Affiliate Marketing

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Affiliate MarketingA Value-Added Service to Help OnlineRetailers Expand their Market Reach andGrow their Revenue BaseRETAIL PRACTICE

The Role of Affiliate Marketingin Online RetailUS Affiliate Marketingspending will reach 4 billion by 2014.Forrester,September 2009Affiliate Marketing is an online advertising channel that is proven to drivestrong, cost-effective performance inthe online retail space. In partnershipwith Gen3 Marketing, Demandwareoffers Affiliate Marketing to its customers as a value-added service to helpexpand their reach to highly relevantaudiences, and drive incrementalqualified shopping traffic. It can alsobe leveraged to drive qualified trafficto content on your site that is aimed atconverting off line shoppers.Affiliate Marketing is not new. Forresterestimates that US Affiliate Marketingspending will grow at a compoundannual growth rate of 16% and reach 4 billion by 2014.Part of Affiliate Marketing’s appeal isits low risk, pay for performance business model. Retailers only pay a commission for successful efforts, suchas the sale of your products resultingfrom qualified traffic the affiliates driveto your site. It can help online retailersestablish a strong brand presence onthe web with very low initial and ongoing costs of As a result, it has been incorporated into the online marketing mixby many high-end brands and retailersto drive incremental revenue and qualified traffic online, while maintainingbrand equity. They like Affiliate Marketing because: These sites influence the purchaseprocess by focusing extensivelyon the right customers for thebrand. The demographics of these sitesare attractive:- Income: 60-100k (31%), 100k (22%)- Age: 18-24 (13%, 25-34(32%), 35-44 (27%), 45 (27%)- Gender: Female (53%),male (47%)- Geography: CA, NY/NJ, TX,FL, IL, PA, NE / SE U.S.Affiliate Marketing is proven towork for many of the biggestbrands and retailers online. Itdrives highly targeted visitors,complements the overall onlinemarketing mix and is likely to bethe most cost-effective channelused as a direct response vehicle.Affiliate Marketing has evolved toinclude not only affinity and discountsites but also many that do a great jobof promoting quality brands by marrying content (i.e. what influencers arebuying) with commerce (where to buy2

Affiliate Marketing - CriticalSuccess FactorsWhile the potential benefits of Affiliate Marketing are significant, realizing them can be challenging. Manyonline retailers get started in AffiliateMarketing by managing their programin-house or having it managed via anonline affiliate network. They quicklyfind that it requires more dedicatedresources and expertise than plannedand that they don’t get the results andvalue they hoped for due to:affiliate program fits into a company’soverall marketing strategy.resources in managing pro- spective and existing affiliates. Relationship ManagementThe time it takes to develop andmaintain relationships with key affiliates should not be underestimated.They are looking to maximize their timeby optimizing multiple programs atonce. It’s incredibly difficult to get theirattention. Even the most experienced,well connected in-house AffiliateManager will have a difficult time accessing all of the top affiliates. He/sheonly has a single program to offer andaffiliate time is at a premium. At thesame time, program managers at thenetworks generally don’t have directcontact with affiliates. Rather, theywork through an affiliate manager whois paid to champion the affiliate ratherthan the affiliate program itself.“Gen3 Marketing has allowedus to re-launch an affiliateprogram both profitably andwith very quick return oninvestment. Our previous forayinto Affiliate Marketing left usfrustrated due to lack of internalGen3 has made our programscale very rapidly by leverag- ing their extremely targetedexpertise in the Affiliate Marketing arena.”Jason Roussos,PresidentRichlund Ventures( time required to organize andimplement a program properly;complexity in managing all thedifferent constituents in the affiliatenetwork;time and ability to develop andmaintain personal relationshipswith key publishers;difficulty keeping affiliate networkand revenues growing.There are four key areas which mustbe managed effectively to realizethe full potential of Affiliate Marketing – Marketing Strategy, RelationshipManagement, Data Analysis and Compliance. Each has important considerations and requirements for success.Our partner, Gen3, brings unparalleledstrengths and expertise in each ofthese areas.Marketing StrategyMany marketers start off on the wrongfoot with Affiliate Marketing. They simply don’t have the expertise in houseand don’t know what they don’t know.Most make it someone’s part-timejob. If they do hire someone full-time,success is dependent on selectingand retaining the right person. Thencost often becomes an issue. AffiliateNetworks, on the other hand, tendto be reactive and tactical, requiring specific direction from the client.Junior account management stafferswith limited strategic marketing experience offer very little insight into how anGen3 has developed a robust strategic approach to managing affiliateprograms and a keen understandingthat ROI matters most. Gen3 leveragesproven strategies with regard to affiliate recruiting, optimization, discounting, PPC involvement and other tacticsthat produce real results.Gen3 has strong ties with many of theweb’s biggest marketers and deeppersonal relationships with the top affiliates in every vertical – Affinity, Shopping, Content/Niche, Discount, Search,Social, etc. Gen3 speaks to them onbehalf of dozens of clients on a weeklybasis and meets with them in personat least quarterly. Gen3 identifies whothe key affiliates are for each product/brand and is able to get their attentionquickly because of this ongoing lineof communication. Moreover, Gen3actively recruits super affiliates startingon day one, enabling online retailersand brands to ramp faster than theycould otherwise.3

Gen3 has launched andgrown over 75 programsand has helped generate anincremental 15-20% of siterevenues for their clients.They added over 3 millionin incremental revenue forDemandware clients in 2009.Data AnalysisThe ability to benchmark results acrossprograms, publishers and verticals is ahuge advantage when trying to targetand optimize your affiliate program.Networks have access to a tremendous amount of data, but tend not touse it because of potential confidentiality issues. Merchants that go thein-house route are limited to datafrom their own program or genericindustry data.Gen3 utilizes in-depth data on theperformance of key affiliates. It knowsthe top performers for different targetmarkets and is able to quickly identifyproductive affiliates (and categories ofproductive affiliates) and leverage thatdata to recruit, activate and optimizethe affiliates on the client’s behalf.ComplianceThere are a number of sensitive channel and brand conflict issues when itcomes to Affiliate Marketing. Retailersand brands cannot always count onthe affiliate to be aware of or concerned with these matters. When acompany manages their Affiliate Marketing in-house, they have to learn thisthrough painful trial and error with eachaffiliate. Networks’ compensation istied to transactional volume regardlessof quality. They simply aren’t alignedto actively manage to avoid potentialchannel and brand conflict.Gen3 has historical knowledge of noncompliant affiliates and utilizes tools toguard against rogue publishers. Gen3knows which publishers do the rightthings and which don’t and knows howto manage against potential channelconflict. Gen3 also has the knowledgeto understand the requirements ofdifferent types of marketing and theimplications of tactics such as onlinecoupons, offers and exclusivity.By combining these strengths withits expertise in business strategy andonline marketing, Gen3 can jump startyour Affiliate Marketing program andput the foundation in place for longterm success. They are marketersfirst with senior-level marketing andconsulting experience as well as vastclient and agency side experiencemanaging affiliate programs.4

Results and ROI with Gen3“When Demandware firstrecommended we pursue theAffiliate Marketing channel,we were very skeptical aboutthe ability to get anything inplace in time for the holidayshopping season. But Gen3was so efficient. They knewexactly which affiliates weneeded to work with and thetypes of programs to put inplace. They had us up andGen3 Marketing has a proven trackrecord of delivering strong resultsand ROI for Demandware customers.They have launched and grown over75 programs and have generated anincremental 15-20% of site revenuesfor their clients. They added over 3million in incremental revenue forDemandware clients in 2009.They have demonstrated successtaking over in-house programs, resurrecting abandoned programs, takingover network managed programs andaccelerating time to market for newprograms from scratch. Below is aquick look at the results of three recentaffiliate programs deployed forDemandware customers.running in time for two of thebiggest shopping days of theseason and we saw immediate results.”Paul ZaengleDirector of EcommerceColumbia SportswearAccelerating Time to MarketColumbia Sportswear is a globalleader in active outdoor apparel andfootwear and offers an extensiveproduct line of outerwear, sportswear,rugged footwear and accessories soldin more than 100 countries. As one ofthe largest outerwear manufacturersin the world, Columbia has developedan international reputation for quality,performance, functionality and value.Demandware provides Columbiawith a scalable, full-featured ecommerce platform that enables completecontrol over its brand and user experience, while eliminating the technicalburden of the IT infrastructure. As itapproached the 2009 holiday shopping season, Columbia had no AffiliateMarketing program in place. It wantedto take advantage of the increasedreach and visibility of relevant affiliatesites for this critical time period, butit was running out of time. Gen3 wasintroduced by Demandware and wasable to develop a solid plan and securekey affiliates for Columbia within days– just in time for Black Friday andCyber Monday. The company saw tangible results from the affiliate programimmediately and is seeing impressivegrowth in activity and revenue monthover month.In-House to Outsourced; DrivingContinuous GrowthFrederick’s of Hollywood is a worldrenowned brand and leading trendsetter in intimate apparel. It has earned adistinct reputation for flattering womenof all sizes with its sexy signaturestyles. It has more than 130 specialtyretail stores nationwide, a world-famous catalog and an online shop.Frederick’s deployed Demandwareto help grow its online sales whilemaintaining the flexibility to makesite changes as market requirementsdictate. At the time, it had an in-housemanaged affiliate program in place,but performance was disappointingand proving to be very expensive tomanage. Gen3 took over the programand quickly increased program performance and efficiency. In just sixmonths, Gen3 was able to cut programcosts by 14% while growing affiliatesales volume by 30%.5

“It’s great working with theGen3 Marketing Team. They really know the industry and havetaken the time to understandour business model and findcreative ways that we can workwith their clients to achieve mutually profitable results. I highlyrecommend Gen3 Marketing!”Adam VienerChairman & FounderImwave, BloggerResurrecting an AbandonedProgramLiving Direct is an Internet Retailer 500destination and Compact Appliance isone of the Living Direct shopping sites.It was created for people in search ofdistinctive home appliances that offermaximum functionality in a minimalamount of space.After closing its original in-house program due to non-performance, LivingDirect/Compact Appliance selectedGen3 to re-launch and manage itsAffiliate Marketing program in 2007.Within one month, affiliates generated enough volume to warrant furtherinvestment in the program. By thethird month, affiliate sales had doubledand in the fourth month, they doubledagain. The success of the programhas continued. Affiliate sales compsgrew 50% from 2008 to 2009. In onerecent month, leveraging new contentand site-wide offers, Gen3 helpedLiving Direct and Compact Appliancerealize impressive gains vs. the samemonth the previous year:- Affiliate sales were up 89%.- Affiliate order volume was up 54%.- Affiliate average order valuewas up 23%.- Affiliate conversion rates improvedby almost 80%.6

Affiliate Marketing Program with Gen3Pre-Launch Develop affiliate programstrategy and budget – We workwith you to develop a pay-out /promotional strategy to ensure youare in-line with your competition. Negotiate contract withAffiliate Network and developprogram terms andconditions – A successfulaffiliate program needs to runthrough an Affiliate Network thathosts creative and provides thirdparty tracking for affiliates.Demandware/ Gen3 has an agencyrelationship with CommissionJunction, a first-tier affiliatenetwork that provides significantsavings to you.Create affiliate resource site/develop program creative – Wewill work with you to develop greatbrand copy and creative fordistribution to the affiliate base.Program Launch – At the end ofthis period, you will have a fullyoperational Affiliate Program thatwill be actively managed by Gen3Marketing.Post-Launch Recruit targeted affiliates and‘Super Affiliates’ – We leverageour relationships with the biggestaffiliate destinations online andensure that your brand and site arerepresented on these sites. Manually approve applications –In order to protect your brandimage, we personally selectwho is eligible to participate inthe program based on ourin- depth knowledge of thedifferent affiliates. Nurture relationships andcorrespond with affiliates – Wehandle all affiliate requests on yourbehalf so that your organizationcan focus on the big picture. Develop strategic marketingcalendar – We work closely withyou to develop an online strategythat is married with your overallbranding and marketing programs. Oversee program administration– We perform all necessaryfunctions such as monitoringaffiliate sites, managing paymentand reconciliation, etc. so that youdon’t have to. These can be verytime-consuming activities. Analyze and report on program –We have developed best practicesfor reporting on program milestones, recruiting, sales and profitability achievements. Test, Learn and Test Again – Weleverage our direct marketingexperience to constantly test newways to promote your brand toensure optimal performance.7

Summary/Next StepsAffiliate Marketing can be an important component in the success ofyour online marketing efforts. It canquickly expand your market reach,drive qualified site traffic and increase online sales. Plus, its low risk,pay-for-performance model makes itone of the most cost-effective marketing channels available.If your program is not delivering theresults you expect or need, or you’rejust getting started with AffiliateMarketing, contact the DemandwareRetail Practice team. In partnershipwith Gen3 Marketing, Demandwareoffers Affiliate Marketing as a value-added service to help you maximizethe success of your ecommerce site.Gen3 has unmatched expertise inAffiliate Marketing and can help youassess the state of your current program and determine whether it candeliver more for your brand and yourmarketing dollars. Working together,Demandware and Gen3 can also offer significant program cost efficiencies, simplify your program deployment and provide a single point ofcontact for technical support.Action Plan Share this paper with your colleagues Evaluate your current Affiliate Marketing programand its current ROI Contact Demandware to learn more about its value-addAffiliate Marketing program and Gen3 Marketing8

Demandware, Inc.High-growth retailers and consumer brands looking to develop or extend the reach of their B2Cecommerce business trust Demandware as their strategic partner for ongoing success. Demandware solutions, comprised of the only enterprise-class, on-demand ecommerce platformand expert services, deliver merchandising effectiveness, proven site reliability and industry bestpractices that exceed profitability goals. Only Demandware provides a distinct time-to-marketadvantage for launching multiple ecommerce sites, customizing the consumer experience fromcontent to code, and maintaining sites at the forefront of ecommerce innovation. Clients includeindustry leaders such as Bare Escentuals, Barneys New York, Columbia Sportswear, Crocs,Jones Apparel Group, Playmobil, s.Oliver and Timberland.Demandware Retail PracticeThe Demandware Retail Practice provides customers with proven expertise and industry bestpractices to optimize their ecommerce implementation and return on investment.Gen3 Marketing, Inc.Gen3 Marketing integrates business strategy and online marketing to drive measurable, scalable, sustainable results. Whether the goal is to drive sales, generate leads or promote a brand,Gen3 will develop and implement an online plan that is integrated with brand strategy andinformed by industry and competitive dynamics. The plan will factor in ROI goals and test, learnand test again so that it can far exceed those goals. Gen3 brings unmatched expertise in Affiliate Marketing to Demandware customers. It has been implementing Affiliate Marketing programssince 2000 and was recently named Commission Junction (CJ) Agency of the year in 2009. Gen3has long-standing relationships with major publishers across various Affiliate Marketing channelsincluding all major loyalty/rewards, discount, community and search sites. For more information,visit 2010 Demandware, Inc.

The Role of Affiliate Marketing in Online Retail Affiliate Marketing is an online adver-tising channel that is proven to drive strong, cost-effective performance in

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