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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?

I had the pleasure of moderating three roundtables at the Shop.org Marketing Workshop on “Avoiding Analysis Paralysis: Making Sense of the Numbers”. As the founder of Coremetrics, spending over seven years deep in this topic, it was nice to jump back into this subject matter. Of course, we do spend a lot of time at Bazaarvoice on Web analytics as we are partnered with Coremetrics, Omniture, WebSideStory, and WebTrends to prove out the value of ratings and reviews on the site as well as in marketing efforts. I referenced many of the lessons that I taught at the first Shop.org Boot Camp back at the Annual Summit in 2005. The surprising thing was that many of the lessons were received as positively as they were in 2005. I was a little concerned as I started the roundtables that my material would be “old hat”. But instead I had three very engaged roundtables. And I was encouraged to make this presentation available to all of the members again, so here it is: click to download it.

If you have any questions about this material, please ask them here. That way everyone that reads this blog will benefit.

For my fourth interview in the Word-of-Mouth Wisdom series, I decided to tap two of the smartest people I know in the field of marketing. Dr. Peter Fader and Dr. David Reibstein both teach marketing at The Wharton School, where I was fortunate enough to earn my MBA. Both have been friends and advisors ever since graduation, and somehow I convinced them to invest in Bazaarvoice!

Pete is well known on many levels. He was helping CDnow run analysis back in the pre-boom times. He has been very outspoken in the age of digital music, advising music companies on how to market in these rapidly changing times. I remember him best as my Markstrat professor, one of the better MBA classes I had the pleasure of taking.

Dave is also very well known. He consults for companies all over the world. He served as the Executive Director of the Marketing Science Institute. And few know him as the co-founder of BizRate, where he served on their Board of Directors from its inception to when Scripps bought the company for $525 million in cash almost two years ago.

Read the Entire Post >

Earlier this year in February, I wrote about Blockbuster vs. Netflix. The main word-of-mouth lesson learned in that post was one of “ bad profits.” Netflix simply took Blockbuster’s negative word-of-mouth regarding late fees and modeled their entire business model and ad campaign around it - “the end of late fees.” It worked, and Netflix took off like a rocket. As I wrote in February, Netflix was worth twice what Blockbuster was at the time. That situation hasn’t changed - Netflix is worth $2 billion today while Blockbuster is worth $1 billion (they are both trading higher due to the more robust stock market we are in). “Bad profits” create an opportunity for entrepreneurs or established companies to come along with a competing service that is highly disruptive.

Speaking of bad profits, I was especially intrigued this morning to read about my friends at 1-800-FREE-411 (Jingle Networks). TechCrunch reports that 1-800-FREE-411 has already received 100 million 411 calls! It has taken over 3% of the $8 billion 411 market. I know the CEO of this company (he founded Flycast with a fellow Wharton MBA graduate from my class), as well as their early investor Josh Kopelman, who is also an investor in Bazaarvoice and the founder of Half.com. I consider these two some of the smartest people I am fortunate enough to know. This is another stunning example of bad profits creating an incredibly huge and disruptive market opportunity. 1-800-FREE-411 has the easiest marketing slogan I have seen in a long time - everything you need to know is right there in the phone number. To learn more about what created this opportunity, check out Josh Kopelman’s great blog post.

There are so many recent examples of bad profits in action. Think of the incredibly disruptive Skype, which yesterday had over 8 million users online. The negative word-of-mouth from exorbitant long distance fees paved the way for Skype’s success. And, of course, everyone knows by now that eBay bought them for $2.6 billion.

Where are the bad profits in your industry and how can you capitalize on them?

Do you have any bad profits yourself? One example I can think of in retail is the difficulty of returns when you have a bad experience with a product. Costco capitalizes on that by providing unlimited returns on all items (i.e. buy a TV, save the receipt, and you can literally return it 2 years later if it breaks). Their only exception is for computers - there is a 6-month policy on those. I have been tracking Costco’s success for years to see if this incredibly customer-friendly policy would hurt them. Quite to the contrary, Costco has thrived as a result. I encourage you to read my friend Gary Stein’s blog for more analysis on Costco.

If you are a Bazaarvoice client, we suggest you measure your word-of-mouth promoters and detractors with our Net Promoter service. We haven’t promoted it as well as we should (we’ll change that), but it is truly powerful and will illuminate any potential sources of “bad profits” and word-of-mouth detractors.

And now enjoy the free 411 calls!