Affiliates: Trusted Allies Or Conniving Cannibals?

It is not uncommon for businesses to find that the relationship they have with their affiliates is one of the most difficult to handle. On the one hand, affiliates can be valuable partners that provide leads and sales for your company. But on the other hand, they are independent entities which require compensation for their services and have their hearts equally divided between your best interest and their own. But if you stop and think about it, this is not an unusual situation: your business probably relies on a number of providers and suppliers with whom it has built a relationship of trust based on mutual dependence.

One of the most common points of conflict is perceived to be the moment when a business is asked to decide whether affiliates—for example, providers of voucher and coupon services or cash back sites—should be allowed to bid on trademark brand words. If they are allowed to do so, consumers entering “M&S” in the search engine, for example, will not only find the link to www.marksandspencer.com displayed on the search page, but also links to a number of websites offering discounts and vouchers for the purchase of Marks and Spencer’s products. If you use affiliates, it is up to you to ensure that your site comes out on top in search rankings, and affiliates are unlikely to bid on your brand so intensely that they knock you out of the top ratings.

If affiliates really are more popular than your company’s own ecommerce site—and they feature higher in the page rankings than the company’s own website—customers searching specifically for your brand are very likely to end up purchasing the product via a website other than your own. The lead gained will then have to be paid for by your company, somewhat reducing its value, even though the consumer would have clicked on your site and not the affiliate’s had the rankings been more favourable.

A burning issue for businesses that have experienced this shift in attribution of sales leads: are the high-ranking affiliates cannibalising sales or is it simply a case of improving the traffic to the brand’s own ecommerce site? Improving your paid-for search results as well as your natural results should be the pressing issue for a business whose affiliates are attracting more traffic than the main site. If the consumer typed in a specific brand term, they almost certainly have been influenced to some extent by the brand’s own marketing and advertising; failing to optimize search lets these efforts down in the last lap. Understandably, however, businesses feel that affiliates should not charge for leads generated on the back of promotional activity that is not their own.

Because the acquisitions made through affiliates carry an associated cost, marketers tend to devalue them. First, they deduct the cost per acquisition (CPA) charge for affiliates, then the cost for the brand’s own marketing effort—which often drives the consumer on to the search engine—and finally the extra bidding cost of trying to keep the brand at the top of the search results page. Most of the leads, however, are entirely new, so they do represent added value in spite of the cost.

There is, however, another important aspect to consider before letting fears of cannibalisation and plummeting return on investment (ROI) damage the relationship with affiliates. Google has recently relaxed its regulations against bidding on competitor trademark names in most countries. For example, when M&S bid on the term Interflora, M&S appeared on the same search page as the brand. Since Google currently has no regulations against competitor trademark term bidding, affiliates can bid on key brand terms in to keep competitors out of that all-important first search page. While affiliate bidding may add a fractional cost to the process of customer acquisition, competitors really are driving business away with their aggressive bidding.

If relationships with affiliates are managed more openly, concerns over the cannibalisation of traffic can be quelled. Last-minute solutions such as lowering commission budgets and suspending programmes are simply unacceptable and feed into the climate of “every man for himself” on which mistrust is based. Some businesses have even gone as far as making up excuses to legitimise suspension of affiliate programmes over Christmas, a time of the year that affiliates have been gearing up to as much as your own business.

A practical solution that prevents the unease sometimes associated with affiliate relationships is to suggest different rates of commission depending on the different type of lead or customer acquired. This way, for example, if the consumer provided by the affiliate turns out to be a returning customer who has previously bought through the ecommerce site, the payment can be set at a lower rate than if the consumer is an entirely new lead or a person whose custom is only available to the business through the intermediation of affiliates.