HMV's music and DVD affiliate business was relatively
unprofitable. The existing affiliate model was favouring cash-back
sites that were attracting thrifty consumers only interested in
buying the cheapest products available. The prices they were paying
for HMV products was low, and the margin HMV was making on
affiliate sales was low too. To compound the problem HMV had been
paying affiliate retailers above average rates for the low
commission sales they had been generating.
HMV's affiliate programme needed to ensure year on year increase
in volume of sales on higher margin products. This would lead to an
increase in ROI and more importantly an increase in the
profitability of the affiliate programme. HMV incentivized a long
tail of special interest affiliate sites (eg jazz music or role
playing computer game sites) where it new people would be prepared
to pay more for HMV products, by increasing commissions and giving
them content users could interact with to drive loyalty. They could
populate their sites with the "Warner Widget", a dynamic gift
generator that enabled shoppers to find the right DVD for their
loved ones and top-peforming affiliates were chosen to use the HVM
display URL within search engines to drive traffic on terms not
covered by HMV's own pay-per-click search campaign. The aim was to
stay true to HMV's vision of allowing people to 'Get Closer' to the
films, music and games they loved. Commissions were, in turn,
reduced for the more general cash-back sites.
to drive traffic on terms not covered by HMV's own pay-per-click
search campaign. Weekly "Top Product" emails were also sent out to
the entire affiliate base to ensure their promotions were in line
with other on and offline media channels - so that all HMV
communications were aligned.
Allowing affiliates to use the HMV display URL drove over
250,000 clicks with no reported cannibalisation on HMV's own search
campaign. Critically, by targeting the right environments and
allowing consumers to engage in HMV content, there was a 6%
increase in the average order value. This led to an impressive 61%
increase in sales revenue.