RISK EVALUATION
The win-win relationship between the sponsor's associate may be broken if the sponsor's value proposition is insufficient. Affiliates execute their business, assuming that each sponsor will provide a slightly predictable return over time. Factors affecting this predictability are:
• The conversion rate (percentage of clients that after visiting the affiliate’s website conducted predefined action),
• the average commission (the average transaction size for a particular advertiser multiplied by the commission percentage).
If the value proposition is inadequate for affiliate, it is typically because the sponsor offers a commission percentage that is too low or the conversion rate for customers once they have been directed to the sponsor's website is insufficient. Low conversion rates occur for a variety of reasons, but at the top of the list are characteristics such as: difficulty with navigating the site, poor product images, inadequate product descriptions and uncompetitive shipping policies.
According to experiences from the US market, a key contributor to conversion rate in e-commerce is free shipping, even if offered based on a minimum purchase amount .
The empirical quantitative research study was based on on-line questionnaire published on www.webankieta.pl system, in which we tried to find out:
• what is the scope of usage of performance models when conducting e-campaigns,
• what is the attitude of e-shops marketers towards affiliate marketing and performance based models of e-campaigns.
In the research study conducted between JanuaryMarch 2011, took part 108 e-shop marketing managers and specialists located in Poland.
The following figure shows still relatively considerable amount of campaigns ran by means of Flat Fee and CPM models (21% and 14% of answers). In such campaigns the publisher of sponsor’s promotional materials takes very limited responsibility for the campaign’s performance. The majority of campaigns are moderately effect driven – 37% of the examined marketers use CPC model in e-promotion activities. What is worth underlining is the fact that campaigns which link the remuneration of owner of advertising space with the campaign’s performance are used relatively not often – only 21% of e-shops take advantage of CPA, CPS or Success Fee models.
The difference between the expectations of sponsors and the offer of publishers is seen in the answers to the next question. When asked about the subjective opinion on the best models of e-promotion campaigns, the respondents indicated mostly the CPC, CPA and CPS models. The CPM model has been indicated only by 5% of respondents. The hypothesis that present market offer does not reflect the needs of sponsors is also supported by answers to the next question, where respondents were asked to indicate which model they will use more often in the future.
60% of respondents would like to use purely performance driven models of e-campaigns. The FF or CPM models would be used scarcely. The trend of performance campaigns usage is also supported by answers to the question on the expectations of sponsors’ towards the campaigns – more than 65% of respondents indicated the increasing volume of sales as the main aim of conducted campaigns, whereas only 35% campaigns were dedicated to branding or relationship building.
The following table presents the opinions on the various issues of e-campaigns development. The respondents indicated that FF or CPM are not effective models of e-campaigns purchase (more than 50% of answers are negative). The marketers are not fully convinced about the concept of e-customer fulfilling the role of traders – more than 45% of answers “hard to say” shows that such strategy is relatively new and respondents don’t have clear opinion on that matter. The same attitude of marketers can be indicated when admitting the influential role of bloggers (ca. 31% of “hard to say” answers) and the outsourcing of sales onto the third parties (43% of “hard to say” answers). More than 65% of respondents agree that if they had a choice they wouldn’t use CPM model of e-promotion campaigns.
Resources:
Mazurek, G, Denying Innovative Internal
Communication Tools: Managers and employees resistance in Enterprise 2.0
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International Conference, vol. 1, 2009, pp. 109-113.