Test Number: #090503-AP
Word Count: 6500+
Focus: 8 Questions
- Can affiliate programs still be effective in the Post-Dot-Com-Crash era?
- How much can you depend upon affiliates for the growth of your business?
- What is a good participation ratio? What should you expect from your initial efforts?
- Why do some programs achieve stellar results, while others are a disappointment? What is the critical difference? (2 Interviews)
- What can we learn from the MEC case studies and tests that will help us develop a more effective program? (21 hard-won principles)
- What software should I use to build my affiliate program? (8 summary reviews)
- How can you set up your own affiliate program? (25-step executive summary and a 5-part, 25-step detailed blueprint)
- What can you glean from all of this data? (The 10 most important lessons from this report)
Credits:
- Editor – Flint McGlaughlin
- HTML Designer – Cliff Rainer
-
Contributors – Brian Alt Jeremy Brookins Jeff Sellers Jalali Hartman Tim Ferriss Nick Chunias
Many sites generate a significant part of their revenue (40%) from capturing the email addresses of their visitors and following up with polite, permission-based marketing.
Traffic will spike on the Net during the final months of 2003. But you should move into 2004 with more than a revenue spike; you should also have gleaned a large list of future customers.
Our next report will study:
HOW TO INCREASE CUSTOMER RETENTION AND CUSTOMER VALUE WITH CAREFULLY CRAFTED EMAIL CAMPAIGNS
This is one of the most overlooked opportunities in (even mature) marketing operations.
>Our test site made an additional 1000 sales per month, without buying any new traffic.
We are also working on several other research projects, including:
- How retailers and publishers can use eBay and other auction sites to sell products and to increase website traffic. (Our research site generated $1 million.)
- How to MAP YOUR SITE’S MESSAGING to optimize the yield per visit. (This is one of the most effective ways to increase your revenue without increasing your marketing budget.)
- How to reduce your abandoned shopping carts, dramatically improve your conversion ratio, and (once again) increase your revenue without increasing your marketing budget.
- How to effectively combine offline and online marketing. Sometimes 1+1=3. Most marketers are not maximizing the potential synergy of “click and brick”.
How is it that AFFIILIATE PROGRAM A achieved a success ratio of 80%, with sales per affiliate ranging between $100,000 and $1 million per year,
While…
AFFILIATE PROGRAM C projected (a very promising) $3.6 million per month, and yet has failed to generate even 10 percent of that number?
What made the critical difference? Can the average company still grow through affiliate/partnership marketing?
Dale Carnegie said, “You can make more friends in two months by becoming interested in other people than you can in two years by trying to get other people interested in you.”i
Our 10-month research project on Affiliates has proven this maxim to be especially true of Internet relationships.
Here is what we discovered…
Can affiliate programs still be effective in the Post-Dot-Com-Crash era?
A TALE OF TWO AFFILIATE PROGRAMS
PROGRAM A – The MuscleMaster Story
BACKGROUND: Nick Chunias is the co-founder of MuscleMaster.com, Inc. The company sells more than 2,000 health related products, including nutritional supplements, weight loss products, anti-aging products, vitamins, minerals, and fitness accessories representing 120 major brands. They have grown at a rate of 75-100% percent per year.
AFFILIATE SOFTWARE: Custom
START DATE OF PROGRAM: May 2000
URL: http://www.musclemaster.com/
Nick writes:
Initially our affiliate marketing focus was on traditional affiliate marketing utilizing third party programs like BeFree and Commission Junction to track and administer our affiliate program.
While this type of affiliate program can be effective, we concluded that it had limited long-term growth potential, as the affiliates were not being properly rewarded for their efforts.
So three years ago, we devised a true strategic partnership program which we refer to as our full e-commerce partnership.
With this program, our strategic partners can still offer all of the 2,000 products that we carry on their websites while they build their own customer list and get the benefit of repeat sales.
How successful was the program?ii
| Traditional Affiliate Program | |
|---|---|
| Total Number of Affiliates | 10,000 |
| Number of Active Affiliates | 500 |
| Revenue Generated through These Affiliates | $600,000 |
| Full E-Commerce Partnership Program | |
|---|---|
| Total Number of Partners | 50 |
| Number of Active Partners | 50 |
| Revenue Generated through These Partners | $6.5 Million |
What You Need To UNDERSTAND: MuscleMaster.com generated OVER 10 TIMES the revenue with a customized, full-featured partnership program than they did with a traditional affiliate program.
In Section 2 we interview Nick to discover the six key principles to an effective affiliate program.
Nick also answers these questions:
- Q: What elements of your partner program have been successful?
- Q: How successful are your partners? Do they market your program exclusively?
- Q: What are you doing to help these partners succeed?
- Q: How do you qualify new affiliates/partners?
- Q: How much do your partners contribute to the success of your enterprise?
- Q: What percentage of commissions do you offer?
- Q: What vendor/provider are you using for your more traditional affiliate program approach?
- Q: Does including the partner company name and logo on shipped orders help attract more (and better) partners?
PROGRAM B – The BrainQuicken Story
BACKGROUND: Tim Ferriss is the founder of BrainQuicken.com, a leading developer and distributor of bioactive and pharmaceutical-grade neural acceleration products.
AFFILIATE SOFTWARE: MyAffiliateProgram iii
START DATE OF PROGRAM: October 2002
Tim comments:
In the past year, our affiliate program has had disappointing results. Our experience has been very frustrating, but that doesn’t mean that affiliate programs can’t work.
One important lesson that we learned was that the higher your commissions, the harder affiliates will work to close sales and promote your product. We are completely re-launching our program with a significantly higher payout.
Our initial efforts produced the following results:iv
| BrainQuicken Affiliate Program | |
|---|---|
| Total Number of Affiliates | 74 |
| Number of Active Affiliates | 14 |
| Revenue Generated through These Affiliates | $23.407.85 |
What You Need To UNDERSTAND: 18.92 percent of all the affiliates in this program generated 100% of the sales. Only 4 affiliates have 20 or more sales.
In Section 2 we interview Tim to discover his top 10 lessons to achieving success with an affiliate program. He answers also the following questions:
- Q: If you had to set up your affiliate program again, are there things you would do differently?
- Q: What elements of your affiliate program have been successful?
- Q: How successful are your affiliates? Do they market your program exclusively or alongside others?
- Q: What are you doing to help your affiliate succeed?
- Q: How much do your affiliates contribute to the success of your enterprise?
- Q: What percentage of commissions do you offer? Why did you choose this? Have you ever experimented with changing your payout? If so, what did you learn?
How much can you depend upon affiliates for the growth of your business?
PROGRAM C – The Infopia Story
BACKGROUND: J. Hartman is the Co-Founder of Infopia.com. Infopia is an online marketplace reaching more than 200 million buyers with product listings valued at $2 billion. Here is his story in his own words. It is replete with the wisdom of hard-won experience.
AFFILIATE SOFTWARE: Custom
START DATE OF PROGRAM: July 2000
During my tenure in the business development division of Infopia, I was tasked with identifying and crafting co-marketing partnerships.
My goal was to create mutually beneficial relationships and expose a self-service version of our Marketplace Manager software to as many small business owners as possible.
As I browsed through the documents and files that supported the project, I came across an Excel spreadsheet titled:
“Partnership Marketing Forecasts: Worst Case Scenario 2001”
It listed all of the companies we had either entered into an agreement with, or were planning to. It also lists the estimated size of each partner’s customer base.
| “Partnership Marketing Forecasts: Worst Case Scenario 2001” |
|
|---|---|
| Partner | Customer Base |
 |
|
| Partner A | 200,000 |
| Partner B | 1,400,000 |
| Partner C | 1,200,000 |
| Partner D | 500,000 |
| Partner E | 200,000 |
| Partner F | 330,000 |
| Partner G | 400,000 |
| Partner H | 940,000 |
| Total | 5,170,000 |
What You Need To UNDERSTAND: In projections, Infopia’s partners had a customer base of over 5 Million.
Upon further investigation, I saw that I had assumed that over time at least 2% of these customers would eventually register for our service, and at an average monthly bill rate of $35, we stood to generate over $3.6 Million in recurring monthly revenue. Even with some attrition, these were great numbers.
Without getting into too many of the gory details, I will say this: The plan did not work!
KEY POINT: The program achieved only 5% of its original projections.
Looking back, I can group our mistakes into five primary obstacles that will keep an affiliate or partnership program from being a success. (See Section 2 of this report.)
What is a good participation ratio? What should you expect from your initial efforts?
These are numbers gleaned from TEST PROGRAM D. They represent a time period from 07/16/03 to 09/30/03 . They are useful; in that they help you consider the difference between affiliate sign-ups and ACTIVE affiliate sign-ups.v
| TEST Program D | |
|---|---|
| Number of Applications | 29 |
| Number Approved | 26 |
| Number of Active Affiliates | 11 |
| Average Number of Linking Methods | 2 |
| Average Number of Follow-up Contacts | 3+ |
What You Need To UNDERSTAND: Of the affiliates that were approved for the program, 42% of them became active. This is due primarily to multiple follow-ups and personal contact.
The contact/follow-up strategy included: 2 emails, 1 personal call, and a follow-up email approximately every 3 weeks.
So what are we learning from all of this testing?
Affiliate marketing can still be a powerful way to grow an online business, but there are several critical principles to success. In Section 2 of this report, we outline those key principles, and we lay out a step-by-step blueprint.
Section 2 (Continue…)