Re: ONLINE-ADS>'Estee Lauder sues Excite over keywords

From: Allan Sabo <admin_at_ad-network.com>
Date: Tue, 9 Feb 1999 21:06:26 -0600 (CST)

KIM BROOKS <KBROOKS_at_BARDO.SEATTLE.WA.US'WROTE:
>Now imagine being a Levi's retailer. Are you happy about
>this? Probably not. So Levi's says, "Well, send people to
>our site as an affiliate, and we'll give you a pittance for
>handing over your customers to us." Do you feel compensated
>& partnered? Probably not. Basically, Levi's would be
>admitting that yes, they are competing with you (the
>retailer) and yes, there's nothing you can do about it so
>you may as well join the bandwagon.
>
>So the retailer decides to compete with its own source. You
>buy the word "Levi's" from Yahoo! to send people to your web
>site (to either sell jeans or even send them off to Levi's
>as an affiliate). You get sued by... Levi's. Does anyone
>else see the growing conflict of interest here?
>
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Kim, you raise a very good point here. Your assessment of
the potential conflict of interest is a real and threatening
possibility. However, your example makes one assumption
that I disagree with.

You assume that Levi's *wants* to alienate its existing
retail chain of distribution by offering "a mere pittance
for handing the customer over". While the possibility of a
manufacturer doing this has happened in a few "selective"
cases; I believe those companies are making a giant mistake.
 I doubt I could in advise a client to do this.

Most manufactures I have had the privilege of dealing with
are very concerned of threatening their existing retail
distribution chain. Most do not want to do too much with
the web in fear that by offering retail e-commerce at their
site would cause a backlash among their real world outlets
against the manufacturer. Such a backlash could effectively
choke that manufacture out of an enormous percentage of
real-world sales. (Of which most manufacturers probably
still rely heavily upon their real-world distribution
channels for the bulk of their revenues, right?)

I think the real opportunity here for manufactures is not to
use e-commerce or "Affiliate Programs" as a means to
threaten their relationship with its retail outlets.
Instead, "Affiliate Programs" should be used as a means to
strengthen the manufacturer / retail relationship. Here is
my example:

Levis announces an "affiliate partner program" for its
existing retail outlets ONLY. These outlets would be given
co-branded storefronts, and would retain their margins on
all sales. Therefore, if Levis sells its product to a small
department store for 50% off SRP. Then that store could
create a co-branded storefront with Levis, and that retailer
would be credited with its fair percentage of the sale
(except for maybe a small charge for "handling"). Further,
the department store did not have to expend any physical
overhead to manage the inventory. Levi's ships direct with
a co-branded thank you letter enclosed. I would also
recommend that Levis refrain from ever selling direct.

Now, with respect to purchasing keywords, Levis would have
little interest in purchasing the keywords, however the
distribution channels would have enormous interest. The
retailers would fight to purchase the keyword, "Levis", and
they would advertise that you can buy Levis from them.
Maybe they could also get you to buy a belt and a shirt to
go with those new blue jeans too. ;)

The moral here is to usenet technology to create a win/win
strategy that will improve the manufacturer/ distributor
relationship, cut costs, increase brand awareness, reduce
conflicts of interest and provide excellent customer
service. Everyone makes money, everyone wins. Can you see
the elegance and simplicity here?

In addition, I can't even visualize why a firm like Levis
(to use your example again) would ever want to engage in a
battle of tug-o-war with its existing retail channel, ever.
While I am a big proponent of the Internet, I still doubt we
will ever see physical stores and malls disappear from the
face of the earth. We may see some consolidation, but I
just don't see stores being eliminated because of the
Internet (sorry). As long as people will continue to visit
stores and malls, manufactures will need to keep the peace
with their retail outlets. This way of using affiliate
programs is a fair and equitable way to do that.

I am curious to know why in your example you assumed that
the affiliate pay-out would be a mere pittance? Is your
opinion of all affiliate programs that they pay too little?
Because, while I agree that many affiliate programs have
been created in haste and with little thought toward
creating a true win/win relationship with affiliate members,
there are some that are very profitable, (for both parties),
which is the only way to measure "true" success.

Allan Sabo

Executive VP of Strategic Marketing e-sports!

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phone: 216-228-0260
e-mail: asabo_at_ad-network.com



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Received on Wed Feb 10 1999 - 07:55:55 CST