Creating a Winning E-Business Second Edition

1
Creating a Winning E-BusinessSecond Edition
MIS/ENTR 375 Global E-Commerce

• Taking Advantage of
• Affiliate Marketing
• Chapter 7

2
Case Studies
Read Seasonal profits page 255 and 274

1. What was the the original idea behind
   BuyCostumes.com?
2. why customers might find the proposition of
   purchasing seasonal costumes online attractive?
3. How the background of the two co-founders may
   have influenced the initial success of the
   e-business startup, and the importance of hiring
   a top retail manager up front

3
Learning Objectives

• Define affiliate marketing
• Explain how affiliate programs function as a
  marketing tool
• Discuss how affiliate programs can serve as a
  revenue source
• List the elements of an affiliate agreement
• Describe affiliate tracking systems and affiliate
  management networks
• Identify affiliate marketing risks and challenges

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Online AffiliateMarketing Programs
Affiliate marketing is a revenue-sharing approach
to marketing in which the merchant or advertiser
(the e-business operating the program) shares
revenue with the affiliate (the e-business
participating in the program) when customers
click through from the affiliates Web site. Note
that an affiliate marketing program is sometimes
called a pay-for-performance or associate
program.

• A revenue-sharing approach to marketing and
  promoting an e-business
• Also called associate programs or
  pay-for-performance programs
• Merchant or advertiser operates the program
• Affiliate or publisher participates in the
  program
• Marketing tool for merchant
• Revenue source for affiliate
• Require custom links from affiliate site to
  merchant site

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Online Affiliate Marketing Programs (continued)

• Pay-per-click (cost-per-click) program
• Merchant pays affiliate a set fee for each
  click-through from affiliate site
• No action at merchant site is required
• Pay-per-lead (cost-per-lead) program
• Merchant pays affiliate a set fee for each
  click-through that results in action
• Make a purchase
• Complete a form or take a survey

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Online Affiliate Marketing Programs (continued)

• Pay-per-sale (cost-per-sale) program
• Merchant pays affiliate a fee or commission on a
  sale that results from a click-through
• Thousands of diverse e-businesses operate
  affiliate programs
• Amazon.com
• Dell
• 1-800-FLOWERS.COM
• Rackspace Managed Hosting

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Online Affiliate Marketing Programs (continued)
8
Online Affiliate Marketing Programs (continued)

• Advantages to merchant
• Tie marketing effort directly to sales
• Pay only for results
• Advantages to affiliate
• Additional source of revenue for affiliate who
  also sells products/services
• Primary source of revenue for affiliate who
  offers entertainment or information

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Online Affiliate Marketing Programs (continued)

• Participating in an affiliate program
• Select the program carefully to ensure a good
  fit
• Understand the terms of the affiliate agreement
• Add custom links to merchants site from
  affiliate Web pages
• Build traffic at affiliate site to increase
  click-throughs to merchant site

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Online Affiliate Marketing Programs (continued)

• Selecting an affiliate program
• Make certain affiliate site visitors will be
  interested in merchants products/services
• Learn about merchant
• Type of products/services
• Easy shopping experience? TRY EXPERIANCING
  YOURSELF
• Customer support
• Reputation in the marketplace
• Look for competitive fees/commissions

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Online Affiliate Marketing Programs (continued)

• Affiliate agreement defines program terms
• Types of Web sites merchant approves
• Guidelines for linking
• Schedule of fees and commissions
• Terms of usage of merchant logo and name

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Online Affiliate Marketing Programs (continued)

• Affiliate agreement defines program terms
  (continued)
• Restrictions on type of content at affiliate site
• Restrictions on marketing tools an affiliate can
  use
• Liability and other legal disclaimers
• Dispute resolution and termination requirements

13
Affiliate Tracking Systems

• Allow merchant to control how it credits
  click-throughs
• Monitor window of time in which affiliate can get
  credit for a click-through
• Record and store affiliate information
• Provide commission/fee reports

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Affiliate Tracking Systems (continued)
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Affiliate Tracking Systems (continued)
An affiliate tracking system allows a merchant to
control how it credits its affiliates for
click-throughs.  

• Affiliate management networks is a third-party
  entity that recruits affiliates, manages the
  registration process, tracks and properly credits
  all of the referral fees and commissions, and
  arranges for payment.
• Third-party entities
• Recruit affiliates
• Manage affiliate registration process
• Track click-throughs
• Credit affiliates with click-throughs
• Arrange for commission/fee reporting and payment

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Affiliate Tracking Systems (continued)
17
Affiliate Tracking Systems (continued)

• Well-established affiliate management networks
• Commission Junction
• LinkShare

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Affiliate Tracking Systems (continued)

• Affiliate tracking technologies
• Custom links containing affiliate information or
  affiliate and merchant information
• Tracking cookies
• Third-party tracking software
• Application service provider tracking service

Tracking information that identifies the
affiliate is included in the links (URLs) the
merchant or affiliate management network provides
to the affiliate for the affiliate's Web site.
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Affiliate Tracking Systems (continued)
20
Affiliate Tracking Systems (continued)
21
Affiliate Marketing Risksand Challenges

• Unethical affiliates
• Cookie stuffing
• Multiple cookies placed on visitors hard drive
  during a single visit to affiliate site
• Parasiteware
• Redirects affiliate links
• Replaces content of existing tracking cookies

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Affiliate Marketing Risksand Challenges
(continued)

• Unethical affiliates (continued)
• Spammers
• Merchant is responsible if affiliates use spam to
  promote sites
• Negative perception of tracking cookies
• Many consumers install and use blocking software
• Block tracking cookies
• Delete tracking cookies

23
Case Studies
Read E-Case in Progress Page 259

1. What types of referral programs does Rackspace
   Managed Hosting operate?
2. What are the advantages to Rackspace for
   operating multiple referral programs?
3. What role does the Rackspace affiliate program
   play in its marketing mix?

24
Case Studies
Read growing a Business Page 237

1. What entrepreneurial abilities and traits did Jim
   McCann possess that helped make him a successful
   entrepreneur? What points in the case illustrate
   those factors?
2. What e-business factors has McCann and his team
   exploited to make 1-800-FLOWERS.COM a success?
   How?
3. What role does its affiliate program play in the
   success of 1-800-FLOWERS.COM?