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July 20, 2009 |
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| Online Marketing Channels Commentary |
Affiliate Marketing vs. Direct Marketing To Marketing Channels
by Chip Arndt, EVP & Co-Founder
 Miami, FL (July 20, 2009) – Last month many ecommerce merchants called in to ask about the value of using Affiliate Marketing Companies to proliferate/list their products online versus sending their products and working directly with Non-Affiliate Marketing Companies. I don’t see the online marketing landscape as an either/or scenario when it comes to using affiliate sites to help online marketing initiatives and, alternatively, sending your product catalog data to a marketing channel directly. I see them as complimentary.
First of all let’s all get on the same page to define an “Affiliate Marketing Company and/or Channel” and what we mean by “Direct Marketing”.
Affiliate Marketing Company/Channel Definition:
MerchantAdvantage defines an “Affiliate Marketing Channel/Company” as a company that brokers an online merchant’s products to numerous Websites that market and sell products to consumers. The affiliate site charges fees for this service based on various payments structures unique to each affiliate, often there is an initial set up fee included in with commission fees on sales. The most common payment methods are based on pay-per-click fees or a cost per thousand of impressions. There is no set business model when working with an affiliate. Affiliates do compete against each other and they all purport to do the same thing = “broker” your products to hundreds of Websites that introduce your products to a consumer to “hopefully” buy.
There are many examples of affiliate marketing channels, some include: (listed in alphabetical order and NOT in order of importance, ease of working with them, cost, or reach)
www.Avantlink.com
www.BettyMills.com
www.ClassifiedFlyerAds.com
www.ClickXchange.com
www.ClixGalore.com
www.CommissionJunction.com
www.DigitalGoodsDelivery.com
www.GoldenCan.com
www.Google.com/ads/affiliatenetwork
www.Half.com
www.iShop.co.uk (UK-London based)
www.Kolimbo.com
www.Lemonade.com
www.Linkconnector.com
www.LinkShare.com
www.PepperJamNetwork.com
www.PriceScan.com
www.SecretPrices.com
www.Shareasale.com
I am sure there are many more affiliate sites, but this is a start if you decide this type of marketing strategy is right for you.
NOTE: Not every affiliate will work with you if they don't think you’re big enough to support their affiliate network or your Web storefront is poorly structured. Some of those listed are small, some are very large, and others are niche and they all have their own pricing model to work with them.
Okay, now what do we mean by” Direct Marketing to Marketing Channels”?
Direct Marketing to Marketing Channels Definition:
MerchantAdvantage defines “Direct Marketing to Marketing Channels” as working with any marketing channel directly, regardless if they are supported by an “Affiliate Marketing Company and/or Channel” or not. These marketing channels include:
- Shopping destination sites and consumer shopping engines, such as Become, Coupon Mountain, Like, MyCoupons, PriceGrabber, Pronto, Shopzilla, and Smarter
- Online marketplaces, such as Amazon and Go Daddy
- Third-party, marketing, solution companies that help ecommerce merchants with site search, reviews, remarketing and direct targeting to customers of data across the Web, email, and a myriad of other marketing solutions.
For MerchantAdvantage, working directly with any entity that requires a product catalog data feed to facilitate their marketing efforts on your behalf is considered “Direct Marketing to Marketing Channels”. And the irony is that this also includes any “Affiliate Marketing Company and/or Channel” that requires a data feed, which they all do.
Definitions Out Of The Way = What Next?
MerchantAdvantage understands that there is no perfect method of marketing, online or offline. Everyone has to dive into the process of testing, or as some like to call it…”trial and error.” There is no perfect solution for everyone and the good news is that there are ample methods in the marketplace to find the solution that works best for you.
Many etailers work directly with marketing channels to save money, i.e. they have the infrastructure and personnel in-house to manage marketing strategies and their return on ad spend without relying on affiliate sites to find the proper marketing channels for them; thus the etailers do not pay associated “broker/affiliate fees” and higher commissions on sales, which can range from 1-10%+ of the gross sale. In many cases, sophisticated etailers supplement their direct marketing efforts and use affiliate sites to reach harder to identify niche, Websites, blogs and other sites to list their products.
Other merchants find that working directly with some marketing channels, such as consumer or comparison shopping engines, is too time consuming and they have difficulty managing pay-per-click campaigns effectively to justify ad spend, especially when products are generic and you are competing against large and entrenched etailers with huge ad budgets and in-house marketing experts. In theory, affiliate marketing overlaps with direct marketing and vice-versa.
In theory, “Affiliate Marketing Companies and/or Channels” should access many of the marketing channels you want to reach. In theory, the costs to work with an “Affiliate Marketing Company and/or Channel” should equate to be about the same it would cost to work directly with a marketing channel…or do they? This is why both methods of marketing work and both can be more cost-effective than the other depending on how you manage your marketing strategies.
Well, theories are theories. MerchantAdvantage has found that the best online marketers actually compliment marketing efforts using some “Affiliate Marketing Companies and/or Channels” with Direct Marketing methods for a few reasons:
- Affiliate Marketing Companies and/or Channels" help with:
- Reach
- Simplicity of sending one feed
- Direct Marketing to Marketing Channels help with:
- Control of data, real time updating of marketing strategies implemented in data feeds
- Product catalog data feeds sent directly to a marketing channel often solve technical issues in real time
- Relationships = you get better pricing and support from marketing channels when you work with them directly
- Cost control = it is often more cost-effective to work directly with a marketing channel, if you know what you are doing, and you can manage pay-per-click fees more effectively higher commissions on sales that Affiliate Marketing Companies and/or Channels charge
- Targeted reach = not every “Affiliate Marketing Company and/or Channel” works with the channels you want most
- Functionality = “Affiliate Marketing Companies and/or Channels” often do not support third-party vendors that are not marketing channels and require specific product catalog data feeds
If you are a sophisticated ecommerce merchant, using “Affiliate Marketing Companies and/or Channels” often are not cost-effective as you have the technical resources and personnel to manage their marketing campaigns effectively in-house. And, many of the marketing channels you could be working with directly alleviate the fees Affiliate Marketing Companies collect from you, the merchant.
If you are a smaller ecommerce merchant, and you don’t have the resources or money to manage channel marketing campaigns, then it is probably more cost-effective to work with “Affiliate Marketing Companies and/or Channels” and allow them to arbitrage your costs across their platform.
If you are a merchant who wants to work with non-marketing channels that require a product data feed to work with them, then you will have to learn how to be a direct marketer to these sites, as “Affiliate Marketing Companies and/or Channels” often won’t support such specific needs.
The technical pros and cons associated with “Direct Marketing to Marketing Channels” and “Affiliate Marketing Companies and/or Channels” are covered below.
So, regardless of what path you choose, it is important to know that you have choice in how you proliferate your product catalog data across online marketing channels. And, with choice comes trade-offs between costs, time, and skills required to manage your online marketing campaigns and the functionality required to work any number of marketing channels and third-party vendors that require a product catalog data feed.
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| Advice, Tips & Tricks |
Technical Pros and Cons: Affiliate Marketing vs. Direct Marketing To Marketing Channels
By B. Thomas Romeo, Sr. Technical Engineer
 Miami, FL (July 20, 2009)— I recently fielded the following question from a client: “Why would I feed direct to a consumer shopping engine or shopping destination site if I’m already feeding to them via an affiliate program?”
This is an excellent question and there are many reasons why it is often better to work/feed directly to a consumer shopping engine/shopping destination site.
There are a few definitions we need to agree upon for the purpose of this article.
First: by affiliate program we mean Affiliate Aggregators such as Commission Junction, Link Share, ShareASale, and others named above. Second: by shopping destination sites we are referring to Consumer Shopping Engines (both free and pay per click) such as Like, NexTag, PriceGrabber, Pronto, thefind, Shopzilla and many others.
Traditionally, Affiliate Aggregators charge a percentage of revenues for sales generated by “affiliate publishers” which the aggregator introduced to the ecommerce merchant. These commissions range between 1-10% of the gross sale.
To follow the cookie trail…the Aggregator is the company that introduces merchants to companies which are then willing to send business to ecommerce merchants, also working with the Aggregator, for commissions which are shared with the Aggregator.
The “affiliate publishers” include Websites that act as aficionados with respect to a certain industry. These Websites include news and media providers, bloggers, and other Websites which generate traffic but do not have direct ecommerce offerings.
Since comprehensive product listings exist with Aggregators, the Aggregators created a business where they can simply “feed” product catalog information to other Website destinations that want to sell/list products on behalf of ecommerce merchants. The driving force behind that decision was that many ecommerce merchants didn’t want to pay pay-per-click fees for leads charged by shopping destination sites/consumer shopping engines/comparison shopping sites, and adopted an affiliate pay-per-acquisition business model (as the aggregators charge). Some ecommerce merchants feel this is a better business model for them and this is often true.
So, there are two reasons an ecommerce merchant may want to reach out to various Websites that sell their products via an Affiliate Aggregator rather than feeding directly to these destinations separately:
- It is easier to create one feed rather than many different feeds required by the various shopping destinations, and
- Payment is pay-per-sale and not pay-per-click, which could be considered a commission payment rather than a marketing cost which keeps a “check” on fees with respect to sales, although the pay-per-sale commissions charged are often high.
And, One Last Note!
As a middle ground to this discussion, there is an issue which I think of as “a wash”.
If you feed to a “Free” shopping destination site using any “Pay” model, you generally are ranked higher in priority when shown on the “Free” shopping destination site -- their priority in listing products is: paid, data feed direct, and then scraped. In this scenario, when you work with Affiliate Aggregator to send your products to a “Free” shopping destination site, you now pay for placement on a free site. I see this as a wash.
That does, however, lead me to address why many ecommerce merchants prefer to feed the product catalog directly to marketing channels and NOT use Affiliate Aggregators.
To answer the basic question of: “Is it better to pay dollars per sale, i.e. a percentage of the gross, or pennies per click, i.e. how pay-per-click models work when redirecting traffic back to your Web storefront?” …it is necessary to have a thorough understanding of the percentage commission per sale you are paying now, number of sales per month, and total cost per clicks you are paying, if any.
But wait!!! If you know that, then you are measuring your marketing efforts. So, if you’re measuring your marketing efforts, doesn’t it make sense to control all these marketing issues rather than just report after the fact?
What I mean is that if:
- You are aware of your click to purchase conversions, and
- You have a tool to convert your content and select which products you send and monitor on a daily basis
Wouldn’t it be better to be in a position of control over your marketing efforts rather than to get a report at the end of the month telling you what already happened from an Affiliate Aggregator?
In the end, online retailing is largely about marketing and ecommerce merchants should clearly control as much of their marketing efforts as possible, in my opinion. So if a merchant is using a tool-based marketing tool to help cost-effectively and efficiently manage their channel marketing strategies – such as MerchantAdvantage Channel Management w/Chanalytics - the ecommerce merchant should be able to easily feed to whatever channels THEY select and optimize and convert their product information and selected products in the manner that an a real expert would choose. And, MerchantAdvantage believes that the ecommerce merchant IS that expert.
So, the issue at the root of this question is how involved do you want to get?
It is often easier to simply send one feed to an Affiliate Aggregator, we understand that fact. So, if you are a retailer that simply wants to get a few products out to some channels and guarantee that the fees won’t outweigh the sales based on a thorough understanding of the commissions charged, then Affiliate Aggregators will likely do the trick.
However, if you are a “marketing warrior” and feel YOU are more qualified to make marketing choices and implement directives than an Affiliate Aggregator, and you have the right tools and reports at your ready to market intelligently, save money, react in real time, and control your marketing channels and branding efforts then …well, you know how I feel about it...Direct Market! |
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About MerchantAdvantage
MerchantAdvantage (www.MerchantAdvantage.com) is an e-commerce software solutions company that focuses on working with companies, agencies, and e-commerce merchants that rely on data feeds. MerchantAdvantage takes a systematic, controlled and proactive approach to online product marketing by providing long-term, cost effective, Web-based software tools that enable an online business to grow by reaching the widest audience possible via online, broadband, and wireless devices.
MerchantAdvantage's applications are designed to connect the online retailer to their marketplace partners in a seamless motion of communication, allowing online merchants to take control of their e-Commerce and m-Commerce channels, marketing strategies and IT solutions. MerchantAdvantage currently markets over $3 billion worth of product value daily, representing over 1,000 online storefronts and is changing the macrocosm of ecommerce by staying ahead of the curve in providing business solutions to the growing online retail marketplace. They are here because your commerce future is online and wireless. For more information, please visit MerchantAdvantage.com, e-mail us at sales@MerchantAdvantage.com or call us at 1.800.550.9466.
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