very important to ’score’ each performance-based marketing channel (indeed, campaign) properly.

Proper Channel Attribution
Ms. Tang warns that retailers could be attributing the transaction to a completely different channel. As an example, although a sale or lead came in from an affiliate the Web analytics package may attribute it to a search campaign.

“Many times those tools don’t necessarily track correctly,” Ms. Tang says.

“They will attribute a transaction to a single marketing channel but because of the way the technology is set up it may or may not attribute it to the correct channel. So I think whereas before the concern was overpaying on a single transaction, now it is on actually attributing the transaction to the proper channel.”

Indeed, this squares with my recent discussion with Alan Rimm-Kaufman regarding how retailers should be tweaking affiliate marketing programs to zero-in on incremental sales.

On the positive side, Ms. Tang says, “There are definitely fixes for it. Many of our merchants are using Omniture and we’re able to work with tools like that… but what’s happening is that a lot of merchants don’t realize that when they do put these tools in place they do need to make tweaks to those tools. You can’t just use it ‘out-of-the-box’ to automatically (correctly) detect everything.”

C’mon In… The Water is Fine!
Those suggesting that marketers SHOULD jump in multiple ponds are heavily invested in the strategy. Vistaprint’s Don Schamber suggested that he could hardly keep track on the number of cost-per-action (CPA) affiliate networks he participates in. That stated, his approach is a sophisticated one taking into account typical challenges including proper channel/strategy attribution (and potential double-payment) in scenarios when one customer “touches” multiple affiliate sites when making a single transaction.

Vistaprint uses a proprietary, home-built technology solution to keep tabs on everything. Of course, that’s a rather luxurious position but one that’s worth considering.

What You Need
Forge’s Jonathan Miller is gung-ho about swimming in multiple CPA network ponds and has built a niche business around serving the needs of retailers looking for a similar technical solution (to the attribution and payment issues).

Mr. Miller suggests that before launching a multi-network affiliate program, retailers must be sure that:

1. Their shopping cart can handle multi-network referral sources without duplicating affiliate pixels / tracking
2. The networks’ tech platform (tracking and reporting technology) meets your business requirements
3. The platform allows you to download reporting for use in your own business intelligence (i.e. analytics) system
4. You have access to advanced business intelligence tools to collate and analyze data

As well, Mr. Miller suggests that retailers must have a focus on synchronizing internal and external reporting engines. Not a trivial task, indeed, but mandatory for success and critical on measuring the ROI of affiliate networks themselves on a network-by-network basis.

AMWSO’s Chris Sanderson shared remarkable insights. He believes “in-house” (proprietary tech platforms) can be attractive to affiliates once you’ve built a track record on a network yet, “The ’see if it succeeds and move’ concept is flawed,” says Sanderson.

“If you succeed you don’t move. You expand.”

“Affiliates do have network preferences and networks they refuse to work with,” says Sanderson. “Variety can help.”

He also believes that participating only on smaller networks can mean missing the bigger affiliates. Sanderson also recommends auditing of sales for proper attribution and payment duplication is a must.

“Split commission rather than ’selective’ cancellation (of commission) is a good option.”

Yet Ms. Tang seems to disagree on what drives the affiliate loyalty-to-networks issue suggesting, “… the larger affiliates, that are not adware-oriented, don’t care which network a merchant is on. They want to work with a merchant. The technology, the tracking, doesn’t really matter to them.”

In fact, this has been my experience as well but I sense that it’s a very retail-focused (multi-product selling, brand-centric) perspective that doesn’t apply widely across other kinds of marketers.

Proper Affiliate Payment
Yet the ‘proper’ or ‘best’ affiliate payment scheme is a contentious and confusing issue — the proper payment model in such a scenario. What’s best for whom, when and how? My posing the question resulted in more questions than answers.

“Is it right to say that the coupon-code affiliate should get the commission even though the content affiliate did the selling?” asks Ms. Tang.

“But then again, the coupon affiliate is the one who actually may have been that last little push to get the consumer over the final hurdle. You can’t really know what the consumer is thinking when they made that purchase. So is it right for the merchant to assume which affiliate to give credit for?”

What do you think? What’s the best affiliate payment model in a multiple-network scenario? For that matter, what’s the best affiliate payment model when considering the ‘incremental sales and affiliates’ issue?

Congratulations to all of the online retailers who took advantage of Cyber Monday this year.  It was only a year ago that the term was added to the vocabulary of the holiday season.  In 2006, armed with the knowledge that this term has caught on to describe the kick-off of the online holiday season and the online equivalent of Black Friday, a number of retailers across the country took advantage of this industry development to use Cyber Monday as a platform for launching their online holiday campaign.

And, Shop.org is very proud to have launched www.cybermonday.com as a central location for Cyber Monday and holiday promotions from nearly 400 merchants.  Thanks again to Mall Networks for building the site for Shop.org.  With cybermonday.com, Shop.org gets into the business of affiliate marketing.  All of Shop.org’s proceeds from this site go to our Ray M. Greenly Scholarship Fund, which provides tuition assistance to college students seeking e-commerce careers.  To date, we’ve raised more than $100,000 for the scholarship fund!  I couldn’t be more proud of such an innovative way to honor the memory of Ray, a Shop.org team member for nearly seven years and who served as Shop.org’s VP of Research and Membership until he passed away in September 2005 from cancer.

Shop.org’s involvement in Cyber Monday has been an interesting ride.  When we coined the term last year, the media response was nothing like I’ve ever experienced.  Front page stories in the Wall Street Journal, New York Times, Washington Post as well as extensive coverage in national TV news.  As a big fan of The Daily Show with Jon Stewart, the high point for me was seeing an hilarious bit about Cyber Monday by “Senior Retail Analyst” Rob Corddry.  Although, as they say, no good deed goes unpunished.  We continue to see chatter describing Cyber Monday as all hype.  And, some reporters and bloggers are still attempting to debunk the myth that Cyber Monday is the biggest online shopping day of the year – a claim that wasn’t made by Shop.org or any other credible industry research firm.

In any event, hopefully the Cyber Monday media coverage helped energize the kick-off of the online holiday shopping season.  There are only a few shopping days left before Christmas, but based on data I’m seeing from the Shop.org/BizRate Research eHoliday Mood Study and other sources, it’s safe to declare that the 2006 online holiday season was a smashing success.

Good luck with the rest of your holiday season.  And, please don’t forget to tell your friends, family or anyone else to start their holiday shopping (or redeem their gift cards) at cybermonday.com and help raise money for a good cause.