Affiliate networks have been a part of online marketing since the inception of the web, and are often touted as a win-win situation for the client and the affiliate; the client only pays for the sales the affiliate generates. But while other mediums have evolved over time, affiliates seem to be stuck in a bad business model that I would argue can limit a brand’s potential, or even cause brand damage.

Is this the fault of the affiliate, the affiliate networks, or the client that hires them? My vote would be to distribute responsibility amongst all three, with the bulk of the accountability on the shoulders of the client, for failing to incentivize a new model that would benefit both themselves and the affiliates.

Generally, the setup is as follows: Affiliate networks house many affiliates, who buy media on behalf of clients. Clients pay the affiliate networks a fixed amount for each sale that an affiliate instigates. The network then disperses this payment to the applicable affiliate, taking a percentage (usually a single digit figure) of the profit.

The problem with this payment structure is that it incentivizes the affiliate to purchase the cheapest media to accomplish the sale—generally brand or late-phase Customer Journey phraseology in Paid Search. Taking the easy way can create brand confusion, unnecessary competition, and potential conflict in messaging. Furthermore, the client can end up paying more for the sale than they would have by purchasing media directly. Loss of efficiency and brand equity: hardly the win-win situation that affiliates are purported to be.

To compound this problem, the current incentives established in many contracts are hardly worthwhile, for the affiliate. I recently reviewed a contract offering ‘prizes’ to the top affiliate, including things a 20 year-old guy might want, but nothing a business would seek. This is inefficient for all parties and does nothing to grow sales.

The network itself can also be a hindrance to progress; instead of allowing the client to select a limited set of motivated partners, they supply affiliates based on their own self-interest. Thus, the potential real value is further diminished. The networks have been responsible for some questionable use of technology, in terms of tracking and sales attribution that I have noticed in European models in particular. These issues do further harm to the perceived value of the network.

I advocate the client-affiliate relationship only so far as a mutual benefit can be achieved. First, the clients should restrict affiliate-generated sales to an appropriate  % of total sales, in order to preserve brand integrity, and maximize profit volume or market share. They should incentivize the use of early phase media by paying a higher percentage of profit for those long-tail sales. To prevent brand degradation, they need to set up clear rules on affiliate media purchasing and messaging. Lastly, tracking and technology issues should be addressed through the client contract, not the affiliate network, to prevent any of the aforementioned problems.

If this new model is created, we may begin to see healthy affiliate programs, where Brand equity is preserved with increased sales and customer reach, and affiliates are profiting at higher percentages than previously. That seems like a real win-win situation.

Marketing is a collection of many moving parts working together; the only way for marketing efforts to be successful is if the parts are optimized. Marketing is similar to a car traveling down a street.  You have a dashboard, engine, fuel and other numerous supportive, critical parts, such as seats. (I once drove a car that had an upside down bucket for a seat.  It was fine until the first turn, followed by an almost complete disaster.)

In this example, the car starts from zero, much in the way marketing efforts begin online. Assuming you wish to drive the speed limit, you have several options for how to achieve your cruising speed. You can rev the engine and get to 60mph quickly, which is the fast course of action but certainly not the most fuel-efficient. Or you can gradually accelerate, holding your miles/gallon indicator steady at 30 mpg.

A marketing dashboard is similar to the one in your car; your marketing barometers include CPO (miles per gallon), an indicator of efficiency; conversions (speed), an indication of volume and sustainability. Budget (or fuel capacity) is also crucial, especially when we want to ramp up our efforts for long-term success (or go really fast and have a big highway in front of us.)

In order to keep all these factors working together towards the health of your company, and overall business goals, you need a marketing framework. A framework can provide goal sales volume, at CPO limits, for a specified period of time. A framework can also take into account the various demands placed on a business, those of a financial and goal-growth nature, and the expectations of your customers.

If we return to the car metaphor, we can clearly see those that are slower to perform and those that have the power and fuel to achieve success. These are the Starbucks and the Wal-Mart’s of the world, with seemingly endless capacity and drive.

There are always issues of course.  We have seen the management insistent on reducing costs while the vehicle has yet to reach the goal. Unfortunately, cutting costs (or limiting our drive toward goal) has serious effects.  Picture this: We started out 10 mph getting 5 mpg.  We are accelerating and bleeding off efficiency to grow sales. (Just like a company, a car is naturally inefficient when accelerating.) We can slow down and save valuable mpg but at a cost of time.  All too often we see companies leave the gate in a rush to keep up with competitors and investors, only to slow down for some reason, often poor management decisions or a false need to meet a ‘middle metric’ goal.

A classic example based on a true story is a company who had consistent acceleration of marketing efforts met by sales growth. When they acquired private equity investment their efforts were refocused from a growth strategy to a maximization of profit volume. That maximization point removed the necessary reach and frequency needed to sustain growth, to the serious detriment of sales and the overall health of the company.

To keep the analogy, it was as if we have a car moving at 30 mph accelerating toward 75 mph and then added a mpg restriction of 20mpg. The car couldn’t accelerate quickly enough to keep up with competitors.

Other times, we see a fast moving company with momentum as their primary KPI, thus becoming blind to market downturn. In this case, there’s always an option to recoup by cutting staff and stores but one must wonder what attention was paid to the other dashboard KPIs clearly in front of them.  Accelerating from zero to 200 mph and sustaining this speed does not last long. In the last 90s, we saw the dot come implosion create fast moving companies that did not balance profit volume with market share. Today, under what should be better conditions, we see it again.  This time, banks and investment firms lead the way.

A business must be reactive to the marketplace and must seize market share when it is available, with innovation often leading the way. For most of us, innovation comes only so often. Most of the businesses of the world should focus on a balance between profit volume and market share. We must run our business much like we drive, with some days requiring a bit of acceleration, and others, necessitating conservation.  If we do not operate our businesses within a framework that focuses on economic realities of cost or volume or profit, we are likely to crash, be ticketed or run out of gas far ahead of our time.

Usually, when I deal with matters of Brand equity, it is with regard to large companies or corporations that have substantial value, to be sure, but no real face attached. But are circumstances altered when an individual is the Brand?

I was given an opportunity to contemplate this question further when I read about Oprah Winfrey’s departure from CBS and her popular talk show to begin her own TV network, OWN, planned for launch in January 2011.

Viewership for her talk show was approximately 7million- a large audience especially now and the largest for this type of programming. But this was down from 14 million in 1998, illustrating the migration of network television audience overall to cable and Internet. Knowing only that Ms. Winfrey plans on airing a mix of original and acquired programs, specials, and movies dedicated to ‘living your best life’, I can say with certainty that no matter what the specifics, she will need to aggressively employ her other channels in order to build her brand in this new arena. The online channel in particular will vital in reaching both her existing audience as well as new viewers.

She is keeping the message consistent, which is hugely important, so as not to alienate the existing audience, and prevent Brand dilution. And her forays into other media, both through O magazine and Oprah.com have been successful. She could leverage these avenues to create new demand for her network (and incentive for advertisers) by cross marketing products, programming content and themes, and contests/special promotions. Her entire offering should act as one organism, allowing TV and magazine content and follow-up to be viewed online.

Internet marketing should play an important role in ensuring that the Customer Journey, or interaction with the Oprah brand is consistent and seamless. If a user searches for subject matter related to OWN TV, media (either free or Paid) should link them to the website, or deep-link them to the specific content online. Martha Stewart has employed a similar strategy with her magazine, television program, and website, for example, allowing readers to follow up on magazine articles online. Yes, Oprah should connect with her users through social media outlets but the real reach and frequency will occur online through Search, Content and Display media.

If she fails to engage new viewers online, she may find herself struggling to find advertisers; with a loyal audience of at most 7 million, she can’t afford NOT to combine her available resources.

With regard to the strategy above, there is no difference between the individual and the corporate Brand. Brands need to evolve and adapt to survive and Oprah has shown herself to be capable of both. This may just be the next step in her brand evolution, assuming she can truly leverage Internet potential through existing and new channels.