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As well as being one of the UK's super-affiliates, Keith Budden is a partner in Affiliate Healthcheck, a consultancy offering affiliate programme performance reviews, training, recruitment and assistance with network selection.
We asked him for an affiliate's perspective on some of the main issues around affiliate marketing programmes.
What is a super-affiliate, and how do you become one?
I have to confess that personally I hate the term ‘super-affiliate’ – it conjures up visions of affiliates wearing capes and their underwear outside of their trousers. Not a nice thought!
But in the generally accepted parlance, a super-affiliate is one of the 2-15 affiliates in a typical programme that are contributing towards 90%+ of the sales within that programme.
If you think about this logically, of course, it may well mean that a super-affiliate to one merchant, or even within a particular sector, is a normal (or even non-productive) affiliate for other merchants – so in my mind a true super-affiliate is someone who is a super-affiliate for more than one merchant and preferably more than one sector.
I think for merchants, super-affiliates are both an opportunity and a threat. The opportunity is of course that they can bring substantial incremental sales to your business. The threat is that loyalty is not a key point to many super-affiliates and if a competitor makes them a substantially better offer, or you do something which knocks their sales, and hence their profitability, the chances are they will vote with their feet and walk to another merchant.
Now if you’ve got 15 super-affiliates then that’s not too bad, but if you’ve only got one or two on your programme and they walk, the whole viability of the programme could be thrown into question.
So what’s the answer? Well, I would advise all affiliate managers (whether in-house or third party) to work towards building the ideal affiliate mix, which to my mind is 50% of sales from ‘super-affiliates’, 20% from ‘mid-tier’ affiliates and 30% from ‘hobbyist’ affiliates.
Clearly, therefore, the art is to nurture your affiliates at all levels. Of course, you need to keep your super-affiliates sweet but if you can get your affiliates who are making two sales a month to make five sales a month (and you’ve got 100 affiliates at that level) then you’re suddenly making an extra 300 sales a month, you’ve got a happy band of affiliates and you are helping more hobbyists become mid-tier, and more mid-tier affiliates become super-affiliates.
Incidentally, if you have a tiered commission structure, achieving the ideal mix can also lower the overall cost per sale of your affiliate programme.
Are super-affiliates a competitive threat to affiliate networks?
Potentially, as the market consolidates, yes - I believe they are. Let’s remember that for most affiliate networks the core of their income is the override (typically 30%) that they charge on affiliate commissions.
So if you have a programme that generates, say, £6m in commissions and £5m of that comes via two super affiliates, if those super affiliates do a direct deal with the merchant then that’s a loss of £1.5m to the network.
Therefore, I think networks increasingly need to work harder and smarter at keeping both merchants and super affiliates on board – and that means they need to be shown to add value to the tri-partite affiliate, merchant, network relationship.
Unfortunately at the present time, in my personal opinion, too many networks are good at the ‘social networking’ aspect of running a network and not so good at the account management side.
While a number of networks are now developing ‘affiliate focused’ account management teams, these teams tend to have only 10% of the personnel resource of the merchant focused teams – while potentially servicing a client base which is at least 10 times larger. You do the maths!
I would say to all networks, if you perceive super-affiliates as a threat, why do you feel threatened? If you are confident that you are truly adding value, you should not feel threatened at all – so if you do feel threatened, maybe it’s time for an objective look at the value you are truly adding.
We estimate that £2bn in sales were generated by affiliates last year. How much organic growth do you think is left for affiliates?
£2bn is a fantastic figure, some 62% growth on the previous year – but – it still only represents less than 10% of online sales, so there is clearly still lots of room for affiliate marketing to grow and for us to take a bigger slice of the cake.
What I think will happen though is that affiliate marketing will no longer be about purely driving incremental sales, and that there will be some cannibalisation of sales from other online channels.
But I think that is only right – it has been proven time and again that for many merchants, affiliate marketing is simply the most cost effective and lowest risk route to market – so why should we not poach some business from other online channels?
Can you suggest three things merchants could do to help drive more sales from their affiliates?
Well, I guess you would expect me to say increase their commissions! And of course that is always welcome, but I think the three main things merchants could do are...
- Provide realistic incentives
Many merchants offer tiered commissions, which is great, as long as the tiers are achievable.
This is especially true at the lower levels. If your average basket value is £50 don’t set the first tier at £5,000 worth of sales per month – to an affiliate making two sales a month for you, the gap between £100 and £5,000 looks unassailable and so the majority simply won’t bother. Set the first tier at £500 and you will see much better results.
The other thing on incentives is do not, do not, do not, offer a prize for ‘the affiliate making the most sales’. Taking as a given that most programmes have between 2 and 15 super affiliates (and even within that, one will normally be predominant over the others) you already know who your ‘most sales’ affiliate is going to be.
If you want to reward them, do so, but don’t make a public song and dance about it by having a phony competition which 99.9% of affiliates do not have a snowball's chance in hell of winning.
Far better is to run a prize draw where every sale by an affiliate gets one entry into the draw, that way far more affiliates will go the extra mile for you.
- Share market demographics
As a merchant, you know (or at least you should know) who your typical customer is, so share that information with your affiliates.
That way, they can target their advertising - they get more sales, you get more sales, everyone is happy. It’s not rocket science but affiliates should not have to ask for this information, you should provide it without prompting.
- Communicate more
Your affiliates are your unsalaried sales force. You wouldn’t fail to tell your own sales team what was happening in your company, so why don’t you tell your affiliates? If you have an internal company newsletter, why not put your affiliates on that mailing list too?
If you are a media buyer and you have TV campaign booked, or other major offline advertising, or you are sponsoring a major event, you know it’s happening, so tell your affiliates it’s happening.
It always astonishes me that most companies have a press office or an external press agency producing press releases on a regular basis - many companies produce enough that if they were printed they would consume a whole rainforest a year - yet no one thinks to issue these to their affiliate base.
It’s all valuable material that affiliates could turn into content to promote you – if only we knew about it.
What are the main things merchants do that you wish they wouldn't?
How long have you got!! But I guess the main things are...
- Overwriting creative with creative of a different size
If a creative called abc.gif was previously a 120x60 graphic, make sure abc.gif is always a 120x60 graphic – don’t suddenly make it a 468x60 graphic and instantly screw up the layout of all of your affiliate sites. Do it once and you will annoy your affiliates, do it more than once and you will find yourself dropped from a lot of sites.
- Including a phone number or URL within creative or within a product feed
Don’t do it - if you want free branding then buy media space on a CPM deal. Ee are here to drive you sales, not to build your brand for free.
- Not having up-to-date creative
I could show you a number of merchants across all affiliate networks who still have creative showing their Valentines Day offers, or even their Christmas offers (and in a number of cases I’m not even convinced they mean Christmas 2006!)
Where do you sit in the debate over brand-bidding?
In all honesty it depends on the brand. Many merchants like to think they have a brand when in reality they don’t, they have a trading name but it is far from becoming a brand.
My personal benchmark would be that if less than 10% of your Google traffic is coming from people searching for your brand, then you don’t yet have a brand, at least not in the online space.
But assuming you have a definite brand and that brand is not made up of common words (i.e. you are not British Gas) then you should safeguard your brand using Google’s existing policies and simply not allow affiliates to brand name bid.
To allow them to bid in these circumstances does nothing, except reduce your bottom line and ultimately affect the financial sustainability of your whole affiliate programme.
If you do have a name which you are unable to protect (and you particularly need to think about broad match terms in Google here), then it may well make more sense to allow a selected number of affiliates to brand bid.
But you should negotiate this carefully, make sure you set some strict rules and conditions, and either offer them a lower rate of commission (while still making it commercially viable for them to bid) or ‘encourage’ them to use some of the profit from brand name terms to expand the number of generic terms (which may or may not be directly profitable) they bid on, so maximising your exposure across the paid search arena.
How do you expect technologies like RSS, AJAX and widgets to help the flow of information between merchants and affiliates?
I thought for a moment there you were going to say the dreaded words ‘Web 2.0’. If ever there was a name dreamed up by a committee and then guaranteed to engender ‘Emperor’s new clothes’ syndrome it was that one – let’s be clear, the web doesn’t make step changes, it simply evolves.
RSS for me is a fantastic step forward, and for affiliates an area that is still very under utilised. It should be relatively easy for merchants to produce RSS feeds of their current bestsellers, yet at the current time very few are doing it.
There are real opportunities here – if my site can show your bestsellers and new additions in real time, then your sales are going to go up, my sales are going to go up and we all win.
RSS is undoubtedly an area where networks should (and most are not) be giving added value – you have the technology, you have the contacts, all it takes is the will and it can happen.
I personally think widgets offer exciting opportunities for affiliates who invest early in getting their heads around the technology and what it is capable of.
I don’t want to give examples as we ourselves are investing in some technology developments in this area at the present time – but the opportunities are numerous if people think outside the box.
The problem I think is that an awful lot of people have problems visualising the box, let alone thinking outside it.
Our recent Affiliate Census showed SEO is by far the most popular tool that affiliates use to drive traffic. Do you think this is down to Google's algorithm change?
Undoubtedly the recent quality score issues from Google - coupled with more and more merchants preventing affiliates from sending traffic direct from PPC ads to their websites - has led to many PPC affiliates having to enter what, for many of them, is uncharted territory and create landing pages, mini-sites and indeed full content sites which are rich in content - in many ways employing tactics that those of us who specialise in SEO have been using for a long time.
This is a far broader threat to the affiliate space than it may at first appear. In the short term it hits the PPC affiliates as they need to regroup and create and optimise their pages, but in the longer term it is also a threat to SEO affiliates as there are now effectively more affiliates competing for the same space – so the marketplace gets noisier.
How many links are you now providing on a CPM or CPC basis, compared to CPA?
At the moment it is still quite low, probably no more than 20% - but I can see this increasing over the next 12 months.
I see a definite trend towards hybrid CPA+CPC deals, where the CPA is lower than a straight CPA deal but the CPC element compensates for this.
This is definitely a good move for any new affiliate programme attempting to break into a noisy marketplace (for example, car insurance).
On our motoring site, for example, I know the value of homepage real estate from our existing advertisers and I would need real convincing to change to a pure CPA basis, but a CPA+CPC hybrid with, by definition, an element of almost guaranteed income for us as the publisher, would be more likely to get my attention.
What can merchants do to take advantage of the convergence between ad networks and affiliate networks?
I think one advantage to merchants of this convergence should be that it becomes easier to do ‘joined up’ marketing.
By that I mean that it should be possible for merchants to ensure that a coherent and consistent message is delivered in the online space, regardless of whether that is by display advertising, affiliates or email marketing.
What new ideas are advertisers coming up with to take advantage of your traffic?
It would be good to see more advertisers delivering rich media (and networks finding technology solutions to track sales via that rich media).
One recent development is that we have been approached by a digital agency who are looking at tracking traffic from our niche sites to general portals which will provide a new way of delivering targeted advertising to those visitors. I would love to tell you more about that but it is still at an early stage of development.
The other medium which is still incredibly underdeveloped in the affiliate channel is mobile advertising – we all need to work at ways of effectively tracking sales delivered via mobile devices, and look at innovative ways for people to actually pay securely via their mobile phone.
There is obviously also work to be done on cross-selling between the mobile and online channels.
For more information on affiliate marketing, see the Briefing Notes from our recent roundtable or our UK Affiliate Census Report, a survey of over 1,500 affiliates which we published earlier this year.