New vs. existing customers in the affiliate channel

Affiliate marketing has grown considerably over the past few years. The latest Online Performance Marketing Study from the IAB in conjunction with PWC estimated that advertisers spent £1.1bn on the channel in 2014. With the increase in spend, it is no surprise to see the channel coming under a greater amount of scrutiny with data analysis being at the heart of understanding the value delivered.

As affiliate programmes mature, attention is switched to focus on qualitative measurements rather than just volume in order to determine success. One of the metrics that is becoming more regularly considered within the channel is the split of new versus existing customers. While monitoring this split is nothing new, there have been some recent high-profile cases where advertisers have reduced the commission rates offered for existing customers.

With this in mind, it’s important to examine the issue and how best to reward affiliates based on this measurement. Rather than penalising affiliates for driving sales from existing customers, it could feasibly be argued they are maintained with new customers paid on an increased tier. By reducing (or in extreme cases removing) commission for existing customers, an advertiser is effectively saying an affiliate is providing little to no value in driving existing customers.

What constitutes a new customer will vary for each advertiser and sector. For example, some will classify this as someone who has never purchased before while others will stipulate that anyone who hasn’t purchased for a period of 12 months or more should be classified as a new customer.

In addition to the classification of new customers, the length of time an advertiser has traded online will impact their share of new customers. As time passes there will invariably be a tipping point at which it is no longer possible to maintain such a high share of sales from new customers.

With only a finite amount of customers, is reducing commission for existing customers counter-intuitive? Shouldn’t advertisers also understand the additional value that can be attributed to retaining and nurturing its existing customer base?

There is also the argument of who owns the customer. By not rewarding an affiliate for driving existing customer sales, the advertiser is effectively saying that the customer would have purchased from them anyway, irrespective of the affiliate’s involvement. The counter argument to this point is if the customer was going to purchase from the advertiser anyway, why were they interacting with the brand through an affiliate’s site? That interaction is indicative the affiliate had an element of influence over the transaction, despite them being an existing customer.

This is especially true in sectors where there is a homogenous product offering. Just because a consumer has purchased from you before doesn’t mean they won’t purchase the product from a competitor if they are influenced to do so having visited an affiliate’s site. What value should be placed on customer retention when they could have easily transacted with a competitor instead?

It can also be short sighted to reduce commission for existing customers. While some promotional types such as cashback and voucher code sites have levers in place to target new customers, content sites have very little control over whether they are able to attract new or existing customers, but are able to target particular sectors. By reducing commission for existing customers there is a chance they will stop promoting these advertisers, so they will also lose out on any new customer sales too. With another key focus for advertisers being to recruit relevant content sites, reducing commission for existing customers will have a negative impact upon this.

New versus existing customers is a key metric to be monitored but it is important that advertisers are looking beyond this split. The value of the customers that are being driven as well as their post-conversion behaviour – such as how often they are returning and how much they are spending – should also be considered. Affiliates should be rewarded for driving valuable customers rather than penalised for influencing existing customers to purchase from a retailer again. With the significant volume of data available, advertisers are now in a good position to understand the true value of customers referred through the affiliate channel and reward accordingly.

Matt Swan, Head of Business Intelligence, Affiliate Window

Tel: +44 (0) 844 557 9240
Email: @AffWin

New vs. existing customers in the affiliate channel

M&A round-up: The rise of channel marketing and the decline of 'conventional' ad agency ...

As the month of May draws to an end, one thing leapt out at me as I looked back at some of the deals of the past four weeks or so – and that was that of the dozen or so deals done during the month, hardly any were ‘conventional deals’.

When I say ‘conventional’, I mean an ad agency buying out, or acquiring, a majority stake in another agency, or two agencies merging. But this kind of deal has been in decline – if that’s the right word – for a while now.

These days, it’s all about acquiring capabilities – to beef up an offer, perhaps, or to expand into new channels.

Interestingly, most of the deals during May link into the field of channel marketing. We’ve looked at this before in The Drum of course, but as so many deals were done in May I thought it would be appropriate to revisit it.

For those who don’t know, channel marketing is the use of partnership to allow a brand or service to reach a wider audience, rather than just trying to sell one thing in one place. In effect it’s a kind of B2B marketing that has been used for ages by tech companies (eg Microsoft or Sandisk working with vendor or retailer partners) and by the grocery industry (eg Heinz working with the supermarkets) to reach end users or consumers. Another example might be a jeweler selling on QVC rather than via a few specialist jewellers; or selling beer at music festivals and football games rather than just through pubs and shops.

As a channel – or perhaps more accurately, discipline – the lines of what defines channel marketing have become increasingly blurred, and it increasingly overlaps with other forms of B2B marketing, shopper marketing, events, experiential and even performance and affiliate marketing.

One of the longest, but most effective channels, is the impulse/convenience retail chain. In the latter, a manufacturer would typically supply, say, crisps to a wholesaler, who would then supply a corner shop, whose owner/staff would then pass on to the crisps to the consumer. At each stage, marketing is involved: manufacturer to wholesaler; wholesaler to retailer; and finally retailer to consumer.

Sometimes there will be marketing from the manufacturer directly to the consumer – in the form of a TV advertising campaign for instance – but for this (expensive) investment to succeed, everyone in the chain or channel has to have bought in to the idea and to stock and pass on the product: no good advertising something that can’t be bought anywhere.

For channel marketing to be effective, relationships and support networks have to be built. Specialist agencies are often used for this purpose. An example of this would be 3ree, an agency based in Singapore, which was last week acquired by Always Marketing Services, China’s leading field and shopper marketing company (which is majority-owned by WPP network JWT).

Founded in 2010 by Tan Li Li and Isabel Cheong, 3ree offers event management, sourcing and production of marketing premiums, project management for exhibitions and activations, and design and creative services, as well as digital marketing; so it’s a classic channel marketing agency.

Always offers trade marketing, including merchandiser management and retail audit; retail marketing, including promoter management, in-store activation and retail environment designs; as well as shopper marketing, including point of sale design, events and road shows, as well as premium design and production.

The two businesses complement each other very well (and 3ree fits in nicely with WPP’s long-term strategy of making acquisitions in growing territories or channels) and the acquired agency has business in key Asian markets, including Malaysia, Indonesia, Vietnam, India, Japan, Korea and Australia. Clients include Microsoft, Mitsubishi Electronic, Seagate and StarHub.

We’ve written before that the big audit and management consultancies – EY, KPMG, PWC, Deloitte, McKinsey and so on – with their ability to offer strategic insights, represent one of the biggest challenges to the established agency networks, so it was no surprise to see KPMG snapping up Nunwood, an independent consultancy specialising in customer experience management and feedback technology a fortnight ago. 

Founded in 1996, Nunwood has offices in Leeds and London.  Advising companies across the retail, telecoms, financial and leisure industries, its acquisition enables KPMG to offer a full-service customer management programme to its clients, from mapping the customer journey to measuring ongoing feedback. Nunwood’s ‘Fizz: Experience Management’ technology is used by organisations like British Airways and Nationwide to provide customer information to hundreds of managers, often in real time.

Commenting on the transaction, Richard Fleming, head of advisory at KPMG, told the media: “This deal is strategically very important to KPMG as it will enable us to provide clients with the tools they require to be truly customer-centric. Nunwood’s understanding of the issues driving customer behaviour, and the way they focus on improving customers’ experiences mirrors our approach of putting technology at the heart of everything we do.

“By combining forces we will be able to help clients take action, so that each decision they make is based on real-time customer feedback.  At a time when companies are worrying about their market share, the combination of KPMG’s Customer and Growth capability with Nunwood’s expertise in managing the customer experience will create an advisory business ideally placed to help our clients as they grapple with the realities of a fluid customer-base that is increasingly selecting services on the basis of their experiences.”

Again, from those remarks there appears to be an intent to sew up the channel experience. On a smaller scale, another recent channel marketing deal that caught my eye this month was digital agency Stickyeyes’ acquisition of Peterborough and London-based content marketing agency Zazzle Media. Content marketing is a discipline which has an increasingly close relationship, and overlap with, channel marketing.

So it’s another astute buy: the joining of the two companies represents a very good fit of digital and content marketing expertise. Both brands will remain independent, but will work in an integrated fashion: Stickyeyes will continue to provide SEO, paid search, social media, PR and digital consultancy Zazzle the content marketing.

And there have been more – Publicis’ media network ZenithOptimedia’s acquisition of the Czech and Slovak performance marketing agency B2B  Group; UK outfit Periscopix being bought by the giant US Merkle group; or Candy Crush tycoon Mel Morris’ investment in Derby-based channel specialist BriefYourMarket.com (which specialises in intelligent, preference-based newsletters and e-mails). As a side note, it’s worth pointing out that BriefYourMarket.com achieved growth of 3,821% in the space of just 12 months, making it one of the UK’s fastest-growing companies.

There was also the April merger between Pink Gorilla Marketing and Hairy Lemon Events in Leeds, creating a company (the somewhat inelegantly named Pink Gorilla Hairy Lemon) that will on fashion shows, bar and restaurant launches, sample sales and corporate events. Given that Leeds is starting to boom again after the recession, and has a comparatively young population, it’s not hard to see PGHL picking up clients pretty quickly.

Even last month’s £190m buyout of price comparison firm uSwitch by property site Zoopla, which looks on the surface to be one internet company buying another, demonstrates the importance of channel marketing in today’s increasingly blurred marketing landscape. 

Barry Dudley is a partner at Green Square, corporate finance advisors to the media and marketing sector

M&A round-up: The rise of channel marketing and the decline of "conventional" ad agency ...

M&A round-up: The rise of channel marketing and the decline of 'conventional' ad agency ...

As the month of May draws to an end, one thing leapt out at me as I looked back at some of the deals of the past four weeks or so – and that was that of the dozen or so deals done during the month, hardly any were ‘conventional deals’.

When I say ‘conventional’, I mean an ad agency buying out, or acquiring, a majority stake in another agency, or two agencies merging. But this kind of deal has been in decline – if that’s the right word – for a while now.

These days, it’s all about acquiring capabilities – to beef up an offer, perhaps, or to expand into new channels.

Interestingly, most of the deals during May link into the field of channel marketing. We’ve looked at this before in The Drum of course, but as so many deals were done in May I thought it would be appropriate to revisit it.

For those who don’t know, channel marketing is the use of partnership to allow a brand or service to reach a wider audience, rather than just trying to sell one thing in one place. In effect it’s a kind of B2B marketing that has been used for ages by tech companies (eg Microsoft or Sandisk working with vendor or retailer partners) and by the grocery industry (eg Heinz working with the supermarkets) to reach end users or consumers. Another example might be a jeweler selling on QVC rather than via a few specialist jewellers; or selling beer at music festivals and football games rather than just through pubs and shops.

As a channel – or perhaps more accurately, discipline – the lines of what defines channel marketing have become increasingly blurred, and it increasingly overlaps with other forms of B2B marketing, shopper marketing, events, experiential and even performance and affiliate marketing.

One of the longest, but most effective channels, is the impulse/convenience retail chain. In the latter, a manufacturer would typically supply, say, crisps to a wholesaler, who would then supply a corner shop, whose owner/staff would then pass on to the crisps to the consumer. At each stage, marketing is involved: manufacturer to wholesaler; wholesaler to retailer; and finally retailer to consumer.

Sometimes there will be marketing from the manufacturer directly to the consumer – in the form of a TV advertising campaign for instance – but for this (expensive) investment to succeed, everyone in the chain or channel has to have bought in to the idea and to stock and pass on the product: no good advertising something that can’t be bought anywhere.

For channel marketing to be effective, relationships and support networks have to be built. Specialist agencies are often used for this purpose. An example of this would be 3ree, an agency based in Singapore, which was last week acquired by Always Marketing Services, China’s leading field and shopper marketing company (which is majority-owned by WPP network JWT).

Founded in 2010 by Tan Li Li and Isabel Cheong, 3ree offers event management, sourcing and production of marketing premiums, project management for exhibitions and activations, and design and creative services, as well as digital marketing; so it’s a classic channel marketing agency.

Always offers trade marketing, including merchandiser management and retail audit; retail marketing, including promoter management, in-store activation and retail environment designs; as well as shopper marketing, including point of sale design, events and road shows, as well as premium design and production.

The two businesses complement each other very well (and 3ree fits in nicely with WPP’s long-term strategy of making acquisitions in growing territories or channels) and the acquired agency has business in key Asian markets, including Malaysia, Indonesia, Vietnam, India, Japan, Korea and Australia. Clients include Microsoft, Mitsubishi Electronic, Seagate and StarHub.

We’ve written before that the big audit and management consultancies – EY, KPMG, PWC, Deloitte, McKinsey and so on – with their ability to offer strategic insights, represent one of the biggest challenges to the established agency networks, so it was no surprise to see KPMG snapping up Nunwood, an independent consultancy specialising in customer experience management and feedback technology a fortnight ago. 

Founded in 1996, Nunwood has offices in Leeds and London.  Advising companies across the retail, telecoms, financial and leisure industries, its acquisition enables KPMG to offer a full-service customer management programme to its clients, from mapping the customer journey to measuring ongoing feedback. Nunwood’s ‘Fizz: Experience Management’ technology is used by organisations like British Airways and Nationwide to provide customer information to hundreds of managers, often in real time.

Commenting on the transaction, Richard Fleming, head of advisory at KPMG, told the media: “This deal is strategically very important to KPMG as it will enable us to provide clients with the tools they require to be truly customer-centric. Nunwood’s understanding of the issues driving customer behaviour, and the way they focus on improving customers’ experiences mirrors our approach of putting technology at the heart of everything we do.

“By combining forces we will be able to help clients take action, so that each decision they make is based on real-time customer feedback.  At a time when companies are worrying about their market share, the combination of KPMG’s Customer and Growth capability with Nunwood’s expertise in managing the customer experience will create an advisory business ideally placed to help our clients as they grapple with the realities of a fluid customer-base that is increasingly selecting services on the basis of their experiences.”

Again, from those remarks there appears to be an intent to sew up the channel experience. On a smaller scale, another recent channel marketing deal that caught my eye this month was digital agency Stickyeyes’ acquisition of Peterborough and London-based content marketing agency Zazzle Media. Content marketing is a discipline which has an increasingly close relationship, and overlap with, channel marketing.

So it’s another astute buy: the joining of the two companies represents a very good fit of digital and content marketing expertise. Both brands will remain independent, but will work in an integrated fashion: Stickyeyes will continue to provide SEO, paid search, social media, PR and digital consultancy Zazzle the content marketing.

And there have been more – Publicis’ media network ZenithOptimedia’s acquisition of the Czech and Slovak performance marketing agency B2B  Group; UK outfit Periscopix being bought by the giant US Merkle group; or Candy Crush tycoon Mel Morris’ investment in Derby-based channel specialist BriefYourMarket.com (which specialises in intelligent, preference-based newsletters and e-mails). As a side note, it’s worth pointing out that BriefYourMarket.com achieved growth of 3,821% in the space of just 12 months, making it one of the UK’s fastest-growing companies.

There was also the April merger between Pink Gorilla Marketing and Hairy Lemon Events in Leeds, creating a company (the somewhat inelegantly named Pink Gorilla Hairy Lemon) that will on fashion shows, bar and restaurant launches, sample sales and corporate events. Given that Leeds is starting to boom again after the recession, and has a comparatively young population, it’s not hard to see PGHL picking up clients pretty quickly.

Even last month’s £190m buyout of price comparison firm uSwitch by property site Zoopla, which looks on the surface to be one internet company buying another, demonstrates the importance of channel marketing in today’s increasingly blurred marketing landscape. 

Barry Dudley is a partner at Green Square, corporate finance advisors to the media and marketing sector

M&A round-up: The rise of channel marketing and the decline of "conventional" ad agency ...

5 Channel Ops: IBM Smart Cities, Teradata + Facebook, AWS

Outgoing Cisco CEO John Chambers led his last quarterly earnings call this week. He’s leaving on a high note — numbers were good overall, UCS now has 43,800 customers, 34 percent of them repeat, and Cisco is the market share leader in x86 blades in the U.S. Who’d have predicted that a few years ago? It was also a good quarter for collaboration and services. A full transcript is here, via SeekingAlpha.

One area where Chambers took a few gleeful swipes: white boxes. “Our margins on the switching actually were at the higher end of our range,” he said. “They’ve been remarkably consistent for the last eight quarters. So all this garbage about new players coming in and software coming in and white label killing our approach was entirely wrong.” Chambers also cited the company’s unified platform approach, saying that architectures “beat white label and free software,” and played up convergence and the potential of the Internet of Things. “We spent the last 20 years moving everything to IP,” he said. “As 50 billion more devices come online, we have a strong hand to play, and we are playing it. We are driving outcomes for our customers through architectures. This is how we differentiate against white label and single-product companies.” Chambers also cited the deal with Microsoft Azure and continued investment in OpenStack Private Cloud Solutions, which the company announced at its recent partners conference.

Like Your New Marketing BFF?

Facebook’s content hosting agreement with The New York Times and eight other publishers is a big deal. The upshot: Facebook gets to keep its 1.5 billion active users tucked snugly within its walled garden as they consume information, rather than passing users off to the originating site. Today, that information is select Times and Atlantic stories. Tomorrow, it could be a documentary produced and distributed by Facebook, similar to Amazon Prime content.

What that means for anyone marketing goods or services is that Facebook plans to keep users in its system. No doubt the other big social sites will have their own stickiness strategies, so you need an effective social marketing plan.

Think about how selling on Facebook works now. You do some research on spring jackets, purchase one and show it off to your friends. Then, for weeks, Facebook shows you more spring jackets. It’s the definition of reactionary and wasted marketing budget. In fact, an IBM/eConsultancy study found that only 35 percent of consumers say the communications they receive from their favorite brands are relevant, and four out of five believe brands fail to understand them as individuals.

Big data analytics company Teradata thinks it can do better via its new Social Advertising Capability on Facebook. The plan is to help marketing pros “deliver highly targeted Facebook advertising as part of an integrated, omni-channel solution that incorporates social advertising with email, mobile and web,” said Teradata in its release. Translated, it wants to help you pull together a data-based campaign so well-tailored that customers don’t even notice how creepily accurate it is. Essentially, Teradata will help create “Facebook custom audience” profiles to predictively target potential customers. The new offering is available now as an add-on feature within Teradata’s Digital Marketing Center. The Digital Marketing Center is delivered in a SaaS-based model, and Teradata has partner opportunities for channel firms with software, digital and mobile practices. Details are here.

IBM Hits the Road

Do you do business in Denver, Detroit, Memphis or Rochester, New York? These are the four U.S. cities that won grants in IBM’s Smarter Cities Challenge, announced this week. While in the past IBM’s channel has not been involved in the program, a spokesman told me that partners are encouraged to recommend local solutions to local problems.

In the coming year, IBM will send teams of experts to the four U.S. cities, along with a dozen more global municipalities, to advise civic leaders on using big data to help with job creation, transportation, public safety, health care and more. For the first time, that expert team will include Watson, and Detroit and Memphis will receive access to historic and current Twitter data pertaining to their cities. IBM says each consulting engagement has a value of $500,000.

The Smarter Cities Challenge teams consult with local officials, citizens, businesses and nonprofits in each winning city and crunch data about a critical issue facing the municipality. The end product is a road map on how the city can improve. As examples, IBM cites Birmingham, Alabama, rolling out mobile food markets in underserved neighborhoods to address local health challenges and helping Knoxville, Tennessee, secure $7.12 million to insulate 615 local homes and boost energy efficiency education.

If your territory includes one of the four winning cities and have an innovative idea to use data to solve a pressing problem, let IBM know. You can also follow progress on Twitter.

AWS Names First White-Label MSP

This week Day1 Solutions announced that it’s the first member of the AWS Partner Network (APN) to be recognized for white-label managed service capabilities as part of the AWS Managed Service Program.

To enter the AWS Managed Service Program, a partner must pass a rigorous third-party audit. Mike Bradicich, vice president, cloud managed services at Day1, told me that the company is looking to work with other channel companies in two ways. First, providers engage Day1 as an MSP partner to deliver, under the partner’s brand, a package including email, ticketing and a dedicated 24×7 support line based in the U.S. The company will also inherit controls at two levels to help APN partners pass the AWS Managed Service Program audit. White-label managed services allow for faster entry to the AWS program versus hiring staff or doing training internally, said Bradicich.

If you haven’t checked out AWS’ partner options lately, it may be worth taking a look. The company has expanded its technology partner roster and just launched a series of APN How-to Guides, in addition to the existing free marketing tools.

Plus: Speaking of free guides check out Microsoft’s series of 11 how-to webinars on using intellectual property and recurring revenues to establish a profitable and sustainable business model.

Dell Vet: $1 Billion by 2020

Know a woman with a great idea but no funding? TheEmpowering a Billion Women by 2020 movement, led by Ingrid Vanderveldt, former entrepreneur-in-residence of Dell, along with partners including Dell Financial Services, Frost & Sullivan and cloud accounting software provider Xero, this week announced its “Business in a Box” software platform as well as a $100 million IV Credit Fund.

The software package integrates select finance and other technologies to help entrepreneurs get their businesses off the ground, or take them to the next level, while the fund, backed in part by Dell Financial Services, is looking to build a portfolio of relationships with fast-growth startups that have at least 51 percent women in the C-suites by lending up to $100 million over the next 12 months.

“Our business goal by 2020 is to get $1 billion of credit into the hands of women, enabling them to gain access to up to $10 billion worth of support and infrastructure to build their ventures,” said Vanderveldt in a statement. “With that, we expect them to generate up to $100 billion in global market by providing women with the tools, technology and resources they need to succeed.”

Beyond just software, EBW matches entrepreneurs with experts to help set financial goals and recommends technology solutions from trusted partners. If you’re looking for funding, or to get involved in a program that can do some social good, this is a great opportunity. “Women-led companies are among the fastest growing entrepreneurial segments,” said Darren Fedorowicz, executive director of Dell Financial Services. “By providing financing options, we can help qualified companies access the scalable technology and capital they need to grow.”

Plus: KPMG announced this week that former Secretary of State Condoleezza Rice and Duke Energy President and CEO Lynn Good will keynote its inaugural Women’s Leadership Summit, held next month in conjunction with the Women’s PGA Championship. Other speakers and panelists include KPMG U.S. chairman and CEO-elect Lynne Doughtie, Frontier Communications executive chairman Maggie Wilderotter and Nasdaq President Adena Friedman. 

Quantum Revenue Leaps

If you needed more proof that scale-out and software-defined storage is hot, take a look at Quantum’s revenue trajectory. In a release, the company said that for FY 2015, revenue from its scale-out storage products and related services grew 74 percent over the prior year, with increasing momentum quarter by quarter. After growing 41 percent in Q1, revenue increased 58 percent and 77 percent in Q2 and Q3, respectively, and then 116 percent in the fourth quarter.

To meet that demand, the number of channel partners reselling its scale-out storage offerings grew too, by 38 percent.

Quantum has a diverse product portfolio, including high-performance and object storage, intelligent tiering software and backup and disaster recovery for physical, virtual and cloud, so it’s a viable partner whether your customer base is SMB, enterprise or verticals such as finance, government or health care. Its channel program includes a tiered validation platform to test and qualify solutions.

Follow executive editor @LornaGarey on Twitter.

5 Channel Ops: IBM Smart Cities, Teradata + Facebook, AWS