Wednesday, December 13, 2006

Disaffiliate marketing

Venturewoods has another interesting post: Where is the catch?

Will viral affiliate marketing work in India, Sanjay asks. Background: MakeMyTrip's High Five program and SeventyMM's free for life program are examples of viral programs in India, but they expect a referral to BUY the service rather than just sign up. That means they don't just expect you to get someone to sign up, but they have to pay up for you to earn anything.

Sanjay rightfully points out that this is a higher bar for such programs - that registration itself is not enough, a transaction must be made. On the other hand, merchants are quite willing to shell out money for paper and TV advertisements, or Google Adwords, which are simply impression or click based programs, and demand money for impressions rather than registrations.

So, he asks, will this viral marketing concept ever work in India? Here's my take.

Viral, Affilliate or Word of Mouth?
Don't care. What I'm talking about is the concept of having users refer others. Versus using a distribution channel where you have to cough up considerably higher money for branding and advertising.

Whether this is by definition viral or affiliate or otherwise, I am talking about having other people do your marketing, but not through the traditional distribution channels. Yes, this can mean MLM too, or a combination of all of the above like this one.

Where's the money?
What do the two sites offer you? MakeMyTrip offers Rs. 500 off on tickets you purchase from them in future. SeventyMM waives 1/6th of your fee for each member you register.

None of these mean hard cash for you. Cash off on tickets or fees bought means you only benefit by using the service in the future. It does not reward you for the task of referring a customer, for which the merchants are paying big bucks for in advertising anyhow. Imagine that MakeMyTrip went to StarTV and said, listen, we'll give you Rs. 500 off for every flight you take for the next three months, just show our ads 10 times a day.

"No, thank you", is what they will get. The "thank you" will likely be replaced with unprintable material even in the "Wingdings" font.

If web sites continue to offer benefits of the form of "you'll use us again, surely, and then we'll save you some money" - they will see very little interest.

Let affiliates make real money instead
Any affiliate program that's really successful in India needs to show people real money. (Not just in India, but anywhere, according to me. See Amazon) It need not even be cash or cheque (though that is vastly preferable), it could be transferrable coupons. If MakeMyTrip makes my coupons transferrable (I'm assuming they are not) then I could sell them on eBay for Rs. 450.

Seventymm needn't give me the cash off - Give me real money instead. Because in the current system if I get six people I have then got complete fees off - why should I then bother referring any more? I won't even place their link on my blog because heck, I'm not getting paid after six, right? (Or so I think, though the terms of use says that they will send me a cheque, but that's not substantiated anywhere on their affiliate page)

Cash can a pain in the neck for tax purposes, but it's a pain that can be solved, believe me. I have been in the business enough to know that I can hire accountants to work this out for less than Rs. 5,000 a month, so if anyone gives me "tax reasons", I say phooey. Service tax is an issue, so cut 12.24% out and offer the rest. TDS is an issue only if payments exceed Rs. 20,000 a year - you can obviously gather tax details at the time. And if this is still such a huge issue, simply allow people to buy gift or food coupons with their accumulated income; country-wide shops like Lifestyle, Westside etc. simply work.

For seventymm, whose customers are specific to two cities, even food coupons from SodexHo might work.

Offer the "referred person" a discount
India loves discounts. Instead of paying me Rs. 500, if paid me Rs. 250, and took Rs. 250 off the reffered person's tickets, that would be a heck of a deal. Same with seventymm.

So the deal is: If you come through me, you get a discount. You don't get that discount if you go directly to the site. So there's a tangible benefit, is there not?

I wouldn't mind a lower affiliate revenue if I can offer real value to my referral. And think of the conversation:
"Don't register directly, register through me",
"I get a referral commission".
"Hmm. Gimme half of it".

But that's the way it works in India.

Better to have:
"Don't register directly, register through me",
"You get Rs. 100 discount".
"Oh, cool, will do".

Guess what. That person will now WANT to get referred by you. Cut the affiliate's revenue by half, but it means she can get 10 times more people because they will see value.

Restrictions on earnings
MakeMyTrip limits your coupon earnings further: You can't use more than one coupon on a flight and the coupons expire after three months. So if I have 10 referrals, I get 10 coupons, and suddenly I must fly 10 times a quarter for this thing to make financial sense to me.

Seventymm restricts me from transferring my earnings. And I'm not sure about this, but I think they might cut my earnings off if my referral unsubscribes - though that's not written anywhere.

Make it easy
Referring customers right now is all word of mouth or referral emails. Why can't I paste a little piece of code on my blog to refer people over? Something like a Google Adsense referral or Amazon's referral code?

Or how about Nothing different except I get the referral income.

Make it a viable business opportunity
Referring people is not seen as a channel in India - but companies have got a hang of it and figured that instead of paying agencies they can pay half that to their own employees for referrals. Win-win.

And web sites can do the same, if they let users (and non-users alike) refer people. I don't mind the idea of pay-as-you-earn, meaning affiliates get paid only on purchase by referrals rather than on registration. Money begets money.

To make it a real business opportunity, sites should:
a) Offer real money or tradable currency
b) Let earnings grow when referrals grow
c) Offer discounts on affiliate based signups
d) Make it easy for affiliates to advertise to referrals

What do you think?


Prateek Dayal said...

Yet another amazing post. Makes me wonder why you are not advising 10 startups already or working with a VC firm :)

Deepak Shenoy said...

Thanks Prateek...I don't think I'm qualified. But it's a ton of fun thinking/writing about this kinda stuff.

Santosh said...

How popular is SodexHo in your city? Do most of your fav. joints partner with them?