Affiliate Marketing and Channel Conflicts

I stumbled across an old forum thread from March 2006 that was started in response to the request for comments on a post that Linda Buquet from 5 Star Affiliate Program Forums made about how an affiliate manager should deal with a channel conflicts with direct mail marketing (and other marketing channels).

Linda received a message that stated the following:

“…, I found you on the XYZ forum and hope you’re well. Not sure if you can help, but I’m trying to do some research to understand a problem that’s come up for a client. I’m particularly ignorant about affiliate marketing and I’m really hoping that you might be able to direct me towards some resources that could help me. Basically, the problem is that my client sends out direct mail and each piece of mail has a code that the prospect enters on the home page when they come to purchase/apply. However, the company also has an affiliate program. What seems to be happening is that people receive the direct mail piece, go online and either with a basic search to find the site, or if they’re searching and trying to do some research, they end up on an affiliates site. They then click through to the company site and sign up with the direct mail code. Essentially, my client then ends up paying both the DM and affiliate costs for the same prospect. Do you know if this problem is endemic and if so, what are others doing about it?”

There was by coincidence a discussion going on at the non-public affiliate manager forum at ABestWeb.com just around the same time where I and several AMs discussed the issue. It concluded the following:

The Fact
It is impossible to determine for sure who is responsible for a sale, the merchant who has an AdWords campaign running where the customer clicked on or the affiliate site the same customer clicked through earlier. There were many arguments, which did and who did not and how much percent etc. etc. but at the end remains the fact, it cannot be determined conclusively. *

This is an important fact!

The Decision
If the merchant decides to kill an affiliates cookie or not to pay commission or revert commission when the customer is clicking a merchants Ad somewhere else or a link in the merchants newsletter (Welcome email, follow up email etc. does not matter). The merchant must make this decision. All kind of reasons must be considered like marketing cost, margins and the merchant’s opinion or policy.

The Must Do
If the merchant decides not to pay commission, then it is absolutely crucial, that this is spelled out in the affiliate program agreement between the merchant and affiliate. Not in legal gibberish, but in plain and clear language, that an affiliate can understand this restriction / policy and make an educated decision, if it wants to partner with this merchant under those conditions or not. It should also be mentioned outside the agreement from time to time, such as affiliate newsletters and Forums or direct communication with the affiliate.

The Do not Ever Do
Not doing so could mean, correction, will mean serious trouble when affiliates find out about it somewhere else. One merchant in the discussion was able to experience first-hand the result of this. It caused serious damage to his Program and if the merchant’s AM would not have been a trusted authority for his affiliates and other AM’s for years, the whole program could have fallen apart in a matter of days. That is it and there is not much to argue about it, except the details of the “decision” – do it or do not do it and the “how” of the “must do” part.

With regards to the exact example of direct mail scenario I did state the following:

How does the merchant know for sure that the affiliate was not the trigger to actually get the customer to the site, then remember the direct mail, look for it and enter the code? On the other hand, how can he be 100% sure that it was the direct mail alone that made the customer go to the site and sign-up? Maybe he saw another offer at an affiliate site which finally convinced the customer to go and signup, meaning both the affiliate and the direct mail are responsible for the conversion. How does the merchant know if the affiliate cookie was set before the customer read the direct mail or after?

In affiliate marketing is the rule that the last clicked affiliate link, before the action occurred, is the one that gets the commission, because all previous affiliate cookies are overwritten by that click.

That is how it was defined, an agreement so to speak where everybody, especially the affiliates agrees to it. The affiliate that gets the commission can thank all other affiliates and the merchant for the help to make the sale happen. It is rarely the case, that the one affiliate can be credited to 100% for the sale. To make somebody buy is not that easy and many factors play a role in the process.

However, in the case of BHO’s / parasite ware, which jumps into the process at the end (almost) with the lowest probability to have contributed anything to the sale, pretty much all affiliates and most merchants do disagree with the rule that the last affiliate click/cookie gets the commission. You do not have to be a marketing expert to know that what the “parasites” do is wrong. Common sense is enough to figure-out that one.

Time-warp to the Present
This was the summary of the original conclusion from early 2006. Two years have passed and think it is getting time to discuss the issue once more and include changes and improvements in areas that are relevant as well.

*Note to: “It is impossible to determine for sure who is responsible for a sale”.
This statement was in early 2006, almost two years ago. It is still holding true generally speaking, but there have been improvements in the area of web analytics over the years. Those improvements do not solve the problem in the previous example with the direct mail campaign, but there are also other channel conflicts between marketing campaigns online that can be tracked.

Some analytics providers are offering features that allow the analysis of multiple touch-points a user might had have with other campaigns from different marketing and advertising channels, in addition to the traditional “last one”.

Multiple Touch-Points Scenarios
For example is it possible to see for a user who came to the site and purchased something after he clicked on an Ad of a paid search campaign, that the same user responded prior to that to a display Ad that was part of an Ad-buy by the department that manages the display advertising campaigns.

In traditional web analytics are all credits for a referred sale assigned to the last “touch-point”. With multiple touch-point analysis is it possible to give credit to campaigns and exposures of the user to the ads and offers of another campaign where the user reacted to, but did not convert.

Offline scenarios are unfortunately not covered yet.**

The Actual Buying Process of People
It is known for a long time already that people usually go through different stages before they purchase a product. “Impulse purchases” happen, but are more the exception than the norm.

People usually do some research to determine what product the need and what the options are. Then they might do some price comparison or look for available deals for the products they consider to purchase. Next to price of the products play factors like additional order cost like tax, shipping and handling cost or the trustworthiness and ease of the ordering and checkout process of a merchants website a role that finally result in a completed and final sale.

Who Should Get the Credits?
If the person who responded to a paid search ad that advertises a current promotion for a product also responded to display ad on a web portal site that introduced the product and/or came earlier in time to the site from an affiliate’s web site that provides product reviews, credits for the sale should not to hundred percent go to the paid search campaign. The display ad campaign and the affiliate site should also receive credits, because of their impact on the buying decision of the customer that finally lead to the purchase of the product.

Back to Reality
The determination process of how much earlier touch-points should get credit for a sale is still in its infancy. There are no standards yet. Practical studies and internal tests of merchants show that the removal of a touch-point of one marketing and advertising channel also impacted the response to other campaigns. This is not new and known for a long time that an aggressive TV ad campaign for example increases responses to campaigns of other channels, such as paid search ads as well.

As you can see, the problem of proper determination of how much credits each touch-point should get who was part of a customer’s buying decision and conversion process is not easy. This type of tracking and analysis is far away from becoming a standard in web analytics; however, most web analytics providers look or already work on the implementation of such features into their line of products.

Current affiliate tracking solutions are also not up to this task yet at all and I am unaware of people at the networks discussing it. At least I have not encountered anybody who is publically or unofficially talking to me about this.

The Future
This will eventually become a priority when advertisers become sophisticated enough and demand solutions to this problem. This would have a huge impact on the current affiliate tracking infrastructure and technologies, but it will be the way to go. It will also require some re-thinking of current ways of doing things for affiliates who will suddenly not get 100% credit for a conversion anymore, but in return should get a small cut on transactions where they played a small part in it and don’t get any credits today.

The perfect solution would also include offline tracking of in-store purchases, because studies show that online advertising drives in-store sales at a 6:1 ratio to online sales. Customers spent in average $16 offline to every $1 spent online***. It would be nice as affiliate to get some credits for those indirect conversions one day.

**On a note to offline conversion tracking of online campaign: There are some solutions available today, which are specifically designed to allow offline tracking (at least orders made via phone) after an exposure to an online campaign. To read more about this subject, see my post from September this year, titled: “Multichannel Offline and Online Conversion Tracking“.

*** Numbers were taken from this Yahoo! Study from 2007 (the result of the study in PDF format for download).

If you have any thoughts or comments on the issues and possible solutions for the future, feel free to post them below. Cheers and Happy Holidays!

Carsten Cumbrowski

About Carsten Cumbrowski

Internet Marketer, Entrepreneur and Blogger. To learn more about me and what I am doing, visit my website and check out the “about” section.

Twitter: ccumbrowski

45 Responses to Affiliate Marketing and Channel Conflicts

  1. Pat Grady says:

    Good article Carsten! Some merchants are waking up and discovering the reported sales volume isn't the same thing as value. Touch point analysis is difficult and prone to misinterpretation, but it's the step after blind trust of last in (that has been the status quo), and the step before measuring and accurately grading value… so progress is being made! If you're a BHO or adware popper, your days are numbered, the number's still in the thousands, but it is counting down. If you're a loyalty or coupon affiliate, now would be a terrific time to begin diversifying into marketing efforts that will be more highly regarded (and rewarded / paid) in the coming years.

  2. Jonathan (Trust) says:

    "If you're a loyalty or coupon affiliate, now would be a terrific time to begin diversifying into marketing efforts that will be more highly regarded (and rewarded / paid) in the coming years."

    Shoppers always highly regard sites that save them money, so no worries there. This is an old topic and no merchant in their right mind would try to split the commission up but I'm sure their competitors hope they try. Good way to kill a program.

  3. Jonathan (Trust) says:

    Have to respectfully disagree with all of that. We actually had a very good thread on this subject that everybody should read:

    <a href="http://forum.abestweb.com/showthread.php?t=90416&highlight=split+commission&quot; rel="nofollow"&gt <a href="http://;http://forum.abestweb.com/showthread.php?t=90416&highlight=split+commission” target=”_blank”>;http://forum.abestweb.com/showthread.php?t=90416&highlight=split+commission

    Many, many points brought up in that thread why it won't happen.

    Just a few.

    You were right it that it's not being discussed by the networks.

    You're talking about killing of the program, that's exactly what would happen to a merchant who tries to split up the commission. Affiliates won't have it. And do you really think affiliates are going to trust it can be accurately and fairly split? And like I said, a competing merchant would love a merchant in their vertical to try and do that.

    When are you going to split it? Up front, later after the sale? How are affiliates supposed to monitor advertising spend if later their commission gets split up?

    Splitting up the commission would be a program killer. Most merchants realize it. You could start a poll and ask affiliates if they would work with a program that does that. It would be an overwhelming no. It's one of those issues that would be so lopsided ala CJ's LMI. A fiasco. And like I said in that thread I linked to above. We can bump this a year from now, years down the road. Just not going to happen.

    Now there are things merchants can do to get a better handle on their program. But that's another topic.

  4. Hi Jonathan,

    I deleted the duplicate comment, the ReveNews issues drive everybody nuts, but people are working on it… anyway.

    Jonathan said “Shoppers always highly regard sites that save them money, so no worries there. This is an old topic and no merchant in their right mind would try to split the commission up but I’m sure their competitors hope they try. Good way to kill a program.”

    The split will become the way to go in the future. I have no doubt about that. The most competitive verticals will adapt to multiple touch-point tracking and analysis earlier than the verticals with big and fat margins, but it will become standard eventually.

    Many merchants will kill their program if they don’t do the split. The split is not a loss for all affiliates. It will actually reward those affiliates that actually provide value and cut out or reduce the commission for those who are today primarily enjoying the fruits of another marketing and advertising channels labor without contributing very much themselves.

    Pat is right about “Touch point analysis is difficult and prone to misinterpretation”.

    It is complicated and a lot of practical experience, measurement and analysis will be necessary to be able to define some sort of standard metrics. Look at online video today. The struggle there gives you a basic idea of what lies ahead.

    Thanks for the comments and happy holidays.

    Cheers!

    Carsten

  5. I deleted the dupe again 🙂

    “Have to respectfully disagree with all of that.”

    You are free to do so and I respect that. Thanks for the link to the thread at ABW. I am missing the link to the podcasr that you were listening to. I could start searching for it, unless you have it flying around and can post it here.

    The poll at the forum shows a 53:9 vote for the last cookie, which does not surprise me.

    However, I am not convinced that A) will not happen anyway and B) that all affiliates that matter to the merchant and his goals will abandon the program

    That there are issues regarding transparency and accountability is obvious. I believe that many merchant are overpaying many affiliates today and at the same time underpay many as well. Think about all the offline sales affiliates indirectly produce for a merchant where they don’t see a single dime for.

    Even tracking of phone sales is rare, but a start. Some merchants do this already and affiliates get commission for those referrals already.

    That those things are a double edged sword should be obvious. With the advanced tracking are merchants realizing where they get basically “ripped off” and were the actual values are. A merchant who realizes that 90% of the commission paid every month goes to cookie cutters, parasites and affiliates that jump into the process when the sale is pretty much a done deal already, he will not have a problem to let those affiliates go.

    They will bitch and yell and condemn the merchant, but that does not matter.

    I would not compare the subject with CJ LMI. That was a completely different animal. I blogged extensively about it on my personal blog, before I was blogging for ReveNews.

    See Are you ready for CJ Analytics?” from May 26, 2006 and ValueClick Behavioral Marketing and Commission Junction LMI from June 11, 2006.

  6. Jonathan (Trust) says:

    “A merchant who realizes that 90% of the commission paid every month goes to cookie cutters, parasites and affiliates that jump into the process when the sale is pretty much a done deal already, he will not have a problem to let those affiliates go.”

    Is the 90% figure just pulled out of the air or are there some stats out there to back it up?

    First, I don’t think cookie cutters make many sales at all. Not sure what type of sites you mean by cookie cutter. We could have different definitions.

    Affiliates that jump into the process when the sale is pretty much done. What do you mean by that? There’s done or not done. It’s who closes. The only way a jump in can occur is if the shopper didn’t get what they were looking for and went looking elsewhere and found a closer unless you’re talking about the third thing you mentioned:

    Parasites which can jump in and this has to be the first thing addressed before you go any further, the first thing. Because this is what messes up the stats for merchants. Because parasites, adware etc. just basically poach the merchant. And many sales attributed to them are off a merchants direct type ins, natural/free traffic, PPC, other advertising spend, newsletters etc. So if a merchant is really serious about what channel is responsible for the sale, it has to start there. But we are a very long way from that. There are plenty of affiliate managers that realize this kind of stuff just pads their numbers and makes them look like superstars, like the affiliate channel they’re in charge of is bringing in the sales. What needs to happen is the actual merchant (their employer) someone higher up, needs to get a handle on this and I realize there are many good ones out there that really have the merchants best interests at heart but there are many who don’t. And there are many problems with that. Lots of times the affiliate channel is just part an overall marketing channel and the person in charge doesn’t have the time that’s needed to run a very good program. I think any merchant out there that does and devotes somebody/or a team to it, can be very successful with it. The affiliate model is a great one, only pay for performance. Some people have figured it out, many are still learning.

    And you can take away the “90%” you’re talking about but ANY affiliate is not going to be ok with their commissions being split. Start a poll Carsten, ask them. People want to know exactly what they’re going to get paid. That won’t change. And again, this has been talked about for years but do you have one example of a merchant doing this? I can’t think of even one.

  7. "How's that? How is splitting the current commission going to result in more commission. "

    If you were part of the conversion process, but your cookie was overwritten by another affiliate or expired by the advertiser triggered by a click on an email or PPC campaign (its not a popular subject, but there are advertisers who do that).

    Furthermore the addition of commission that resulted from offline sales with prior online exposure by an affiliate (as I stated in my post and the post I referred to in my post, the technology to track some of the offline conversions that were triggered by online marketing campaigns exists today already and would have to become part of the mix of course).

    See, plenty of cases where the affiliate that is actually contributing to the conversion gets money it wouldn't get today.

  8. “Is the 90% figure just pulled out of the air or are there some stats out there to back it up?”

    That is no statistical figure, but a hypothetical number, which can actually be replaced by any number that has as the following bottom line: The loss in sales, because of dropping the program or loss of affiliates because of the change to paying commission based on how much the affiliate actually contributed to ANY sale, does not exceed the money saved in commission paid for sales that the merchant would have had without the affiliate in the first place (if the program was intended to increase sales and profits and not just for branding)

    “Parasites which can jump in and this has to be the first thing addressed before you go any further, the first thing. Because this is what messes up the stats for merchants. Because parasites, adware etc. just basically poach the merchant.”

    Exactly, something that current stats without multiple touch-points don’t show, but stand out like a sore thumb with it.

    ” but ANY affiliate is not going to be ok with their commissions being split.”

    Sure, affiliates that already know that they will see a cut at their bottom line if this is implemented will be against it. However, at that point when merchants actually do this kind of reporting, affiliates who do play an important role in the conversion process overall will see the benefits of it and approve, because they are actually getting more commission than they did before.

    That an implementation of such commission structure has still a long way to go before it is realistic (and fair), transparent and trustworthy enough to be matured enough to be up to the task. That does not mean that it will never happen.

  9. Jonathan (Trust) says:

    “because they are actually getting more commission than they did before.”

    How’s that? How is splitting the current commission going to result in more commission. If I’m getting paid 10% for a sale from a merchant now and then they want to somehow split that up between multiple channels, that isn’t going to result in me getting more than 10%.

  10. Jonathan (Trust) says:

    There’s even problems with what you just posted.

    “If you were part of the conversion process, but your cookie was overwritten by another affiliate or expired by the advertiser triggered by a click on an email or PPC campaign (its not a popular subject, but there are advertisers who do that).”

    Right and do you think they want to go back and pay affiliates part of that if they’re not doing it now? Of course not. I’ve even seen (which I knew but was suprised they posted it) that they want to pay out what they can get away with, not anymore. It’s why a lot of merchants also have low cookies, moreso the 0, 1, 2 day cookie merchants and the other ones ridiculously low. They know sales happen later than that and usually the bigger sales. Ever take a look at Linkshare’s Non-Commissionable Sales Report? It’s an eye opener. Search for threads on that. You can see all the sales you would have gotten had the merchant had a decent cookie duration.

    And cookie getting overwritten by another affiliate is just part of the business. I don’t have a problem with that because, again it’s who closes.

    So we already have many reasons why this isn’t going to happen, let me add just a couple more.

    So when an affiliate signs up to a merchant under such a condition, are they supposed to see something like:

    Sale: 2%$ – 15%

    C’mon now, you know that isn’t going to fly. Floating payouts aren’t going to work. Affiliates are going to want to know exactly what they’re going to get paid for a sale which leads us into the next reason, a big one, trust.

    Working online, we really can’t see what’s happening on the other end (besides our stats) so there is a big leap of trust there. I can’t see the shopper going thru checkout, can’t see the merchant/affiliate manager does with the numbers or the network. Some examples. Let’s say there is a reversal. A merchant can reverse a sale and I can’t tell if there was an actual one or not, have to have some trust in the merchant you’re working with. Let’s say somebody is averaging 5 sales a day with a merchant. So getting 6, 7, 8 sales is normal or 4, 3, 2, 1, 0 could be normal. It’s just the business. But on a day when there was 0 sales. It could be a normal affiliate marketing day or maybe there was an issue somewhere. Let’s say there was a tracking issue. I wouldn’t know on my end. So now you want affiliates to take even a bigger leap of faith in that affiliate managers can accurately split up the commission somehow and figure out what channels were responsible for the sale? Again, I will start that poll myself if you want. They won’t. There’s the trust factor, the reality is this would result in lower overall commissions, let’s be real on that one. And then I don’t think networks would even allow a floating payout like that. Leaves way too much room for abuse and manipulation. I think people who think this even has a remote chance of working, really haven’t thought it all the way thru or really don’t have a handle on what affiliates think.

  11. Carsten Cumbrowski says:

    Revenue share implies the need for trust in the partner. How do you know if your partner who is reporting honestly all the $100 sales all the time that you get your commission is not blocking the reporting of unusual high tickets, let say $10,000?

    You can't, but if you feel that your partner is cheating on you, the relationship will start suffering and probably break eventually.

    What are the alternatives?

    CPA would be one of them. Retailers could pay a good bounty for the referral of a new customer, if the retailer got his metrics straight and know things like the average customer lifetime value etc.

    This is of course a viable option in general and can be done in parallel to the revenue share model with selected partners, but I am going off topic already. It's a whole different animal.

  12. Pat Grady says:

    Carsten, many affiliates whose business income is at risk will deny that change is coming (thought they’ve seen it’s start), or seek to mischaracterize those changes – it’s self preservation at work. While asking you to document your numbers, they (and I don’t just mean Trust), they will say a split is a sure way to kill a program… so where’s the proof for that counter argumant? I have seen several merchants remove loyalty and/or couponing from their programs and talk (ans show me numbers) about how their ROI is much improved. The part that is true, is that couponing and loyaltyware isn’t going away, it’s too prevalent and too ingrained into consumer mentality. But it’s value isn’t on par with some other types of affiliate activity, so merchants will (and are starting) to split it off. The trend I predict will come is a simple two channel system, where the main program is available to anyone and everyone and the comm rate is low (and the need to police is also lower, so merchants let it become a free for all, crazy unregulated mess… intentionally, to save time). From this traffic, merchants can find (by measuring!) which affiliates are bringing them mostly incremental traffic. Then taking those affs out of the “main” fold and bringing them into higher paying, closely watched, resource intensive partnerships to maximize both parties productivity.

    As it is now, brining incremental traffic to programs with loyalty, coupon and other leaks means there are big gains in sales being missed by merchants because they’re paying to much of their rewards to those affs who deserve it least.

    And realize that by “deserve”, I don’t mean anything other than merchants best putting their margins where it will generate the maximum sales volume and income for themselves, as it should be.

  13. Jonathan (Trust) says:

    “Carsten, many affiliates whose business income is at risk will deny that change is coming”

    Or it’s people who’ve been in this business long enough to recognize more doomsday nonsense and actually thinks things through. I’ve noticed you’ve offered up nothing to debate any of the points I’ve brought up as well as others. Take it point by point with your next post.

    “As it is now, brining incremental traffic to programs with loyalty, coupon and other leaks means there are big gains in sales being missed by merchants because they’re paying to much of their rewards to those affs who deserve it least.”

    Your views on the value of couponing is also just way off and shows a lack of understanding of marketing and consumer behavior.

  14. Hi Pat,

    "While asking you to document your numbers, they (and I don't just mean Trust), they will say a split is a sure way to kill a program… so where's the proof for that counter argumant?"

    My numbers were a guess, because I am talking about the future. I am not a fortune teller :). I made my arguments against the "killing of programs" who will credit referrers based on contribution to a conversion. Affiliates who claim that they will loose commission as a result of it, either did not understand the concept I was talking about or use methods to promote advertisers that are somewhat questionable.

    "I have seen several merchants remove loyalty and/or couponing from their programs and talk (ans show me numbers) about how their ROI is much improved. The part that is true, is that couponing and loyaltyware isn't going away, it's too prevalent and too ingrained into consumer mentality."

    Coupon and loyalty sites are not "real affiliates" IMO, because they are not a good vehicle for customer acquisition, but customer retention. Affiliate marketing is supposed to be a strong customer acquisition channel. This is a completely different animal and go beyond the current discussion.

    "where the main program is available to anyone and everyone and the comm rate is low" … " From this traffic, merchants can find (by measuring!) which affiliates are bringing them mostly incremental traffic. Then taking those affs out of the "main" fold and bringing them into higher paying, closely watched, resource intensive partnerships to maximize both parties productivity."

    This is how most programs work today already. Commission tiers (public and non-public, called "performance incentives" by CJ) are very common for exactly the reasons you stated.

    Cheers!

    Carsten

  15. Pat Grady says:

    "Your views on the value of couponing is also just way off and shows a lack of understanding of marketing and consumer behavior."

    Your efforts at self-preservation and self-promotion are humorous.

    And you insist that I reply to you on a point-by-point basis, yet you feel free to waive your wand over my entire understanding of not just the value of couponing, but marketing overall… and you say things like splitting a program is a sure way to kill it… where you're infering it's a 100% certainty… got any proof of that? No, of course not, you just demand proof of others. So as long as you spew your own absolutes and impugn my industry knowledge without basis, it's not a debate you're trying to have with me, it's something much uglier. And everyone here can see it.

  16. Jonathan (Trust) says:

    Didn't think you could. Because I gave specific reasons why it won't work as well as others and I realize it's hard to debate good points.

    Self preservation? You should really take a class, read some marketing books or just Google and learn about consumers and what they like. And you might take that as a put down but I'm serious. I think a lot of affiliates should, not just you. Those type of sites are plentiful and usually top performers for a reason. Because saving people money never goes out of style. Consumers wanting coupons and good deals, will always be around. Been around before the internet existed. They're an important part of the equation. And I do question your knowledge about couponing based on your posts here and your recent ones about coupon links vs. codes. You're not a couponer but like to give advice on it and it's usually off. Stick to what you know. But this one is going into my bookmarks so I can bump in the future.

  17. Carsten Cumbrowski says:

    Jonathan,

    “Or it’s people who’ve been in this business long enough to recognize more doomsday nonsense and actually thinks things through.”

    What planet are you on? Who is talking about doomsday. I am not even talking about big commission cuts for performing affiliates. You started that talk.

    “I’ve noticed you’ve offered up nothing to debate any of the points I’ve brought up as well as others. Take it point by point with your next post.”

    Which one did I miss? I mean arguments about something that isn’t in the future and we both don’t know yet.

    “As it is now, brining incremental traffic to programs with loyalty, coupon and other leaks means there are big gains in sales being missed by merchants because they’re paying to much of their rewards to those affs who deserve it least.”

    I agree with you about this part, but consider it a different subject. I touched on this in my post about affiliate retention and activation.

    “Your views on the value of couponing is also just way off and shows a lack of understanding of marketing and consumer behavior.”

    What do you mean? I did not question couponing as marketing method here in the states. Coupons work, they work well, but they can work against the advertiser/merchant if not used properly.

  18. Pat Grady says:

    Trust, I never said consumers don't value coupons or that they would go away, in fact, I said EXACTLY the opposite – they are here to stay. But, as usual, you like to twist what was said into your own agenda. You suggest I should go read a book, while you don't bother to read what I wrote here. You're reactionary and a bit delusional.

    "You're not a couponer but like to give advice on it and it's usually off. Stick to what you know."

    Affiliate managers and merchants are here that know me, know my websites, know what I do for them and other programs and can see how wrong you are. You are making a glaring idiot of yourself with your declarative false statements.

    Bookmark whatever you want, bump it, post it, throw some more trashy lies and crazy conclusions at me and others, I look forward to hearing your narrow minded, uninformed rants as the years pass to the point people realize you've marginalized yourself by loudly demonstrating your own ignorance.

  19. Jonathan (Trust) says:

    Reality check time. You're not a couponer. You might do a little here and there but I'm talking day to day and on a much bigger scale. That's what I mean by a couponer, not someone who just dabbles in it. Did you forget you told me how much you're involved in them in a PM? If you're ok with it, I'll post what you told me, I still have it. With your own words, we'll see how off I am.

  20. Jonathan (Trust) says:

    Carsten, that whole response was directed at Pat, not you 🙂 and his comment directed at coupon sites – “affs who deserve it least.”

    Which I’ll be glad to debate because it’s one of the more ridiculous things I’ve read.

    “Coupon and loyalty sites are not “real affiliates” IMO, because they are not a good vehicle for customer acquisition, but customer retention. Affiliate marketing is supposed to be a strong customer acquisition channel. This is a completely different animal and go beyond the current discussion.”

    I’ve seen you post something along those lines before and would be glad to get into that if you want on a new blog post. It’s what I’m talking about in that there are a lot of people in this Affiliate Marketing business that don’t get the marketing part and their background is more computers or site development. Those that believe in the myth of the acquired customer. It’s not a one shot deal, you have to constantly win them. And that’s what sites like coupon sites do. They are real affiliates because they drive sales. Some of the top affiliates happen to be those kinds of sites. For new customers and recurring. Sales drivers. If anything, you should pay them more, not “the least”.

  21. Carsten Cumbrowski says:

    And on a note to the low return days and the Linkshare non-commissionable report.

    If an advertiser sets the cookie duration lower than the average time to convert a customer to a buyer, then it is already unethical, with and without multiple touchpoint scenary, because the advertiser cuts out affiliates out of their commissions on purpose, knowing that most legitimate referrals will not be credited.

  22. Pat Grady says:

    Right, “you’re not a couponer” out one side of your mouth and then “you just dabble in it” out of the other. You have no idea how much couponing I do or don’t do, you’re just busy squirreling away my private messages from long ago. You’re pathetic.

    So go ahead and enlighten us all, how much couponing does it take to be qualified to have this discussion?

  23. Jonathan (Trust) says:

    “You have no idea how much couponing I do or don’t do,”

    Actually I do, you told me. I asked you in my last post if it was alright, you’re not saying yes or ok for a reason. Like I said, say it’s ok and I’ll post about your experience and how much you do and it’s all from what you’ve told me.

    Do you see me giving advice on direct to merchant PPC? No, because it’s not what I do and if you did, you should call me on it because it’s more your area of expertise. So when I see you giving advice on couponing and it’s bad advice, expect to get called on it. If you did as much couponing as you would like to have people believe, you wouldn’t have made the ridiculous statement of them deserving the least. You’ve wouldn’t be giving the bad advice in our code vs. link discussion with which your views are not in line with other couponers and is actually a step backwards. So when you give coupon advice to merchants and it’s bad and it’s backwards, again, expect to get called on it.

    And as far as replying to points brought up, I have, you haven’t. You have your opinion on this subject and I brought forth many reasons why I think it doesn’t have a chance, not only here but in the thread over at ABW. So I addressed it but you haven’t touched the points I’ve brought up. You even agreed with me over at ABW on one of them, remember your horse and cart comment. About before going anywhere with this, you have to take the toolbar affiliates out of the equation and we both know how likely that is.

  24. Carsten Cumbrowski says:

    Guys, keep it easy. The discussion is not about coupon sites and not about loyalty sites and PPC affiliates either.

    Let me give examples where the affiliate would win and loose commission in a multiple touchpoint scenario.

    If the customer goes to a coupon site and then to the merchants website, does not buy anything. Sees a product in a print add, walks into the store with a printout of the coupon from earlier and buys the product, the affiliate would get a cut also and not only the direct mail campaign. In this case the affiliate gets commission it did not get before. Change the scenario that the customer saw the flyer first, finds the coupon site and buys the advertised product online. In this case the affiliate would get less commission than it did before, because the direct mail campaign would get credits too.

    Does this make sense?

  25. Jonathan (Trust) says:

    Except, that there is no way to accurately measure all of that.

    And let’s take the first example. What merchant is going to do that? And the coupons on sites are usually for online use only, not to be printed out and taken to the store.

    The second example, the flyer didn’t close the sale, the coupon site did. Maybe the flyer should have had the coupon in the first place. The only reason the shopper went to the coupon site is because they were looking for more information, what the flyer should have had in the first place.

    Let’s say somebody comes to my site and uses a coupon for a merchant. Clicked thru my link and completed a sale, I get commission. What you’re proposing is that after the fact, the merchant is going to someone figure out all the other players that might have had a part in that sale. You can’t accurately do that. Maybe a friend told them about the merchant. Maybe they saw a commercial on TV. Maybe they saw a billboard on the way home from work. Maybe they saw something in a newsletter from the merchant. Maybe they went to another site first but completed the sale thru mine. You’re going to figure out how to split all that up? You think affiliates are going to trust a merchant doing that? It opens the door to much abuse and manipulation of the numbers.

  26. Carsten Cumbrowski says:

    “The second example, the flyer didn’t close the sale, the coupon site did. Maybe the flyer should have had the coupon in the first place.”

    Yep, such things would be revealed by this type of analytics.

    You are right Jonathan and the analytics I am talking about is improving on the problem of determining what steps lead a customer to the conversion. The goal would be to be able to see and track everything, but that is almost impossible to accomplish IMO.

    However, there are already solutions for online/offline tracking scenarios where I did myself believed a few years back that it is impossible to track, which is obviously not the case (see my reference to the ClickPath post of mine). That made me a bit more cautious with the use of words like “never” and “impossible” 🙂

  27. Pat Grady says:

    I asked one simple question that comes from your attempts to discredit / disqualify me, so I can try to satisfy your self-imposed standards. That question remains…

    How much couponing does it take to be qualified to have this discussion?

    And again, you've chosen to not answer.

    By the way, I completely disagree with the assertion that I even have to be a coupon affiliate to understand it and discuss it. But you've argued otherwise here and also won't tell me the "standards" you're imposing for me to be qualified. Creating undfined standards that are impossible to satisfy… hmmm… what can we do to get past your road block….

    Why don't you and I sit down in Vegas at Affiliate Summit and I'll share my "dabble" numbers with you in person and then you can tell me whether my sales volume meets your needs for me to discuss this further?

  28. Jonathan (Trust) says:

    "How much couponing does it take to be qualified to have this discussion?

    And again, you've chosen to not answer."

    Pat, I've asked you 3 times now to say these little words, yes or ok and I will post what you told me. But you haven't and you won't for a reason. How about another way. Between CJ, Linkshare and Performics, how many merchants do you work with and post coupons? You going to avoid that question too?

    And why do I think you're not qualified for this discussion?

    A. You don't have a competitive coupon site.

    B. I base that on your views such as link vs. code. Already went thru that. Bad advice to merchants, not in line with what other couponers think and going backwards.

    C. I can post up merchants and ask you if they have coupons available. People who work with them on a daily basis would know right off the bat, you wouldn't.

    D. They don't say stuff like:
    "Ideally, as an affiliate, I'd prefer that there were no coupons anywhere – I feel it devalues things more than it helps add value and it usually interferes with focusing on incremental sales and value propositions."

    Or what you posted above in saying they deserve the least. You saying that alone tells me all I need to know. That you don't get it.

    Couponers wouldn't say nonsense like that. It's why I suggested to pick up a book, start here – -http://www.amazon.com/s/ref=nb_ss_b/102-3377461-2618543?url=search-alias%3Dstripbooks&field-keywords=consumer+behavior

    Why do you say stuff like that? Would it be because you do more product stuff and you feel the big bad couponers take your sales away somehow?

    "How much couponing does it take to be qualified to have this discussion?"

    Anybody can talk about it. But people who do it on a daily basis, actually have competitive coupon sites, actually know the value of them to not only the consumer but the merchant are more qualified. I'm talking about people who really know their coupon stuff, that just wouldn't be you.

  29. Carsten Cumbrowski says:

    It’s between you two guys, but I have to say something anyway.

    1) It does not matter if you run a coupon site or not to understand the things I was writing about. It also does not matter if you are a PPC affiliate or loyalty site, content affiliate or an affiliate altogether.

    What helps is some understanding and knowledge of analytics, the fundamentals of the typical sales/conversion process and customer behavior on the Internet.

    2) “Ideally, as an affiliate, I’d prefer that there were no coupons anywhere – I feel it devalues things more than it helps add value and it usually interferes with focusing on incremental sales and value propositions.”

    Its an opinion and I tend to agree with it, but the reason for that is that I am German and in Germany are no coupon affiliates. You heard right, no coupon affiliates.

    The reason for that is the difference in buying culture between the two countries and the ultra-competitiveness of the retail business in Germany that even the largest retailer in the world, the mighty Walmart, was unable to compete there. They were far away from talking about stuff like “crushing” or dominating the market and left after a few years of trying just to get a foot-hold in the market. It is hard to believe, isn’t it, but the “always low prices” giant didn’t manage to get their prices low enough and at the same time remain profitable.

    This massive use of coupons is an American thing.

    I am not an “ueber user” of coupons myself, although I see the benefits of them and at the same time see how much margins retailers have to remain profitable after all the discounts, coupons, affiliate commissions, affiliate network fees etc.

    That shows me that retail in the USA has still a lot of room for businesses who are able to provide high value for lowest prices to all customers, without the need for them to go run around hunting for coupon codes. That would be better for customer retention for sure, because prices would be lower overall at any time and nothing for me to worry about to make me shop around and buy from another retailer.

    That’s just my personal opinion and I am not a typical American, so your business model is not in danger Jonathan, at least from what I can tell. 🙂

  30. Jonathan (Trust) says:

    A. You don't have a competitive coupon site. Check out the other bloggers here who have coupon sites (Connie, Tim, David) . They have what? Merchants from Performics, CJ, Linkshare. Check out any competitive coupon site, they have to have merchants from those networks to be competitive, it's really that simple.

    B. Total commissions? That doesn't prove anything, since you post most of what you do is direct to merchant and usually products. Also only a newb is impressed by total sales and commissions. Usually those whose eyes glaze over when someone post screenshots of commissions earned BUT never post screenshots of how much they spent (PPC, other advertising spend) in getting that amount. Wonder why that is? And you also post you do a lot of PPC. So gross is nothing to me, net is. And again, most of your income is products. Glad you're doing great although it has nothing to do with the topic and you continue to skip my questions. And you say you have a coupon site, want to call yourself a couponer but say you wish there were no coupons anywhere. Yeah, that makes a lot of sense, like someone who derives most of their income from coupons (sarcasm).

    If you want to challenge anything, challenge yourself. Actually work with some of those merchants who have coupons in various networks. Actually go thru the checkout process with codes links so you don't have to guess if you see the discount at checkout. When you do, you're realize you'll see it about the same amount of code links. And also actually test out the conversion rate between the two methods. That kind of thing.

    And Carsten, having lived in Germany myself for about 12 years on and off (Heidelberg) isn't Germany more socialist than capitalist? Not sure if that has anything to do with coupons or not.

  31. Carsten Cumbrowski says:

    "And Carsten, having lived in Germany myself for about 12 years on and off (Heidelberg) isn't Germany more socialist than capitalist?"

    No, it's not. It used to be a lot more social than the United States, but that is not hard compared to international standards in the developed countries, but they cut back a lot of those things over the recent years, even with the US equivalent of the "Democrats" in power instead of the "Republicans". I was shocked actually about the extend of those steps backwards when I last visited, but that is a different story.

    "Not sure if that has anything to do with coupons or not. "

    No, it doesn't, its really the difference in buying culture and the competitiveness that evolved from that, which caused a severe reduction of profit margins and less room for merchants to play with. German retail businesses are really niche oriented and focused on specific types of customers and buying habits. For example when it comes to grocery stores. Aldi is the low price chain where stuff is as cheap as it gets. They sell bulk, literally, very narrow selection of products sold virtually out of the box without even putting the products up on a shelf. The stores are small and crammed and geared to get you through and out as fast as possible. Kaiser on the other hand is wide open, friendly lights, wide selection of products, fancy packages in small amounts etc. Well, you spent twice as much for stuff at Kaisers than you do at Aldi, even though the product quality is more or less the same, but both chains target different types of consumers. Kaisers does not make more profit than Aldi because it charges higher prices (its actually the other way around), because they have much higher cost than Aldi does. Each of them carved out their niche and each of them has no large margins to play with and a coupon would in almost all cases make the merchant lose money on that order.

  32. Pat Grady says:

    blah, blah, blah… more with you don’t compete, you don’t have all of your coupons memorized, i don’t like your views so you’re not worth listening to, you don’t do it on a daily basis, you should read a book…

    here’s a challenge for you, let’s get somebody who will maintain the confidentialty of our specific details and let them see our numbers for last month and then let them report the aggregate total sales and commissions here? my coupon site against yours, we can list their domain names and their numbers and you can teach me a lesson and put me to shame.

  33. Jonathan (Trust) says:

    I remember Aldi over in Germany 🙂 they also have many stores in the U.S., one in my own city. I know you're supposed to bring your own bags from home for the groceries (or you cay pay for them there) and bag your own groceries. Just another little way they keep the prices down.

  34. Pat Grady says:

    "You don't have a competitive coupon site. Check out the other bloggers here who have coupon sites (Connie, Tim, David)"

    So your position now is that I must be as large as the most prominent couponers in our industry… the bar is raised again.

    "And you say you have a coupon site, want to call yourself a couponer but say you wish there were no coupons anywhere."

    Yes, I have a coupon site. It's DNS records are public and I've told you it's domain. You, on the other hand, hide your identity and levy accusations and pretend to know all the facets and volume of my business.

    Yes, because of I have a coupon site and because it has plenty of sales, I am a couponer, among other things.

    No, not quite accurate. I said I wish coupons weren't in the same channel as affiliates who promote a merchants products and I also said that coupons aren't going away from the landscape. As well, I've said they belong in a different channel (for the merchant) because they're of a markedly different value to merchants, a lower value than people promoting the merchant's products who bring mostly new customers.

    "only a newb is impressed by total sales and commissions"

    So you'd like to Net then, ok, perfectly fine with me. Let's do Net then. And afterwards, you can also explain why Net matters since you first argued that I need volume to understand things… the bar is raised again.

    "Actually work with some of those merchants who have coupons in various networks."

    So, is there now a minimum number of merchants and a minimum number of networks I must also meet in order to know how a coupon sale works… the bar is raised again.

    "you continue to skip my questions"

    And you mine. I've allowed you to distract me with inferred questions about my qualifications to answer your questions, seems that argument does come first to me. If your position and arguments here are that I'm not qualified to answer your questions, what's the point? My question for you continues to try to address your arguments about my qualifications – so I am trying to adress your questions… but I know what your plan is there… raise that bar again.

    You won't share your numbers, you won't meet and compare, you won't agre to a third party doing it for us, you won't reveal your identity or your website, you won't address where you stand in regards to your imposed levels of qualifications to answer things you've imposed upon me… these positions are of course, constructed to do exactly these things, deflect the conversation from the real topic at hand… like your socialist comment aimed at Carsten.

    We know you have no intention of discussing real subjects Jonathan and we can see how adept you've grown at constructing this deflection yet dodging it yourself, which in itself, reveals a lot about you.

  35. Jonathan (Trust) says:

    Oh brother. You know where the coupon forum is. If you want to learn about it, just ask. Or just take the day and reread past discussions. There are plenty of other couponers more than willing to help. For example, your "advice" to merchants about coupons actually goes against the advice of other couponers like this thread –

    http://forum.abestweb.com/showthread.php?t=6215

    So that's the problem I have. When your advice is bad and backwards (IMO). And some other stuff you posted in this thread is just ridiculous. I guess we'll just have to agree to disagree on that and take a look at this thread in the future and see how well you've done on some of your predictions.

  36. Kurt Lohse says:

    Hi Carsten,

    Great post – thought provoking and worth discussing.

    The channel conflict you describe in your original post has been discussed before but it is still worthy of continued debate whenever practical examples of conflict occur.

    I come from the fairly rare perspective of having actually earned online, offline, and phone order revenue from online only marketing campaigns consistently over the past 7+ years. I do know a bit about the real impact of channel conflict.

    IMO, unless you are someone like a major retail cataloger who spends a very large share of your operating expenditures on regularly recurring monthly mailings, the percentage of conflict between direct mail and online orders is too small to re-structure your affiliate program. Ultimately, the overlap you describe will be permanently absorbed as a cost of doing business in the offline/mailing channel. This "absorption" must be expected, planned for, and counter-measured prior to the mailing – not afterwards.

    Creating unique keycodes or source codes is probably the most successful way I have seen the conflict minimized though there are technical considerations and not all merchants can handle all the codes they need to track all marketing touch points at POS. This is nothing new. Source codes are how direct marketing has been tracked for over 100 years. The system just needs to be updated to include the breadth of marketers that have become available thanks to online affiliate marketing.

    The splitting of commissions will not work for the vast majority of programs. There are simply too many hungry eyes on the online sale pie, none of who can claim with any level of certainty that they deserve more credit than the other if they were not the last one connecting to the sale prior to the sale.

    I know the direct mailer wants his/her credit for online sales made with the mailings promotional code. But, you know what, I want my share of all the sales I make for hundreds of merchants in store every day because shoppers found sale and product info on my site and decided to go in store to make the sale. The marketing execs "in the know" at the big merchants know it goes both ways. If they were to ever really try to make sale allocation fair, they would find that the big affiliate websites are producing far more sales than they are getting credit for – again I can say this with absolute certainty because I have seen the data. If merchants were to truly split commissions they would ultimately be paying much, much more – not less – due to sales that aren't credited at all to any marketing source – which may have been your point from the beginning.

    As for the coupon site value sub-topic, (and I say this as an old school direct mail marketer and not as a coupon site owner), direct marketing requires 3 components: 1.) and audience, 2.) creative, 3.) offer. Affiliate marketing minimizes the importance of the creative and accentuates the importance of the offer and audience. Offers a.k.a. "coupons", "discounts", "sales", "deals", etc. will only disappear when direct marketing does. Offers are the "sales triggers" most programs need to grow market share and provide competitive leverage at key seasonal periods. Bottom line, outside of niche retail categories, coupon sites are here to stay to serve the broader consumer and retail industry needs.

    As for PPC direct-to-merchant product search marketing, IMO this is a viable business model because there are merchants who do not have the knowledge, tools, or resources to do an adequate job of search marketing on their own – right now that number is many. PPC search affiliates are fronting money on behalf of the clients they serve to buy terms and placements the merchants should be buying on their own – and making a well deserved margin. We operate in this arena too, but IMO it adds less value to the consumer and the merchant and is therefore more susceptible to long term extinction. It is more about outsourcing than marketing or web publishing – though you have to know a great deal about online marketing, search functionality, and consumer research behavior to be able to provide this service well in the first place.

  37. Carsten Cumbrowski says:

    “I remember Aldi over in Germany 🙂 they also have many stores in the U.S., one in my own city. I know you’re supposed to bring your own bags from home for the groceries (or you cay pay for them there) and bag your own groceries. Just another little way they keep the prices down.”

    That thing with the bags is normal for all grocery store chains. There is also nobody to put your stuff back into the bags and carry it out to your car. You have to do that yourself. But Germans don’t want anybody else to pack their bag and they also want to be bothered by an employee in the store who came by accident or not too close to the customer to be forced by contract to ask the customer if they find everything okay and if they need any help. Two things Walmart tried to introduce (which cost them extra money), but was rejected by German consumers. As I said, its a different buying culture.

    Aldi even sold PCs ones, with moderate success. They offered one configuration, no selection of part or optional upgrades, a take it or leave it offer, but for a ridicules low price, because of the volume without special labor cost for customized assembly etc. I wonder, if that would work here in the US. I can already see the picture in front of my eyes:

    Customer: “I am king customer!”, Store: “Shut up!… take it or go somewhere else!”, Customer: “This is an outrage!” …. hehe

  38. Carsten Cumbrowski says:

    Hi Kurt,

    thanks for your comment. Yes, the subject was already discussed before, but not enough in the spaces where it matters. Most web analytics providers don’t provide multiple touch-point tracking yet and the few who do, see only a small number of their clients actually do something with it and use it for their internal analytics.

    Channel conflicts between the online and offline channels and between the online channels itself were not really there in the past, but things are changing and some conflicts are gaining in significance and new conflicts emerge. Paid search is the most prominent one, but it is not the only one.

    Regarding the tracking. Did you also read my article about ClickPath I linked to from this article? It’s pretty interesting. ClickPath positioned itself as analytics provider for paid search primarily, but started to expand into other marketing channels as well, when they realized that their solution is actually flexible enough to fulfill the needs of other channels as well.

    The commission slit is one option, but advertisers could also average out their figures and adjust commission structures accordingly. That would be the same as a retailer who usually has a revenue share program, but wants to take advantage of lead generation opportunities. Those retailers who know things like the average customer lifetime value etc. can determine what they are able to pay as flat commission (bounty) for a new acquired customer to a lead generation service.

    Advertisers should and I am certain will do the actual analytics of incorporating and considering multiple touch-points internally, even if they still pay commissions as they do today. It will have impact on the commission one way or another, because things are getting more and more measurable to allow advertisers to determine much more precisely what works and what not and what is worth how much to them. Behavioral targeting in display advertising is on the same route as the stuff I was talking about here. Behavioral targeting might not change who much advertisers pay on a CPM or CPA basis, but it has impact on the spent on their Ad inventory, what they buy from whom and why.

  39. Pat Grady says:

    “If merchants were to truly split commissions they would ultimately be paying much, much more – not less – due to sales that aren’t credited at all to any marketing source”

    Kurt, we agree on many things you said, which I also thought were thought provoking, but not this one above. The purpose of touch point analysis is to view your channels with a more critical eye and to try (sometimes with great difficulty) to determine the value you (as a merchant) should pay / allocate for certain activities. While I agree some sales will be “found” as you say (and incur a cost), the merchant will learn much more about touches that aren’t as valued (like a BHO setting a cookie automatically right after the merchant’s in-house ppc click and cost occured). Having consulted with several merchants, the data I’ve seen at work shows me the savings to be recognized in properly assigning value is at least one order of magnitude higher than the “found” sales factor for a typical merchant.

    These factors however, are not easy to analyze, the pieces are influenced by more than can be seen by an analytics package (as an example, the affiliate ppc policy’s impact on the merchant’s actual ppc costs) – one must integrate macroscopic views into analyzing the more microscopic data. And often there are circumstances unique to a merchant that means an out-of-the-box analytics package is blind to certain things. One example being, when in the funnel, consecutive affiliates make a touch – many analytics packages, if not most, have to be customized to “see” this happening and to track it and to properly integrate its presence into the output reporting.

    The costs to merchants of blindly assuming that all touches in the affiliate channel are equal AND that they are all contributing to closing or introducing the sale AND that they aren’t impacting other channels is very high. A few merchants are beginning to put their pieces together and recognize what touches they want to pay top dollar for, which they will pay less for and which are just undesired. As this progresses through the marketplace, those who lead will have higher margins, and eventually, many years from now, the majority of merchants who want to remain competitive will have to adapt some of these techniques and lessons learned if they want to compete with those no longer allowing margins to flow out the window through their own ignorance.

  40. Pat Grady says:

    There’s another intangible (or tangible but delayed) to pushing the rewards to where a merchant values it most… in each channel, there are people or teams of people working towards maximizing their productivity and profit, people whose goals are aligned with the merchant… bringing in more sales. They can be in-house teams like seo or ppc or direct mail and they can be outside teams like affiliates or ad agencies, etc. These folks are all trying to get their own sales-to-cost ratios looking good as well.

    It has been my experience, in many facets of marketing and merchanting, that aiming your rewards at the partners you value most, makes those channels more productive for both the people in that channel and for the merchant who benefits from that channel’s work.

    And that’s something very few analytics packages even attempt to measure.

    If you want to grow sales, put rewards where it’s being best earned.

  41. Kurt Lohse says:

    Carsten – I’ll agree with you that better analytic tools are needed in the modern digital age – no question. The lack of reliable, accountable, easy-to-understand analytics on consumer behavior relating to advertising ROI has single handedly created the biggest shift in advertising ever – the one we are seeing today from “mass-brand-guess-work-advertising” to “performance-based-mass-marketing” – and this lack of good info allowed Google (thanks of GoTo’s ad model) to become the largest ad agency in the world in just a matter of a few years. More analytics is always better, but not to craft complicated commission split reports, rather, to understand more about how buyers are going about making buying decisions. Advertisers will always pay to be where their buyers are and overly complicating the pay for sales model will ultimately hurt any big retailers ability to reach the masses via the affiliate channel. It just will. I personally would never accept a pay for sales program where I did not completely understand what I will make off each and every sale I generate. I suspect most major online publishers in this space would agree with me because it makes our jobs way to difficult and puts us in the precarious position of losing money. And I suspect any type of commission split program will be unfair because of all the arbitrary assumptions that must be made no matter how good your analytics are. One of the many beautiful things about online performace marketing is that it is simple – PPC – you pay x per click; CPS – you pay me x% for x$ of sales. If you mess with this simplicity too much, the large publishers will opt out of those programs and go back to selling CPC spots or CPM banners – and we all know that would be a step backwards.

    Pat – I think you are drastically under estimating the number of sales merchants believe occur “naturaly” because of brand recognition or loyalty. If you had the analytics tools to understand which websites people visited and what pages or products they reviewed before walking into a store and making a purchase – and if you could appropriately set up a way to pay those websites a split of the standard affiliate commissions they would have otherwise earned online – believe me, the merchants would be paying far more in total commissions than they would save by reallocating a few points from “website A” to “direct mail vendor B”. Brand loyalty is one of the biggest myths of the dying old ad agency age. Sure there are some small percentage of “brand loyalists” out there that shop at single source retailers, but they don’t do any research online before they shop. They don’t search, read product reviews, look for coupons, or spend much time on competitor’s websites – and I’ll bet they represent less than 2% of the shoppers in any merchant’s house file. Shoppers who claim they are loyal to Merchant A will question each and every purchase they make. Websites like mine are filled with brand loyalists looking for a reason or no reason at all to shop somewhere else. The reality is that every new sale has to be won. It’s a constant battle for merchants to win over their competitor’s brand loyalists nd their own customers – and companies like mine are the most cost effective ways to wage that war. Remember, if you want to really save merchants money, try applying all of the great analytic tools on the least accountable lowest ROI forms of avertising first: like TV, Radio, Direct Mail, Print, etc. It doesn’t makes sense to start razor cutting into the most accountable and fair forms of adverting yet invented before you trimmed the excessive fat and spending in these other areas first.

    And lastly, I would love to see the direct ROI report of the analytics tools and reccomendation process, all the man hours, analysis time, debate and implementation, fall-out resolution, etc. that (IMO) might make the whole commission split theory cost more than its worth before it ever gets to implementation stage. Since everything is being cut with the fine razor of accountability these days, let’s start with the analytics tools ROI and consultancy fees first.

  42. Pat Grady says:

    “I think you are drastically under estimating the number of sales merchants believe occur “naturaly” because of brand recognition or loyalty.”

    I do understand your point and there’s validity to it, but the work I’ve done has showed me a different perspective on the magnitudes of channel cannibalization versus your no-brand-loyalty outlook.

    For instance, I’ve seen merchants stop their in-house PPC because the “returns” on their affiliate channel were “so high” and the merchant says things like “PPC doesn’t work anymore”. I look into things for them and they’re not monitoring when an affiliate uses adware to take credit for the sale from their PPC, or the BHO overwrites their ppc, or the coupon affiliate who gets tagged as “making” the sale, or the domain name bidding affiliate who grabs those who seek out the merchant by name on return days… same thing for seo, direct mail, brand building etc (not just their ppc)… this article is about channel conflicts, and recognizing those conflicts and dealing with them in a way that’s most productive for the merchant is paramount to their success and their ROI, as well as that of their partners who contribute towards the merchants goals.

    Your arguments about ownership of a customer are valid, there’s no such thing as owning them forever or even for very long – but “loyalty” programs that interfere or mask the various bona fide sales producing activites (note i didn’t say customer acquisistion activities) lead merchants to focus on the wrong areas to grow their business.

    I’m an affiliate myself and it’s very plain to me that the affiliate channel is highly over rated – because it too often cannibalizes from a merchant’s other channels (and within the aff channel, there’s too often cannibalization as well). For the vast majority of affiliates, it’s not because of what they are doing or even intend to do, but rather because the merchant doesn’t understand what’s happening and they’ve made poor decisions and have otherwise allowed the channel conflicts to remain unexplored and unresolved.

    “The reality is that every new sale has to be won. It’s a constant battle for merchants to win over their competitor’s brand loyalists nd their own customers”

    I agree, each new sale has to be won. Overall, I’m just saying that if Party A won it for you, paying Party B for winning it, is misplaced. And, I’m also saying determining who won it, when there are multiple touches, isn’t easy, but it’s possible to construct reward systems than are far better than not looking at the issue at all. And lastly, and MOST importantly, well before you even think about splitting channels or figuring out the best way to allocate sales credit or it’s rewards to maximize your results, the hunt for, and elimination of, touches that are of no value must be done. It’s destructive to try to split anything (or alter the split) among parties if some of them are non-contributors. If you start thinking about your aff-coupon sub-channel or aff-ppc sub-channel for instance (both of which have some value), and you’ve got poachers and adware affiliates and bho affiliates, you won’t achieve anything productive at all.

  43. Carsten Cumbrowski says:

    “they’re not monitoring when an affiliate uses adware to take credit for the sale from their PPC, or the BHO overwrites their ppc, or the coupon affiliate who gets tagged as “making” the sale, or the domain name bidding affiliate who grabs those who seek out the merchant by name on return days… ”

    Merchants became more and more aware of that issue within the last two years and it does not require complex multi touch point analysis to figure out that this hurts a merchants bottom line. Merchants who still don’t know about this stuff and/or didn’t do anything are also the ones who will not use multiple touch-point analysis. Those are usually merchants who have a lot more problems internally than poaching, typosquatting and cookie-cutting affiliates.

    However, it could be used by the analytics team to detect rouge affiliate managers who benefit from this bad affiliate behavior in one way or another or to proof that the affiliate manager is not worth the money he is paid for not doing his job, but this is again a different suject. Lets put it this way, there are not only affiliates that behave bad. A lot of the “getting away” with it has to do with “not taking actions” by other parties who benefit from this behavior, including entities who are supposed to be on the advertisers side and his “friend”.

    “same thing for seo, direct mail, brand building etc (not just their ppc)… ”

    Now we are talking again :). There it is much harder to determine what is actually going on and where you can “guess” awefully wrong. Advertisers are often not aware that a change in behavior in one channel can have positive or negative impact on another channel. Todays analytics also cause the over valuation of some channels and at the same time the under valuation of others. This is where multiple touch-point analysis can help. It will still not be perfect, but provide deeper inside into the different conversion processes that take place in a world that gets more and more complex.

  44. Pat Grady says:

    Two hungry cousins…

    One guy finds and manages to herd some wild hens onto his uncle’s free range ranch.

    His cousin waits and pulls the string on the stick that causes cage to fall and the chicken to be caught in the trap.

    Uncle Buck lops it’s head off and ships it out.

    A stranger shows up and claims he hypnotized the hen into conceding. The now-dead hen doesn’t deny his influence.

    Uncle Buck’s got 3 quarters in his hand as a reward.

    There’s no sense at all in Uncle Buck or the cousins having any conversation at all about what’s equitable (or motivating, or good for Uncle Buck’s business) until the stranger gets booted and run out of town.

  45. Carsten Cumbrowski says:

    Kurt,

    I actually agree with you on that one as well, even if it did not come across that way.

    “never accept a pay for sales program where I did not completely understand what I will make off each and every sale I generate”

    I honestly do not like the revenue share model as it today, without things like multiple touch-point analysis and commission split. This is because I am an affiliate that is working towards customer acquisition and not support (and some cases diversion) of converting existing customers for future sales (retention). The revenue share model would only be of interest for me, if I would receive some commission for any future sales generated by this new customer, online AND offline.

    Revenue share requires already more trust in the advertiser. There is always this risk that a merchant “forgets” to report larger ticket sales for which commission would be due. Its always the question about how much is enough to corrupt somebody. $1, $10, $100, $1,000 and how likely it would be that he would get away with it. That equation requires an awful lot of trust of the affiliate into the advertiser, especially in the medium price range consumer market with less than $100 in average commission per ticket.

    When Marissa Mayer from Google said during her keynote at the SES San Jose last year that “CPA is the holy grail”, which is also affiliate marketing to a large degree (even with display advertising now dominated by CPA versus CPM), did she not say affiliate marketing or revenue share, which is automatically associated with affiliate marketing by many.

    That was no accident IMO. I prefer CPA deals today. They are more straight forward and bear a lower risk that an advertiser tampers with reporting commissionable actions. There is no temptation to fail to report a transaction here or there, because its always the same at stake. CPA has the advantage that it is much better scalable, but the disadvantage that many advertisers must understand their own business very well in order to determine what the right action is and how much the appropriate value for that action is at the same time.

    Retailers for example can offer CPA too, some already do. If you know your average customer life-time value and how good of a job you are doing in converting new customers who decided not to buy at the first time into happy and profitable buying customers.

    Multiple touch-point analytics will help them with the determination of the value of a certain action by a publisher as well. An action could for example be the conversion of a paid search affiliate referred visitor to a customer versus another action that could be the conversion to a customer by a referred visitor from a content site affiliate who does product or services reviews. Both actions could have different values attached to them. It would still be transparent to the individual affiliates, but more realistic for the advertiser. Not every customer acquired is worth the same. Advertisers start to realize that the “how the customer was acquired” has direct impact on the customer life-time value.

    Man, I am getting off the main subject again 🙂

    Good comments though from you and from Pat and worth writing several new posts about in the future hehe.