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Becoming a Segway Gypsies, Inc.
Affiliate Why Affiliate with Segway Gypsies,
Inc.?
For online merchants, an affiliate sales channel is one of the most cost-effective sources of customer acquisition. The affiliate channel achieves its low cost of acquisition because it is a pay-for-performance model -- if an affiliate doesn't generate sales, it represents no cost to the merchant. According to Jupiter Communications: "Among merchants that do have affiliate programs, 17% of total sales, on average, are driven by affiliates."
Affiliate sales channels evolved when merchants began applying lessons they had learned in the brick-and-mortar world to the online marketplace, but not before they had made a few mistakes. When merchants first established an online presence, they tended to forget the old retail adage that "there are three secrets to successful selling: location, location, location." The merchant established a single, monolithic store and assumed that people would flock to it. When this failed, they tried to advertise their way out of trouble. Unfortunately, advertising can't overcome the location issue any better online than it does in the real world. Studies by Forrester, Jupiter, and Nielsen show that by the time a user has been online six months, they have largely stopped using portals and have established regular traffic patterns on their favorite sites. In essence, they have created a virtual neighborhood for themselves consisting of sites that relate to their interests. In the real world, if a store is located 50 miles from your home, no amount of advertising will make you a regular customer of that store. Interestingly, just as in the real world, it is very difficult to shift online users outside their regular traffic patterns. The challenge to merchants is therefore to find a way to sell goods on the hundreds of thousands of sites that their online customers visit.
A merchant-branded affiliate sales channel is the equivalent of a real-world direct sales force -- a store or a salesperson in every community. Online, this means that merchants display goods and services on Internet sites. Users therefore have the opportunity to purchase goods and services within their normal browsing patterns. To better understand the model, let's use an example. Joe Smith loves skiing and snowboarding, so he creates a site that reviews skiing sites, equipment and techniques -- JoeInTheSnow.com. The site gets a regular following. Meanwhile, barnesandnoble.com sells books about skiing and travel, Travelocity.com sells travel packages, and Fogdog Sports sells skiing and snowboarding equipment. Note that none of these merchants' ad agencies would have found JoeInTheSnow.com, much less advertised on it. However, after signing up with these merchants' affiliate programs, Joe can partner with these merchants to sell these goods next to the relevant content on his site. In this way, barnesandnoble.com, Travelocity.com and Fogdog Sports respectively can create "local" storefronts on Joe's site, right in the path of users' virtual foot-traffic. This model works with all sizes and types of sites, from the top 50 sites on the Internet to sites like Joe's. One of the most important aspects of the affiliate sales channel is that the sales opportunity catches viewers in context. Goods and services that relate to the content are displayed at the moment viewers are most likely to make a purchase. The skiers and snowboarders who visit Joe's site are already highly qualified prospects by virtue of visiting the site. Add to this the contextual placement of goods next to related content and you have an extremely targeted opportunity. Contextual selling is an important reason that the affiliate sales channel has between two and ten times the sell-through of online advertising. By the way, Joe is happy -- he makes up to eight percent on books, 20 percent on sporting goods and gets a bounty on travel packages -- all for placing a few links next to his content.
Note that all affiliate sales channels are not equal. When you start to build an online affiliate sales channel, you will face a number of choices. Key decisions will include the channel model, the underlying technology and the services necessary to support the program. In order to capture the 25 to 35 percent of online sales that your affiliate sales channel can represent today, you must create a merchant-branded affiliate channel. The merchant-branded model means that your affiliates will be immersed in your brand whenever they interact with you. The increased affinity for your brand and loyalty to your program that this fosters in your affiliates allows you to build a truly dedicated, direct online sales channel. So called "network models" are the online equivalent of a manufacturer's representative. They do not allow you to build affiliate loyalty, and hence represent only 5 to 7 percent of online sales, just as rep channels do in the real world.
The right technology matters, too. You need to be sure that you can understand and respond to all of the effects the online marketplace will have on your business. A full retail decision support system like Be Free's BFAST™ should be at your fingertips. Also, even though it is invisible, your underlying technology should include an abstraction layer. This means your affiliates don't have hard-coded links to specific pages on your site. This allows you to make whatever changes you need to make to your site, including completely re-architecting it as often as necessary, without interrupting your order pipeline. Where does this leave online advertising? Right where it should be, fulfilling the roles that it very effectively accomplishes in the real-world: branding and promotion. Online branding campaigns are effective, particularly on the highly trafficked sites. New studies by Nielsen have shown that users who frequent portals have typically been online less than six months and are receptive to online branding. Additionally, the interactive nature of the Internet means that promotional advertising can be even more effective because users can respond to it in real time. Advertising can be made accountable online in ways impossible in traditional media. Services like Be Free's BFIT™ work on the back end of whatever means you use to deliver your online advertising (an ad network, ad-house server, or a mix of the two) and track the ads through to sale, giving you a true measure of accountability. This means that you can determine which of your advertising dollars are working for you and which aren't. Good advice for any merchant considering moving online, or already there: Pay only for performance! First, build a merchant-branded affiliate sales channel so that you can cost-effectively acquire customers. Second, track your branding and promotional ads through to sale so you won't waste a dime on non-performing ads
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Copyright
© 2004 Segway Gypsies,
Inc. All Rights Reserved. |
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