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  1. #1
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    Proposal: Separate 'channel' for charity, incentive, and loyalty
    I think one of the problems, when dealing with "incentive affiliates," is that networks and merchants use a single model ("affiliate") for very different marketing activities. I'd like to suggest an alternative.

    The core issue, for me, is whether an "incentive" or "loyalty" site adds marketing value: does the involvement of the loyalty or incentive site bring me new business? In most cases, the answer is "no," or the incremental business is nominal. (Of course, there are exceptions.)

    But for the merchant, there are other considerations. Brick-and-mortar retailers recognize that they can benefit from supporting non-profits (which I'll define to include charities, PTAs, Little League, Girl Scouts, Rotary Clubs, etc.). And B&M retailers also recognize that these are a separate piece of their marketing puzzle.

    There really is a real-world analogy here:

    (1) A local pizza restaurant allows school groups to host fundraising events (usually on Tuesday evening), in which the restaurant donates a percentage of ALL SALES during the specified hours to a school program. If someone redeems a coupon, the restaurant still honors its committment to share revenue with the school; they don't decide that because one marketing channel (couponing) is clearly documented, they can ignore another marketing channel.

    (2) Some restaurants operate their fundraising events differently: they agree only to share revenue from those customers who bring in a flyer to show that they came for the fundraising event; revenue is not shared for customers who don't bring a flyer. (The server is expected to attach the flyer to the check, so that these checks can be separated and counted.) Sometimes, customers can also use coupons; sometimes, they cannot.

    Either way, the restaurant believes that the group will bring in new customers -- but in example 2, the restaurant will only pay a share of revenue if there is "clear proof" that customers were "pushed" through the channel, and not some other channel. In example 1, the restaurant has made a committment without conditions; the owner hopes for new business from the promotion, but the bargain is different.

    I think that merchants need to identify and manage "incentive, loyalty, and charity" sites and services separate from affiliates, and should not allow either to interfere with the other.

    Another real-world example: Target stores encourage patrons to sign up for a program so that a percentage of their purchases are credited back to a local school. I'm sure that program is managed and measured completely independently from their other marketing; I'm not sure if revenues from online purchases (which might have an affiliate referral) are also shared.

    Merchants must start looking at ways to fairly compensate all their marketing partners, while also supporting consumer choice and preference. The logical solution here is to create a separate "channel" for loyalty/incentive/charity services -- separate from "affiliate" programs. And while we're at it, perhaps merchants should also split "coupon affiliates" as a separate sub-group, to be compensated independently of other affiliates. And maybe the merchant's in-house PPC should be a separate channel, too.

    What I'm suggesting is a very complex solution: some transactions might actually be credited to all four channels (incentive, coupon, affiliate, and PPC). But the merchant would design its programs to allow for this.

    To work effectively, I believe that a "multi-channel" implementation would need to be supported by one or more affiliate networks.

    Thoughts? Feedback?

    Added: Another channel to consider is the tele many merchants treat telephone orders as completely separate from online orders, and don't compensate affiliates for orders which were "placed" over the phone; a few merchants actually allow a "phone assist" to bump the affiliate, so that even if an online order is placed, the affiliate is not paid. Given the frequency of "phone assisted" orders, this is probably an additional, separate channel to be included in the mix.
    Last edited by markwelch; November 20th, 2008 at 12:47 PM.

  2. #2
    Moderator MichaelColey's Avatar
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    This was discussed some in this thread.

    So with the possibility that four channels would get credit for a sale, how many merchants offering a 10% commission would drop that commission to 2.5%?

    As pointed out in the other thread, the real problem with a solution like this is that many merchants only credit the last "channel" that touched the customer, so putting loyalty in a separate channel has no real impact.
    Michael Coley
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  3. #3
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    Michael: No, I would certainly not expect merchants who structure four channels to split a 10% commission equally among the four channels. Nor should merchants allow one channel to overwrite another.

    Let's assume that a merchant currently pays a 10% commission, and decides to add separate channels for affiliate, coupon, incentive, and telephone. Compensation for each channel should be based on value-added. I would expect that the merchant might pay 2% to 3% to coupon and incentive sites, and 8% to 9% to affiliates who are not coupon or incentive/loyalty sites. If telephone sales staff are rewarded based on sales, then an appropriate percentage would be allocated to that channel. Most transactions would only be credited to a single source; very few transactions would be credited to three sources (but if a transaction did trigger all four channels, the total advertising cost for that transaction might exceed 15%).

    I certainly agree that it's reasonable to be skeptical about how many merchants would implement a "multi-channel system," because many merchants are managing their current systems very poorly. I also suspect that the larger affiliate networks would prefer to keep things muddier by mixing everyone together, since that makes it hard for most merchants to effectively police unethical affiliates (and thus the networks collect more fees).

    Do any affiliate networks currently support a true "multi-channel" affiliate system? Should they?

  4. #4
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    Clarification: The fact that I've identified separate channels here (traditional affiliate, coupon, incentive, PPC, and phone) is NOT intended to suggest that every merchant should implement all of these channels. If a merchant concludes that a specific "type" of affiliate does not add value, then they would exclude them from any paid channel; if the merchant excludes all incentive/loyalty/charity sites for this reason, then that channel would simply not be implemented. As a skeptic, I also assume that some merchants would choose not to "properly implement" a multi-channel system; that's one reason (in addition to complexity) why I think a multi-channel system would best be implemented through a network.

    I also strongly believe that compensation for any channel should not be contingent on engagement of other channels -- I don't think a "commission-split" model would fairly compensate participants in each channel.

  5. #5
    Moderator MichaelColey's Avatar
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    Quote Originally Posted by markwelch
    Nor should merchants allow one channel to overwrite another.
    That would be great, but it's unrealistic. Merchants do it now and the networks don't do anything about it.

    I don't see where something like this would get any support.

    Coupon affiliates aren't going to like it because your model implies that coupon affiliate traffic is less valuable, while many coupon sites delivery excellent, profitable traffic to merchants.

    Loyalty sites aren't going to like it because they'll be relegated to a considerably smaller percentage than they're getting right now. Currently, most big loyalty sites demand considerably higher commissions than normal affiliates. (Some rebate sites pay a higher rebate than what a base affiliate makes, and rebates sites typically only pay 50% of their commissions out as rebates, so those sites are getting more than double what a normal affiliate does for those merchants.) They want the whole pie.

    General affiliates aren't going to like it because their commission rates will drop as some credit is shifted to other channels. Sure, they might improve their conversion since they're not losing sales to loyalty sites, but the commission rate is what they look at.

    Most merchants are clueless when it comes to these channels, so very few of them will be a champion for something like this.

    Networks would probably like to get their hands on each of these channels (and thus a cut), but they already do, so I don't see them getting in line behind this.

    It's a fine academic discussion, but I don't see it ever taking off.
    Michael Coley
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  6. #6
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    "Compensation for each channel should be based on value-added. I would expect that the merchant might pay 2% to 3% to coupon and incentive sites,"

    No.

  7. #7
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    Michael wrote (in part): > "Coupon affiliates aren't going to like it because your model implies that coupon affiliate traffic is less valuable, while many coupon sites delivery excellent, profitable traffic to merchants." <

    An increasing number of merchants already have lower rates for coupon sites -- and my understanding is that although the coupon site gets a reduced commission, the coupon site's link usually overwrites any previous affiliate link.

    This isn't the place to debate the relative value of different channels; the question is whether affiliates and merchants would benefit from implementing a multi-channel system.

  8. #8
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    No.

    Only a few merchants have lower rates for coupon sites. I have over 1000 merchants on my coupon site and can count on one hand how many have lower rates. So would disagree with increasing number.

    "the coupon site's link usually overwrites any previous affiliate link."

    Anytime an affiliate link is clicked, it overwrites any cookie from a previous affiliate link. It could work in your favor too. A shopper might have a cookie from my site but go to your site and let's say click a product link or something and that overwrites my cookie. That's how things work.

    And coupon sites are one type of site, different from charity or some other sites.

    Reality is coupon sites drive a lot of sales and people, even moreso with this economy, are looking for them. So you don't decrease the commission on sites that drive sales.

    I've read your site before and know you don't think too much of coupon sites, it's why I don't put much credence in your posts on them because what you had on your site is off and bad advice for merchants.

  9. #9
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    I think that there is also a big problem with crossing over. For example, a coupon site may have member reviews of merchants, which creates a different value than just a coupons. A loyalty site might have videos of products, which creates a different value than just cash back. Either might have a forum or blog that is the most active part of its site. Do you then have hybrid sites that are considered both coupon and loyalty and content? With social networking, it seems like the lines are starting to blur even more.

    Plus, throw in something like GoldenCan. Does its feed conversely make a content site into a coupon site because that site now has dedicated coupon pages?

    Academically, I think we all see flaws in the system. But I think that what seems like a simple solution of just separating them all out actually becomes really complicated because you can't draw lines in the sand to truly define all sites.
    --Tricia Meyer-- I love being the exception to the rule.

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  10. #10
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    I have a problem with the concept of separate channels that is similar to the problem I have with multiple networks. It makes it too easy for a dishonest affiliate manager or merchant to hide the baby in the bathwater.

    I used to promote a merchant on SAS, CJ and in-house who reversed lots of sales claiming that they had gone to the affiliate cookie on another network. No way for me to prove or disprove that so I either had to believe they were truthful or ditch them. I ditched them.

    Good concept but the implementation would require diligent oversight.

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