April 19, 2005
If you're a typical eretailer, affiliate-driven customers make up to 20% of your revenues. The problem is, many affiliates don't care about your brand. They're solely driven by the size of their commission checks. Which can lead to campaigns running the gamut from great to slightly cheesy and amateurish to downright dishonest. How can you keep your logo and your brand name safe (not to mention avoiding insane search engine arbitrage)? Discover how leading edge eyewear and apparel retailer Oakley runs a strong affiliate program while protecting its brand. (Hint: they turn down 93% of potential affiliates who apply).
Can aggressive affiliate marketing coexist with careful brand management?
Last August, Ryan Erwin, General Manager of Oakley Inc's Direct Division (NYSE:OO) wanted to launch an affiliate program to boost the site's ecommerce sales.
But he didn't want to risk upsetting the brand's enormous consumer fan base. "People who love the brand *really* love the brand," he says. Without stringent policing of affiliates, the program could backfire. "It was really important that we not denigrate or negatively impact the brand."
How do you ramp up affiliate sales ... safely? Erwin's team used five specific tactics:
Tactic #1. Recruit aggressively
In order to know what terms other companies were offering, Erwin's team signed up as an affiliate through their affiliate service. That way, they could view other advertisers' terms and compare what they themselves were offering.
Erwin's team ran a 30-day ad on the sign-in page of Oakley's affiliate management service. The ad contained the Oakley logo, plus a basic commission offer: 7% on all sales up to $5,000 per month; 10% on anything after that.
"7% is a little high for apparel, and 10% is definitely high," Erwin says. But he's aware that competition is high to get top affiliates -- and you can lose an affiliate quickly to companies with better offers.
With that in mind, Oakley allows affiliates to receive commission on sales for up to 45 days (the range is generally from 30-45) from the time a customer first clicks through to the Oakley site. And, unlike many programs where an affiliate only gets a commission on a first-time customer or gets a decreased commission for repeat customers, Oakley offers affiliates full commissions each time a customer accesses Oakley through the affiliate site.
Tactic #2: Filter applicants just as aggressively
"This is not your typical program where you recruit any affiliate," Erwin says. "We wanted to have best-in-breed affiliates."
Once recruits started rolling in, Erwin's team picked through them carefully for the right affiliates for their brand. They looked at three indicators:
o Affiliate management service's ranking
The service Oakley uses to manage the affiliate program ranks affiliates in two ways: by average revenue per click and by a more subjective number (one through five) that is based on the quality of the affiliate site, the relationship history, the affiliate's record of playing by the rules, etc. Erwin's team chooses only affiliates in tiers four or five with a strong revenue per click.
o Manual site checks
The only way to have a truly high quality affiliate program is to check sites manually, Erwin's team believes. "We literally went to thousands of Web sites." They looked at the sites each affiliate controlled, the marketing messages they employed, and whether Oakley fit into that mentality.
o No price-based incentive sites
Oakley never offers price-based incentives because the company needs to maintain strong relations with retail channels. So no affiliate that passes discounts along to the customer makes the cut. This means coupon sites -- the mainstay of many other eretailers' programs -- won't make the cut.
In the end, Oakley only allowed in approximately 7% of people who have applied to the Oakley program, which now has about 200 affiliates.
Tactic #3. Develop strict criteria for affiliate marketing tactics
As you'd expect, Oakley has rules about the marketing activities affiliates can take.
o No email campaigns: Oakley does not allow affiliates to engage in email campaigns, even though the company's affiliate service is integrated with Unsubcentral and could ensure that nobody on Oakley's Do Not Email list was getting mail from affiliates.
Erwin believes that affiliate emails, no matter how well done, will eventually result in damaging the brand. To enforce the policy, Erwin signs up dummy email accounts to each affiliate’s newsletters, and the accounts are checked weekly.
o No pops: Again, this could damage the brand.
o Restricted paid search bidding: Affiliates can participate in paid search but can only bid the minimum for trademarked terms.
Erwin's team proactively polices affiliates to be sure they're continuing to follow the rules. Twice a week, the team runs a report that allows them to track specific purchases back from the purchase point to the original link, to view a customer's entire experience.
In addition, once a week, the team picks a handful of sites at random and spot checks them.
Tactic #4. Seasonal incentives
Because Oakley's business is seasonal, with top sales in the summer or at Christmas, Erwin's team has been testing a few tactics to stimulate ecommerce activity during the spring.
Currently, they're offering additional commissions: 8% at $3,500, and 12% at $7,500. "It's the first time we've tried a contest," Erwin says. "We're only 10 days into the month and we're already higher than we were last month."
Tactic #5. Communicate frequently
Erwin sends newsletters to his affiliates at least twice a month, talking about new products and incentive programs, and offers a product catalog that affiliates can receive via a data feed and show portions of it in real time on their sites.
His team is in touch more often with Erwin's top affiliates (about 10% of their 200 affiliates generate about 80% of the revenue). "We communicate on a weekly basis through email or the newsletters. Sometimes they ask for specific links other than the ones they already have, so we’ll set that up for them."
As summer approaches, Erwin's team is considering another active recruitment program. However, it will continue to be a search for the elite. "From a strategic aspect, it makes more sense to have an exclusive program because you want to have control over your outside marketing force."
Useful links related to this article
MarketingSherpa Report: Affiliate Marketing 2005 -- Do Merchants & Affiliates Have Unrealistic Expectations? http://library.marketingsherpa.com/sample.cfm?contentID=2878
MEA Digital - Oakley Direct's interactive agency who helped design the affiliate program: http://www.meadigital.com
Commission Junction - The affiliate management program Oakley uses: http://www.cj.com