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.