All GTO Blog Posts

This one is dedicated to all those merchants out there who are interested in launching an affiliate program and are curious about what to expect.  I hope that it gets read extensively because it will spare both the merchants and their managers or outsourced managers some serious stress.

Affiliate Marketing for retail merchants is a MARATHON and NOT a SPRINT.

What does this mean?

It means that merchants who are launching an affiliate initiative need to be prepared for some expenses that will need to be looked at as "sunk costs" that won’t be recovered immediately.  Why is this?   Launching and building out an affiliate program is a ton of work.  In many ways (especially at the launch of a new program) it’s really manual and tedious work composed of prospecting using a variety of tools to determine what sites have Google ranking for client keywords, what sites are complimentary to the merchant site, which sites are promoting the competitors, and which are promoting competitive programs.

Once the target affiliates are identified, information needs to be gathered (super tedious and labor intensive) and contacts need to be made by a variety of possible methods.   The affiliate program’s benefits have to be "sold" to the affiliates to get them to join, then the affiliates need to be gently prodded to activate the merchant’s links quickly (as quickly as possible) and they need to be merchandised and followed with to make sure they have  what they need.  Applications need to be vetted and approved or declined.  It all takes time.  The process needs to be repeated time and time again until critical mass of affiliates with sufficient traffic are linking to the merchant with effective links.  It’s a PROCESS  

How long should you expect to wait until your program is profitable?   That varies based on a couple of factors - Is the merchant well branded?  How much are they spending on management and infrastructure?  Is the space they play in competitive?  Is the merchant’s product seasonal and in demand? 

As a rule, we tell prospective clients that it takes 6-12 months to get an affiliate program up to critical mass.  

Should the merchant be able to see trends pointing towards profitability at 4-5 months post launch?   Yes (see above) 

Do some programs connect right off and get profitable in month 1?   Not very often in retail.

The long and short of it is this.  If your business needs and financial situation require that you have instant traffic and sales, you should dedicate your resources to paid search and look for someone who does it well and doesn’t charge based on channel spend, but on a flat rate + commission on sales or a flat rate. 

If you would like to add a sales channel that can provide consistent results and can magnify your industry trends by providing well targeted traffic and increased branding through the display of banners and product links across a large network of sites- affiliate marketing is a great fit for you.   But you have to be prepared to give the affiliate channel some time to grow. 

Will this lead to some tense moments?  Definitely.

Will your CFO or accountant occassionally find themselves cursing you and your decision?  Probably.

The companies who are leading in affiliate marketing in your space all took this leap at some point and faced the same concerns.  They stuck it out and now here they are.  Rome wasn’t built in a day and neither was the affiliate program at Amazon, Overstock, REI, Office Depot, or your favorite competitor.

Hire good people, structure an attractive program and dig in for the long haul and you will reap the rewards.  

Happy Selling!

Wade Tonkin 

We have been doing a lot of thinking and research on the topic of the New York decision to hold non - New York based merchants who have affiliates doing business in New York accountable for collecting state sales tax.   We’ve been speaking with lawyers, other affiliate managers, industry colleages, our clients and each other on this.

We don’t by any means claim to know all the answers in this - no one does until the Amazon and Overstock lawsuits are decided or settled with clarification of the law.  We encourage all of our clients to meet with counsel with understanding of the New York law and it’s details to make the decision that is best for them.

If the client has no objections, we’re recommending that our clients incorporate language suggested by Deb Carney  on ABestWeb to add this language or something similar to their affiliate agreements:

If Affiliate is based in New York State or has office(s) located within
New York State, Merchant will only allow Affiliate to promote Merchant
brand(s) and/or web site(s) via Affiliate’s web site. Affiliate may not
promote Merchant through any other marketing channel, that targets NYS
residents, including, but not limited to: paid search marketing, e-mail
marketing, offline marketing, (including flyers and physical
newsletters), lead generation, mobile marketing or telemarketing.

New York State affiliates CAN use these methods to market their *own
website*, as long as the ad copy, email, etc does NOT mention the
Merchant directly.

We feel that the affiliates from the State of New York really are pawns in this game and we stand by them and their right to earn a living through affiliate marketing.  Unfortunately, this language may put a crimp in some of their efforts for a time, but we’d rather change the way that we work together a bit than have to lose them altogether.   We’re adding this language to the Agreement’s of our clients C28 and Geoff and Drew’s Cookies, as well as any other retail merchants we work with until this issue is clarified.

Happy Selling!

Wade Tonkin