Affiliate marketing

Affiliate Marketing is an Internet-based marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate's marketing efforts. It is an application of crowdsourcing.

The Affiliate Marketing industry has four core players at its heart: the Merchant, the Network, the Publisher and the Consumer. The market has grown sufficiently in complexity to warrant a secondary tier of players, including Affiliate Management Agencies, Super-Affiliates and Specialized Third Parties vendors.

Affiliate marketing overlaps with other Internet marketing methods to some degree, because affiliates often use regular advertising methods. Those methods include organic search engine optimization, paid search engine marketing, e-mail marketing, and in some sense display advertising. On the other hand, affiliates sometimes use less orthodox techniques, such as publishing reviews of products or services offered by a partner.

Affiliate marketing—using one website to drive traffic to another—is a form of online marketing, which is frequently overlooked by advertisers.^{[citation needed]} While search engines, e-mail, and website syndication capture much of the attention of online retailers, affiliate marketing carries a much lower profile. Still, affiliates continue to play a significant role in e-retailers' marketing strategies.^[1]

History

Origin

The concept of revenue sharing—paying commission for referred business—predates affiliate marketing and the Internet. The translation of the revenue share principles to mainstream e-commerce happened almost four years after the origination of the World Wide Web in November 1994.

The consensus of marketers and adult industry insiders is that Cybererotica was either the first or among the early innovators in affiliate marketing with a cost per click program.^[2]

During November 1994, CDNOW launched its BuyWeb program. With this program CDNOW was the first non-adult website to introduce the concept of an affiliate or associate program with its idea of click-through purchasing. CDNOW had the idea that music-oriented websites could review or list albums on their pages that their visitors may be interested in purchasing. These websites could also offer a link that would take the visitor directly to CDNOW to purchase the albums. The idea for remote purchasing originally arose because of conversations with music label Geffen Records in the fall of 1994. The management at Geffen wanted to sell its artists' CDs directly from its website, but did not want to implement this capability itself. Geffen asked CDNOW if it could design a program where CDNOW would handle the order fulfillment. Geffen realized that CDNOW could link directly from the artist on its website to Geffen's website, bypassing the CDNOW home page and going directly to an artist's music page.^[3]

Amazon.com (Amazon) launched its associate program in July 1996. Amazon associates could place banner or text links on their site for individual books, or link directly to the Amazon home page.

When visitors clicked from the associate's website through to Amazon and purchased a book, the associate received a commission. Amazon was not the first merchant to offer an affiliate program, but its program was the first to become widely-known and serve as a model for subsequent programs.^[4][5]

In February 2000, Amazon announced that it had been granted a patent (6,029,141) on all the essential components of an affiliate program. The patent application was submitted in June 1997, which predates most affiliate programs, but not PC Flowers & Gifts.com (October 1994), AutoWeb.com (October 1995), Kbkids.com/BrainPlay.com (January 1996), EPage (April 1996), and several others.^[2]

Historic development

Affiliate marketing has grown quickly since its inception. The e-commerce website, viewed as a marketing toy in the early days of the Internet, became an integrated part of the overall business plan and in some cases grew to a bigger business than the existing offline business. According to one report, the total sales amount generated through affiliate networks in 2006 was £2.16 billion in the United Kingdom alone. The estimates were £1.35 billion in sales in 2005.^[6] MarketingSherpa's research team estimated that, in 2006, affiliates worldwide earned US$6.5 billion in bounty and commissions from a variety of sources in retail, personal finance, gaming and gambling, travel, telecom, education, publishing, and forms of lead generation other than contextual advertising programs such as Google AdSense.^[7]

Currently the most active sectors for affiliate marketing are the adult, gambling, and retail industries.^[8] The three sectors expected to experience the greatest growth are the mobile phone, finance, and travel sectors.^[8] Soon after these sectors came the entertainment (particularly gaming) and Internet-related services (particularly broadband) sectors. Also several of the affiliate solution providers expect to see increased interest from business-to-business marketers and advertisers in using affiliate marketing as part of their mix.^[8]

Web 2.0

Websites and services based on Web 2.0 concepts—blogging and interactive online communities, for example—have impacted the affiliate marketing world as well. The new media allowed merchants to become closer to their affiliates and improved the communication between them.^[9][10]

New developments have made it more difficult for unscrupulous affiliates to make money. Emerging black sheep are detected and made known to the affiliate marketing community with much greater speed and efficiency.

Compensation methods

Predominant compensation methods

Eighty percent of affiliate programs today use revenue sharing or cost per sale (CPS) as a compensation method, nineteen percent use cost per action (CPA), and the remaining programs use other methods such as cost per click (CPC) or cost per mille (CPM).^[11]

Diminished compensation methods

Less than one percent of traditional affiliate marketing programs today use cost per click and cost per mille. However, these compensation methods are used heavily in display advertising and paid search.

Cost per mille requires only that the publisher make the advertising available on his website and display it to his visitors in order to receive a commission. Pay per click requires one additional step in the conversion process to generate revenue for the publisher: A visitor must not only be made aware of the advertisement, but must also click on the advertisement to visit the advertiser's website.

Cost per click was more common in the early days of affiliate marketing, but has diminished in use over time due to click fraud issues very similar to the click fraud issues modern search engines are facing today. Contextual advertising programs such as Google AdSense are not considered in the statistic pertaining to diminished use of cost per click, as it is uncertain if contextual advertising can be considered affiliate marketing.

Performance marketing

In the case of cost per mille/click, the publisher is not concerned about a visitor being a member of the audience that the advertiser tries to attract and is able to convert, because at this point the publisher has already earned his commission. This leaves the greater, and, in case of cost per mille, the full risk and loss (if the visitor can not be converted) to the advertiser.

Cost per action/sale methods require that referred visitors do more than visit the advertiser's website before the affiliate receives commission. The advertiser must convert that visitor first. It is in the best interest for the affiliate to send the most closely-targeted traffic to the advertiser as possible to increase the chance of a conversion. The risk and loss is shared between the affiliate and the advertiser.

Affiliate marketing is also called "performance marketing", in reference to how sales employees are typically being compensated. Such employees are typically paid a commission for each sale they close, and sometimes are paid performance incentives for exceeding targeted baselines.^[12] Affiliates are not employed by the advertiser whose products or services they promote, but the compensation models applied to affiliate marketing are very similar to the ones used for people in the advertisers' internal sales department.

The phrase, "Affiliates are an extended sales force for your business", which is often used to explain affiliate marketing, is not completely accurate. The primary difference between the two is that affiliate marketers provide little if any influence on a possible prospect in the conversion process once that prospect is directed to the advertiser's website. The sales team of the advertiser, however, does have the control and influence up to the point where the prospect signs the contract or completes the purchase.

Multi-tier programs

Some advertisers offer multi-tier programs that distribute commission into a hierarchical referral network of sign-ups and sub-partners. In practical terms, publisher "A" signs up to the program with an advertiser and gets rewarded for the agreed activity conducted by a referred visitor. If publisher "A" attracts publishers "B" and "C" to sign up for the same program using his sign-up code, all future activities performed by publishers "B" and "C" will result in additional commission (at a lower rate) for publisher "A".

Two-tier programs exist in the minority of affiliate programs; most are simply one-tier. Referral programs beyond two-tier resemble multi-level marketing (MLM) or network marketing but are different. Multi-level marketing (MLM) or network marketing have more requirements/qualifications to get paid a commission. Whereas affiliate programs do not.

From the advertiser perspective

Pros and cons

Merchants favor affiliate marketing because in most cases it uses a "pay for performance" model, meaning that the merchant does not incur a marketing expense unless results are accrued (excluding any initial setup cost).^[13] Some businesses owe much of their success to this marketing technique, a notable example being Amazon.com. Unlike display advertising, however, affiliate marketing is not easily scalable.^[14]

Implementation options

Some merchants run their own (i.e., in-house) affiliate programs using popular software while others use third-party services provided by intermediaries to track traffic or sales that are referred from affiliates (see outsourced program management). Merchants can choose from two different types of affiliate management solutions: standalone software or hosted services, typically called affiliate networks. Payouts to affiliates or publishers are either made by the networks on behalf of the merchant, by the network, consolidated across all merchants where the publisher has a relationship with and earned commissions or directly by the merchant itself.

Affiliate management and program management outsourcing

Successful affiliate programs require significant work and maintenance. Having a successful affiliate program is more difficult than when such programs were just emerging. With the exception of some vertical markets, it is rare for an affiliate program to generate considerable revenue with poor management or no management (i.e., "auto-drive").

Uncontrolled affiliate programs did—and continue to do so today—aid rogue affiliates, who use spamming,^[15] trademark infringement, false advertising, "cookie cutting"^{[citation needed]}, typosquatting,^[16] and other unethical methods that have given affiliate marketing a negative reputation.

The increased number of Internet businesses and the increased number of people that trust the current technology enough to shop and do business online allows further maturation of affiliate marketing. The opportunity to generate a considerable amount of profit combined with a crowded marketplace filled with competitors of equal quality and size makes it more difficult for merchants to be noticed. In this environment, however, being noticed can yield greater rewards.

Recently, the Internet marketing industry has become more advanced. In some areas online media has been rising to the sophistication of offline media, in which advertising has been largely professional and competitive. There are significantly more requirements that merchants must meet to be successful, and those requirements are becoming too burdensome for the merchant to manage successfully in-house. An increasing number of merchants are seeking alternative options found in relatively new outsourced (affiliate) program management (OPM) companies, which are often founded by veteran affiliate managers and network program managers.^[17] OPM companies perform affiliate program management for the merchants as a service, similar to advertising agencies promoting a brand or product as done in offline marketing.

Types of affiliate websites

Affiliate websites are often categorized by merchants (i.e., advertisers) and affiliate networks. There are currently no industry-wide accepted standards for the categorization. The following types of websites are generic, yet are commonly understood and used by affiliate marketers.

• Search affiliates that utilize pay per click search engines to promote the advertisers' offers (i.e., search arbitrage)
• Comparison shopping websites and directories
• Loyalty websites, typically characterized by providing a reward system for purchases via points back, cash back
• CRM sites that offer charitable donations
• Coupon and rebate websites that focus on sales promotions
• Content and niche market websites, including product review sites
• Personal websites (This type of website was the reason for the birth of affiliate marketing; however, such websites are almost reduced to complete irrelevance compared to the other types of affiliate websites.)^{[citation needed]}
• Weblogs and website syndication feeds
• E-mail list affiliates (i.e., owners of large opt-in -mail lists that typically employ e-mail drip marketing) and newsletter list affiliates, which are typically more content-heavy
• Registration path or co-registration affiliates who include offers from other merchants during the registration process on their own website
• Shopping directories that list merchants by categories without providing coupons, price comparisons, or other features based on information that changes frequently, thus requiring continual updates
• Cost per action networks (i.e., top-tier affiliates) that expose offers from the advertiser with which they are affiliated to their own network of affiliates
• Websites using adbars (e.g. Adsense) to display context-sensitive, highly-relevant ads for products on the site

Publisher recruitment

Affiliate networks that already have several advertisers typically also have a large pool of publishers. These publishers could be potentially recruited, and there is also an increased chance that publishers in the network apply to the program on their own, without the need for recruitment efforts by the advertiser.

Relevant websites that attract the same target audiences as the advertiser but without competing with it are potential affiliate partners as well. Vendors or existing customers can also become recruits if doing so makes sense and does not violate any laws or regulations.

Almost any website could be recruited as an affiliate publisher, although high-traffic websites are more likely interested in (for their own sake) low-risk cost per mille or medium-risk cost per click deals rather than higher-risk cost per action or revenue share deals.^[18]

Locating affiliate programs

There are three primary ways to locate affiliate programs for a target website:

1. Affiliate program directories,
2. Large affiliate networks that provide the platform for dozens or even hundreds of advertisers, and
3. The target website itself. (Websites that offer an affiliate program often have a link titled "affiliate program", "affiliates", "referral program", or "webmasters"—usually in the footer or "About" section of the website.)

If the above locations do not yield information pertaining to affiliates, it may be the case that there exists a non-public affiliate program. The most definitive method for finding this information is to contact the website owner directly.

Past and current issues

Since the emergence of affiliate marketing, there has been little control over affiliate activity. Unscrupulous affiliates have used spam, false advertising, forced clicks (to get tracking cookies set on users' computers), adware, and other methods to drive traffic to their sponsors. Although many affiliate programs have terms of service that contain rules against spam, this marketing method has historically proven to attract abuse from spammers.

E-mail spam

In the infancy of affiliate marketing, many Internet users held negative opinions due to the tendency of affiliates to use spam to promote the programs in which they were enrolled.^[19] As affiliate marketing matured, many affiliate merchants have refined their terms and conditions to prohibit affiliates from spamming.

Search engine spam

As search engines have become more prominent, some affiliate marketers have shifted from sending e-mail spam to creating automatically-generated webpages that often contain product data feeds provided by merchants. The goal of such webpages is to manipulate the relevancy or prominence of resources indexed by a search engine, also known as spamdexing. Each page can be targeted to a different niche market through the use of specific keywords, with the result being a skewed form of search engine optimization.

Spam is the biggest threat to organic search engines, whose goal is to provide quality search results for keywords or phrases entered by their users. Google's PageRank algorithm update ("BigDaddy") in February 2006—the final stage of Google's major update ("Jagger") that began in mid-summer 2005—specifically targeted spamdexing with great success. This update thus enabled Google to remove a large amount of mostly computer-generated duplicate content from its index.^[20]

Websites consisting mostly of affiliate links have previously held a negative reputation for underdelivering quality content. In 2005 there were active changes made by Google, where certain websites were labeled as "thin affiliates".^[21] Such websites were either removed from Google's index or were relocated within the results page (i.e., moved from the top-most results to a lower position). To avoid this categorization, affiliate marketer webmasters must create quality content on their websites that distinguishes their work from the work of spammers or banner farms, which only contain links leading to merchant sites.

Some commentators originally suggested that Affiliate links work best in the context of the information contained within the website itself. For instance, if a website contains information pertaining to publishing a website, an affiliate link leading to a merchant's Internet service provider (ISP) within that website's content would be appropriate. If a website contains information pertaining to sports, an affiliate link leading to a sporting goods website may work well within the context of the articles and information about sports. The goal in this case is to publish quality information within the website and provide context-oriented links to related merchant's websites.

However, more recent examples exist of "thin" Affiliate sites which are using the Affiliate Marketing model to create value for Consumers by offering them a service. These thin content service Affiliate fall into three categories:

• Price comparison
• Cause related marketing
• Time saving

Adware

Although it differs from spyware, adware often uses the same methods and technologies. Merchants initially were uninformed about adware, what impact it had, and how it could damage their brands. Affiliate marketers became aware of the issue much more quickly, especially because they noticed that adware often overwrites tracking cookies, thus resulting in a decline of commissions. Affiliates not employing adware felt that it was stealing commission from them. Adware often has no valuable purpose and rarely provides any useful content to the user, who is typically unaware that such software is installed on his/her computer.

Affiliates discussed the issues in Internet forums and began to organize their efforts. They believed that the best way to address the problem was to discourage merchants from advertising via adware. Merchants that were either indifferent to or supportive of adware were exposed by affiliates, thus damaging those merchants' reputations and tarnishing their general affiliate marketing efforts. Many affiliates either terminated the use of such merchants or switched to a competitor's affiliate program. Eventually, affiliate networks were also forced by merchants and affiliates to take a stand and ban certain adware publishers from their network. The result was Code of Conduct by Commission Junction/beFree and Performics,^[22] LinkShare's Anti-Predatory Advertising Addendum,^[23] and ShareASale's complete ban of software applications as a medium for affiliates to promote advertiser offers.^[24] Regardless of the progress made, adware continues to be an issue, as demonstrated by the class action lawsuit against ValueClick and its daughter company Commission Junction filed on April 20, 2007.^[25]

Trademark bidding

Affiliates were among the earliest adopters of pay per click advertising when the first pay per click search engines such as Goto.com (which later became Overture.com after being acquired by Yahoo! in 2003) emerged during the end of the 1990s. Later in 2000 Google launched its pay per click service, Google AdWords, which is responsible for the widespread use and acceptance of pay per click as an advertising channel. An increasing number of merchants engaged in pay per click advertising, either directly or via a search marketing agency, and realized that this space was already well-occupied by their affiliates. Although this situation alone created advertising channel conflicts and debates between advertisers and affiliates, the largest issue concerned affiliates bidding on advertisers names, brands, and trademarks. Several advertisers began to adjust their affiliate program terms to prohibit their affiliates from bidding on those type of keywords. Some advertisers, however, did and still do embrace this behavior, going so far as to allow, or even encourage, affiliates to bid on any term, including the advertiser's trademarks.

Lack of self-regulation and collaboration

Affiliate marketing is driven by entrepreneurs who are working at the edge of Internet marketing. Affiliates are often the first to take advantage of emerging trends and technologies. The "trial and error" approach is probably the best way to describe the operation methods for affiliate marketers. This risky approach is one of the reasons why most affiliates fail or give up before they become successful "super affiliates", capable of generating US$10,000 or more per month in commission. This "frontier" life combined with the attitude found in such communities is likely the main reason why the affiliate marketing industry is unable to self-regulate beyond individual contracts between advertisers and affiliates. Affiliate marketing has experienced numerous failed attempts to create an industry organization or association of some kind that could be the initiator of regulations, standards, and guidelines for the industry.^[26] Some examples of failed regulation efforts are the Affiliate Union and iAfma.

Online forums and industry trade shows are the only means for the different members from the industry—affiliates/publishers, merchants/advertisers, affiliate networks, third-party vendors, and service providers such as outsourced program managers—to congregate at one location. Online forums are free, enable small affiliates to have a larger say, and provide anonymity. Trade shows are cost-prohibitive to small affiliates because of the high price for event passes. Larger affiliates may even be sponsored by an advertiser they promote.

Because of the anonymity of online forums, the quantitative majority of industry members are unable to create any form of legally binding rule or regulation that must be followed throughout the industry. Online forums have had very few successes as representing the majority of the affiliate marketing industry. The most recent example of such a success was the halt of the "Commission Junction Link Management Initiative" (CJ LMI) in June/July 2006, when a single network tried to impose the use of a Javascript tracking code as a replacement for common HTML links on its affiliates.^[27]

Lack of industry standards

Certification and training

Affiliate marketing currently lacks industry standards for training and certification. There are some training courses and seminars that result in certifications; however, the acceptance of such certifications is mostly due to the reputation of the individual or company issuing the certification. Affiliate marketing is not commonly taught in universities, and only a few college instructors work with Internet marketers to introduce the subject to students majoring in marketing.^[28]

Education occurs most often in "real life" by becoming involved and learning the details as time progresses. Although there are several books on the topic, some so-called "how-to" or "silver bullet" books instruct readers to manipulate holes in the Google algorithm, which can quickly become out of date, ^[28] or suggest strategies no longer endorsed or permitted by advertisers.^[29]

Outsourced Program Management companies typically combine formal and informal training, providing much of their training through group collaboration and brainstorming. Such companies also try to send each marketing employee to the industry conference of their choice.^[30]

Other training resources used include online forums, weblogs, podcasts, video seminars, and specialty websites.

Affiliate Summit is the largest conference in the industry, and many other affiliate networks host their own annual events.

Code of conduct

A code of conduct was released by affiliate networks Commission Junction/beFree and Performics in December 2002 to guide practices and adherence to ethical standards for online advertising.

Threat to traditional affiliate networks

Cost per action networks can be viewed as a threat to "classic" affiliate marketing networks. Traditional affiliate marketing is resource-intensive and requires continual maintenance. Most of the maintenance includes managing, monitoring, and supporting affiliates. The goal of affiliate marketing is directed toward long-term and mutual beneficial partnerships between advertisers and affiliates. Cost per action networks, however, eliminate the need for the advertiser to build and maintain relationships to affiliates, as that task is performed for the advertiser by the cost per action network. The advertiser makes an offer, almost always CPA-based, and the cost per action networks handle the remainder of the process by mobilizing their affiliates to promote that offer. Cost per sale and revenue sharing are the primary compensation models for classic affiliate marketing, and are rarely found in cost per action networks. Affiliate marketers typically avoid the topic of cost per action networks; however, if it is being discussed, the debates can become heated and explosive.^[31][32][33]

Marketing term

Members of the marketing industry are recommending that "affiliate marketing" be substituted with an alternative name.^[34] Affiliate marketing is often confused with either network marketing or multi-level marketing. Performance marketing is a common alternative, but other recommendations have been made as well.^[35]

Sales tax vulnerability

In April 2008 the State of New York inserted an item in the state budget asserting sales tax jurisdiction over Amazon.com sales to residents of New York, based on the existence of affiliate links from New York–based websites to Amazon.^[36] The state asserts that even one such affiliate constitutes Amazon having a business presence in the state, and is sufficient to allow New York to tax all Amazon sales to state residents. It is expected that Amazon will challenge this issue in court.

Cookie stuffing

Cookie stuffing involves placing an affiliate tracking cookie on a website visitor's computer without their knowledge, which will then generate revenue for the person doing the cookie stuffing. This not only generates fraudulent affiliate sales, but also has the potential to overwrite other affiliates' cookies, essentially stealing their legitimately earned commissions.

Affiliate services

• Affiliate programs directories
• Affiliate networks (see also Category:Internet advertising services and affiliate networks)
• Affiliate manager and Outsourced Program Management (OPM or APM) (manages affiliates)
• Category:Internet marketing trade shows

References

1. ^ Guide to E-Commerce Technology, 2007-08 Edition by Internet Retailer
2. ^ ^{a b} Shawn Collins (November 10, 2000), History of Affiliate Marketing, ClickZ Network, retrieved October 15, 2007
3. ^ Jason Olim, Matthew Olim and Peter Kent, "The Cdnow Story: Rags to Riches on the Internet", Top Floor Publishing, January 1999 ISBN 0-9661-0326-2
4. ^ Frank Fiore and Shawn Collins, "Successful Affiliate Marketing for Merchants" , from pages 12,13 and 14. QUE Publishing, April 2001 ISBN 0-7897-2525-8
5. ^ Daniel Gray, "The Complete Guide to Associate and Affiliate Programs on the Net", McGraw-Hill Trade, November 30, 1999 ISBN 0-0713-5310-0
6. ^ October 2006, Affiliate Marketing Networks Buyer's Guide (2006), Page 6, e-Consultancy.com, retrieved June 25, 2007
7. ^ Anne Holland, publisher (January 11 2006), Affiliate Summit 2006 Wrap-Up Report -- Commissions to Reach $6.5 Billion in 2006, MarketingSherpa, retrieved on May 17 2007
8. ^ ^{a b c} February 2007, Internet Statistics Compendium 2007, Pages 149–150, e-Consultancy, retrieved June 25, 2007
9. ^ Dion Hinchcliff (15.July, 2006),Web 2.0's Real Secret Sauce: Network Effects,SOA Web Services Journal, retrieved on 14.May, 2007
10. ^ Dion Hinchcliff (29.January, 2007), Social Media Goes Mainstream, SOA Web Services Journal, retrieved on 14.May, 2007
11. ^ AffStat Report 2007. Based on survey responses from almost 200 affiliate managers from a cross-section of the industry.
12. ^ CellarStone Inc. (2006), Sales Commission, QCommission.com, retrieved June 25, 2007
13. ^ Tom Taulli (9 November 2005), Creating A Virtual Sales Force, Forbes.com Business. Retrieved 14 May 2007.
14. ^ Jeff Molander (June 22, 2006), Google's Content Referral Network: A Grab for Advertisers, Thought Shapers, retrieved on December 16th, 2007
15. ^ Danny Sullivan (June 27 2006), The Daily SearchCast News from June 27 2006, WebmasterRadio.fm, retrieved May 17 2007
16. ^ Wayne Porter (September 6 2006), NEW FIRST: LinkShare- Lands' End Versus The Affiliate on Typosquatting, ReveNews.com, retrieved on May 17 2007
17. ^ Jennifer D. Meacham (July/August 2006), Going Out Is In, Revenue Magazine, published by Montgomery Research Inc, Issue 12., Page 36
18. ^ Marios Alexandrou (February 4th, 2007), CPM vs. CPC vs. CPA, All Things SEM, retrieved November 11, 2007
19. ^ Ryan Singel (October 2 2005), Shady Web of Affiliate Marketing, Wired.com, retrieved May 17 2007
20. ^ Jim Hedger (September 6, 2006), Being a Bigdaddy Jagger Meister, WebProNews.com, retrieved on December 16, 2007
21. ^ Spam Recognition Guide for Raters (Word document) supposedly leaked out from Google in 2005. The authenticity of the document was neither acknowledged nor challenged by Google.
22. ^ December 10, 2002, Online Marketing Service Providers Announce Web Publisher Code of Conduct (contains original CoC text), CJ.com, retrieved June 26, 2007
23. ^ December 12, 2002, LinkShare's Anti-Predatory Advertising Addendum, LinkShare.com, retrieved June 26, 2007
24. ^ ShareASale Affiliate Service Agreement, ShareASale.com, retrieved June 26, 2007
25. ^ April 20, 2007, AdWare Class Action Lawsuit against - ValueClick, Commission Junction and beFree, Law Firms of Nassiri & Jung LLP and Hagens Berman, retrieved from CJClassAction.com on June 26, 2007
26. ^ Carsten Cumbrowski (November 4 2006),Affiliate Marketing Organization Initiative Vol.2 - We are back to Step 0, Reve News, retrieved May 17 2007
27. ^ May 2006, New Javascript Links? main discussion thread to CJ's LMI, ABestWeb, retrieved on May 17 2007
28. ^ ^{a b} Alexandra Wharton (March/April 2007), Learning Outside the Box, Revenue Magazine, Issue: March/April 2007, Page 58, link to online version retrieved June 26, 2007
29. ^ Shawn Collins (June 9, 2007), Affiliate Millions - Book Report, AffiliateTip Blog, retrieved June 26, 2007
30. ^ March/April 2007, How Do Companies Train Affiliate Managers? (Web Extra), RevenueToday.com, retrieved June 26, 2007
31. ^ Jeff Molander (November 15, 2006), Are CJ and Linkshare Worth Their Salt?, CostPerNews.com, retrieved May 17 2007
32. ^ November 17 2006, Affiliate Networks vs CPA Networks- Official statements to CostPerNews.com post from 11/15/2006 and comments, CostPerNews.com, retrieved May 17 2007
33. ^ January 2006, There Must Be a Better Way - Thread at ABestWeb affiliate marketing forums, ABestWeb, retrieved May 17 2007
34. ^ Vinny Lingham (11.October, 2005), Profit Sharing - The Performance Marketing Model of the Future,Vinny Lingham's Blog, retrieved on 14.May, 2007
35. ^ Jim Kukral (18.November, 2006), Affiliate Marketing Lacks A Brand - Needs A New Name, Reve News, retrieved on 14.May, 2007
36. ^ Linda Rosencrance,15.April, 2008), N.Y. to tax goods bought on Amazon , Computerworld, retrieved on 16.April, 2008

Internet marketing

Internet marketing, also referred to as i-marketing, web marketing, online marketing, or eMarketing, is the marketing of products or services over the Internet.

The Internet has brought many unique benefits to marketing, one of which being lower costs and greater capabilities for the distribution of information and media to a global audience. The interactive nature of Internet marketing, both in terms of providing instant response and eliciting responses, is a unique quality of the medium. Internet marketing is sometimes considered to have a broader scope because it not only refers to digital media such as the Internet, e-mail, and wireless media; however, Internet marketing also includes management of digital customer data and electronic customer relationship management (ECRM) systems.

Internet marketing ties together creative and technical aspects of the Internet, including design, development, advertising, and sale.

Internet marketing also refers to the placement of media along different stages of the customer engagement cycle through search engine marketing (SEM), search engine optimization (SEO), banner ads on specific websites, e-mail marketing, and Web 2.0 strategies. In 2008 The New York Times working with comScore published an initial estimate to quantify the user data collected by large Internet-based companies. Counting four types of interactions with company websites in addition to the hits from advertisements served from advertising networks, the authors found the potential for collecting data upward of 2,500 times on average per user per month.^[1]

Business models

Internet marketing is associated with several business models:

• e-commerce — goods are sold directly to consumers (B2C) or businesses (B2B),
• publishing — the sale of advertising,
• lead-based websites — an organization generates value by acquiring sales leads from its website, and
• affiliate marketing — A process in which a product or service developed by one person is sold by other active seller for a share of profits. The owner of the product normally provide some marketing material ( sales letter, affiliate link, tracking facility).

There are many other business models based on the specific needs of each person or business that launches an Internet marketing campaign.

One-to-one approach

The targeted user is typically browsing the Internet alone, so the marketing messages can reach them personally. This approach is used in search marketing, where the advertisements are based on search engine keywords entered by the user.

And now with the advent of Web 2.0 tools, many users can interconnect as "peers."

Appeal to specific interests

Internet marketing and geo marketing places an emphasis on marketing that appeals to a specific behaviour or interest, rather than reaching out to a broadly-defined demographic. "On- and Off-line" marketers typically segment their markets according to age group, gender, geography, and other general factors. Marketers have the luxury of targeting by activity and geolocation. For example, a kayak company can post advertisements on kayaking and canoing websites with the full knowledge that the audience has a related interest.

Internet marketing differs from magazine advertisements, where the goal is to appeal to the projected demographic of the periodical. Because the advertiser has knowledge of the target audience—people who engage in certain activities (e.g., uploading pictures, contributing to blogs)— the company does not rely on the expectation that a certain group of people will be interested in its new product or service.

Geo targeting

Geo targeting (in internet marketing) and geo marketing are the methods of determining the geolocation (the physical location) of a website visitor with geolocation software, and delivering different content to that visitor based on his or her location, such as country, region/state, city, metro code/zip code, organization, Internet Protocol (IP) address, ISP or other criteria.

Different content by choice

A typical example for different content by choice in geo targeting is the FedEx website at FedEx.com where users have the choice to select their country location first and are then presented with different site or article content depending on their selection.

Automated different content

With automated different content in internet marketing and geomarketing the delivery of different content based on the geographical geolocation and other personal information is automated.

Advantages

Internet marketing is relatively inexpensive when compared to the ratio of cost against the reach of the target audience. Companies can reach a wide audience for a small fraction of traditional advertising budgets. The nature of the medium allows consumers to research and purchase products and services at their own convenience. Therefore, businesses have the advantage of appealing to consumers in a medium that can bring results quickly. The strategy and overall effectiveness of marketing campaigns depend on business goals and cost-volume-profit (CVP) analysis.

Internet marketers also have the advantage of measuring statistics easily and inexpensively. Nearly all aspects of an Internet marketing campaign can be traced, measured, and tested. The advertisers can use a variety of methods: pay per impression, pay per click, pay per play, or pay per action. Therefore, marketers can determine which messages or offerings are more appealing to the audience. The results of campaigns can be measured and tracked immediately because online marketing initiatives usually require users to click on an advertisement, visit a website, and perform a targeted action. Such measurement cannot be achieved through billboard advertising, where an individual will at best be interested, then decide to obtain more information at a later time.

Internet marketing as of 2007 is growing faster than other types of media.^{[citation needed]} Because exposure, response, and overall efficiency of Internet media are easier to track than traditional off-line media—through the use of web analytics for instance—Internet marketing can offer a greater sense of accountability for advertisers. Marketers and their clients are becoming aware of the need to measure the collaborative effects of marketing (i.e., how the Internet affects in-store sales) rather than siloing each advertising medium. The effects of multichannel marketing can be difficult to determine, but are an important part of ascertaining the value of media campaigns.

Limitations

Internet marketing requires customers to use newer technologies rather than traditional media. Low-speed Internet connections are another barrier: If companies build large or overly-complicated websites, individuals connected to the Internet via dial-up connections or mobile devices experience significant delays in content delivery.

From the buyer's perspective, the inability of shoppers to touch, smell, taste or "try on" tangible goods before making an online purchase can be limiting. However, there is an industry standard for e-commerce vendors to reassure customers by having liberal return policies as well as providing in-store pick-up services.

A survey of 410 marketing executives listed the following barriers to entry for large companies looking to market online: insufficient ability to measure impact, lack of internal capability, and difficulty convincing senior management.^[2]

Security concerns

Information security is important both to companies and consumers that participate in online business. Many consumers are hesitant to purchase items over the Internet because they do not trust that their personal information will remain private. Encryption is the primary method for implementing privacy policies.

Recently some companies that do business online have been caught giving away or selling information about their customers. Several of these companies provide guarantees on their websites, claiming that customer information will remain private. Some companies that purchase customer information offer the option for individuals to have their information removed from the database, also known as opting out. However, many customers are unaware if and when their information is being shared, and are unable to stop the transfer of their information between companies if such activity occurs.

Another major security concern that consumers have with e-commerce merchants is whether or not they will receive exactly what they purchase. Online merchants have attempted to address this concern by investing in and building strong consumer brands (e.g., Amazon.com, eBay, Overstock.com), and by leveraging merchant/feedback rating systems and e-commerce bonding solutions. All of these solutions attempt to assure consumers that their transactions will be free of problems because the merchants can be trusted to provide reliable products and services. Additionally, the major online payment mechanisms (credit cards, PayPal, Google Checkout, etc.) have also provided back-end buyer protection systems to address problems if they actually do occur.

Broadband-induced trends

Online advertising techniques have been dramatically affected by technological advancements in the telecommunications industry. In fact, many firms are embracing a new paradigm that is shifting the focus of online advertising from simple text ads to rich multimedia experiences. As a result, advertisers can more effectively engage in and manage online branding campaigns, which seek to shape consumer attitudes and feelings towards specific products. And just what is the critical technological development that is fueling this paradigm shift? The answer: Broadband.

In March 2005, roughly half of all American homes were equipped with broadband technology. By May 2008, broadband technologies had spread to more than 90% of all residential Internet connections in the United States. When one considers a Nielsen’s study conducted in June 2008, which estimated the number of U.S. Internet users as 220,141,969, one can calculate that there are presently about 199 million people in the United States utilizing broadband technologies to surf the Web.

As a result, all 199 million members of this burgeoning market have the ability to view TV-like advertisements with the click of a mouse. And to be sure, online advertisers are working feverishly to design rich multimedia content that will engender a “warm-fuzzy” feeling when viewed by their target audience. As connection speeds continue to increase, so will the frequency of online branding campaigns.

Effects on industries

Internet marketing has had a large impact on several previously retail-oriented industries including music, film, pharmaceuticals, banking, flea markets, as well as the advertising industry itself. Internet marketing is now overtaking radio marketing in terms of market share.^[3] In the music industry, many consumers have been purchasing and downloading music (e.g., MP3 files) over the Internet for several years in addition to purchasing compact discs. By 2008 Apple Inc.'s iTunes Store has become the largest music vendor in the United States.^[4]

The number of banks offering the ability to perform banking tasks online has also increased. Online banking is believed to appeal to customers because it is more convenient than visiting bank branches. Currently over 150 million U.S. adults now bank online, with increasing Internet connection speed being the primary reason for fast growth in the online banking industry.^{[citation needed]} Of those individuals who use the Internet, 44 percent now perform banking activities over the Internet.^{[citation needed]}

Internet auctions have gained popularity. Unique items that could only previously be found at flea markets are being sold on eBay. Specialized e-stores sell items ranging from antiques to movie props.^[5][6] As the premier online reselling platform, eBay is often used as a price-basis for specialized items. Buyers and sellers often look at prices on the website before going to flea markets; the price shown on eBay often becomes the item's selling price. It is increasingly common for flea market vendors to place a targeted advertisement on the Internet for each item they are selling online, all while running their business out of their homes.

The effect on the advertising industry itself has been profound. In just a few years, online advertising has grown to be worth tens of billions of dollars annually.^[7][8][9] PricewaterhouseCoopers reported that US$16.9 billion was spent on Internet marketing in the U.S. in 2006.^[10]

Internet marketing has had a growing impact on the electoral process. In 2008 candidates for President heavily utilized Internet marketing strategies to reach constituents. During the 2007 primaries candidates added, on average, over 500 social network supporters per day to help spread their message.^[11] President Barack Obama raised over US$1 million in a single day during his extensive Democratic candidacy campaign, largely due to online donors.^[12]

References

1. ^ Story, Louise and comScore (March 10, 2008). "They Know More Than You Think" (JPEG). http://www.nytimes.com/imagepages/2008/03/10/technology/20080310_PRIVACY_GRAPHIC.html. in Story, Louise (March 10, 2008). "To Aim Ads, Web Is Keeping Closer Eye on You". The New York Times (The New York Times Company). http://www.nytimes.com/2008/03/10/technology/10privacy.html. Retrieved on 2008-03-09.
2. ^ Mediapost (Blog) - Why Marketers are Not Investing Online (2/13/2008)
3. ^ Businessweek - Advertising Goes Off the Radio (2006-12-07)
4. ^ iTunes 'biggest US music seller' (2008-04-04)
5. ^ Ian Mohr Daily Variety. Reed Business Information February 27, 2006 "Movie props on the block: Mouse to auction Miramax leftovers"
6. ^ David James People Magazine Time, Inc. February 24, 2007 "Bid on Dreamgirls Costumes for Charity"
7. ^ eMarketer - Online Ad Spending to Total $19.5 Billion in 2007 (2007-2-28)
8. ^ The Register - Internet advertising shoots past estimates (2006-09-29)
9. ^ Internet Advertising Bureau - Online Adspend (2007-06-18)
10. ^ PricewaterhouseCoopers reported U.S. Internet marketing spend totaled $16.9 billion in 2006" (Accessed 18-June-2007)
11. ^ "Spartan Internet Consulting - Political Performance Index (SIPP)" (Accessed 28-June-2008)
12. ^ "Center For Responsive Politives Fundraising Profile Barack Obama" (Accessed 28-June-2008)

Marketing research

Marketing research is a form of business research and is generally divided into two categories: consumer market research and business-to-business (B2B) market research, which was previously known as industrial marketing research. Consumer marketing research studies the buying habits of individual people while business-to-business marketing research investigates the markets for products sold by one business to another.

Consumer market research is a form of applied sociology that concentrates on understanding the behaviours, whims and preferences, of consumers in a market-based economy, and aims to understand the effects and comparative success of marketing campaigns. The field of consumer marketing research as a statistical science was pioneered by Arthur Nielsen with the founding of the ACNielsen Company in 1923.

Thus marketing research is the systematic and objective identification, collection, analysis, and dissemination of information for the purpose of assisting management in decision making related to the identification and solution of problems and opportunities in marketing. The goal of marketing research is to identify and assess how changing elements of the marketing mix impacts customer behavior.

Role of marketing research

The task of marketing research is to provide management with relevant, accurate, reliable, valid, and current information. Competitive marketing environment and the ever-increasing costs attributed to poor decision making require that marketing research provide sound information. Sound decisions are not based on gut feeling, intuition, or even pure judgment.

Marketing managers make numerous strategic and tactical decisions in the process of identifying and satisfying customer needs. They make decisions about potential opportunities, target market selection, market segmentation, planning and implementing marketing programs, marketing performance, and control. These decisions are complicated by interactions between the controllable marketing variables of product, pricing, promotion, and distribution. Further complications are added by uncontrollable environmental factors such as general economic conditions, technology, public policies and laws, political environment, competition, and social and cultural changes. Another factor in this mix is the complexity of consumers. Marketing research helps the marketing manager link the marketing variables with the environment and the consumers. It helps remove some of the uncertainty by providing relevant information about the marketing variables, environment, and consumers. In the absence of relevant information, consumers' response to marketing programs cannot be predicted reliably or accurately. Ongoing marketing research programs provide information on controllable and non-controllable factors and consumers; this information enhances the effectiveness of decisions made by marketing managers.

Traditionally, marketing researchers were responsible for providing the relevant information and marketing decisions were made by the managers. However, the roles are changing and marketing researchers are becoming more involved in decision making, whereas marketing managers are becoming more involved with research. The role of marketing research in managerial decision making is explained further using the framework of the DECIDE model:

D —- Define the marketing problem

E —- Enumerate the controllable and uncontrollable decision factors

C —- Collect relevant information

I —- Identify the best alternative

D —- Develop and implement a marketing plan

E —- Evaluate the decision and the decision process

The DECIDE model conceptualizes managerial decision making as a series of six steps. The decision process begins by precisely defining the problem or opportunity, along with the objectives and constraints. Next, the possible decision factors that make up the alternative courses of action (controllable factors) and uncertainties (uncontrollable factors) are enumerated. Then, relevant information on the alternatives and possible outcomes is collected. The next step is to select the best alternative based on chosen criteria or measures of success. Then a detailed plan to implement the alternative selected is developed and put into effect. Last, the outcome of the decision and the decision process itself are evaluated.

Marketing research characteristics

First, marketing research is systematic. Thus systematic planning is required at all the stages of the marketing research process. The procedures followed at each stage are methodologically sound, well documented, and, as much as possible, planned in advance. Marketing research uses the scientific method in that data are collected and analyzed to test prior notions or hypotheses.

Marketing research is objective. It attempts to provide accurate information that reflects a true state of affairs. It should be conducted impartially. While research is always influenced by the researcher's research philosophy, it should be free from the personal or political biases of the researcher or the management. Research which is motivated by personal or political gain involves a breach of professional standards. Such research is deliberately biased so as to result in predetermined findings. The motto of every researcher should be, "Find it and tell it like it is." The objective nature of marketing research underscores the importance of ethical considerations, which are discussed later in the chapter.

Marketing research involves the identification, collection, analysis, and dissemination of information. Each phase of this process is important. We identify or define the marketing research problem or opportunity and then determine what information is needed to investigate it., and inferences are drawn. Finally, the findings, implications and recommendations are provided in a format that allows the information to be used for management decision making and to be acted upon directly. It should be emphasized that marketing research is conducted to assist management in decision making and is not: a means or an end in itself. The next section elaborates on this definition by classifying different types of marketing research.

Comparison with other forms of business research

Other forms of business research include:

• Market research is broader in scope and examines all aspects of a business environment. It asks questions about competitors, market structure, government regulations, economic trends, technological advances, and numerous other factors that make up the business environment (see environmental scanning). Sometimes the term refers more particularly to the financial analysis of companies, industries, or sectors. In this case, financial analysts usually carry out the research and provide the results to investment advisors and potential investors.

• Product research - This looks at what products can be produced with available technology, and what new product innovations near-future technology can develop (see new product development).

• Advertising research - is a specialized form of marketing research conducted to improve the efficacy of advertising. Copy testing, also known as "pre-testing," is a form of customized research that predicts in-market performance of an ad before it airs, by analyzing audience levels of attention, brand linkage, motivation, entertainment, and communication, as well as breaking down the ad’s flow of attention and flow of emotion. Pre-testing is also used on ads still in rough (ripomatic or animatic) form. (Young, pg. 213)

Classification of marketing research

Organizations engage in marketing research for two reasons: (1) to identify and (2) solve marketing problems. This distinction serves as a basis for classifying marketing research into problem identification research and problem solving research.

Problem identification research is undertaken to help identify problems which are, perhaps, not apparent on the surface and yet exist or are likely to arise in the future. Examples of problem identification research include market potential, market share, brand or company image, market characteristics, sales analysis, short-range forecasting, long range forecasting, and business trends research. A survey of companies conducting marketing research indicated that 97 percent of those who responded were conducting market potential, market share, and market characteristics research. About 90 percent also reported that they were using other types of problem identification research. Research of this type provides information about the marketing environment and helps diagnose a problem. For example, a declining market potential indicates that the firm is likely to have a problem achieving its growth targets. Similarly, a problem exists if the market potential is increasing but the firm is losing market share. The recognition of economic, social, or cultural trends, such as changes in consumer behavior, may point to underlying problems or opportunities. The importance of undertaking problem identification research for the survival and long term growth of a company is exemplified by the case of PIP printing company

Once a problem or opportunity has been identified, as in the case of PIP, problem solving research is undertaken to arrive at a solution. The findings of problem solving research are used in making decisions which will solve specific marketing problems. More than two-thirds of companies conduct problem solving research.

The Stanford Research Institute, on the other hand, conducts an annual survey of consumers that is used to classify persons into homogeneous groups for segmentation purposes. The National Purchase Diary panel (NPD) maintains the largest diary panel in the United States.

Standardized services are research studies conducted for different client firms but in a standard way. For example, procedures for measuring advertising effectiveness have been standardized so that the results can be compared across studies and evaluative norms can be established. The Starch Readership Survey is the most widely used service for evaluating print advertisements; another well-known service is the Gallup and Robinson Magazine Impact Studies. These services are also sold on a syndicated basis.

Customized services offer a wide variety of marketing research services customized to suit a client's specific needs. Each marketing research project is treated uniquely.

Limited-service suppliers specialize in one or a few phases of the marketing research project. Services offered by such suppliers are classified as field services, coding and data entry, data analysis, analytical services, and branded products. Field services collect data through mail, personal, or telephone interviewing, and firms that specialize in interviewing are called field service organizations. These organizations may range from small proprietary organizations which operate locally to large multinational organizations with WATS line interviewing facilities. Some organizations maintain extensive interviewing facilities across the country for interviewing shoppers in malls.

Coding and data entry services include editing completed questionnaires, developing a coding scheme, and transcribing the data on to diskettes or magnetic tapes for input into the computer. NRC Data Systems provides such services.

Analytical services include designing and pretesting questionnaires, determining the best means of collecting data, designing sampling plans, and other aspects of the research design. Some complex marketing research projects require knowledge of sophisticated procedures, including specialized experimental designs, and analytical techniques such as conjoint analysis and multidimensional scaling. This kind of expertise can be obtained from firms and consultants specializing in analytical services.

Data analysis services are offered by firms, also known as tab houses, that specialize in computer analysis of quantitative data such as those obtained in large surveys. Initially most data analysis firms supplied only tabulations (frequency counts) and cross tabulations (frequency counts that describe two or more variables simultaneously). With the proliferation of software, many firms now have the capability to analyze their own data, but, data analysis firms are still in demand.

Branded marketing research products and services are specialized data collection and analysis procedures developed to address specific types of marketing research problems. These procedures are patented, given brand names, and marketed like any other branded product.

Types of marketing research

Marketing research techniques come in many forms, including:

• Ad Tracking – periodic or continuous in-market research to monitor a brand’s performance using measures such as brand awareness, brand preference, and product usage. (Young, 2005)

• Advertising Research – used to predict copy testing or track the efficacy of advertisements for any medium, measured by the ad’s ability to get attention, communicate the message, build the brand’s image, and motivate the consumer to purchase the product or service. (Young, 2005)

• Brand equity research - how favorably do consumers view the brand?

• Brand association research - what do consumers associate with the brand?

• Brand attribute research - what are the key traits that describe the brand promise?

• Brand name testing - what do consumers feel about the names of the products?

• Commercial eye tracking research - examine advertisements, package designs, websites, etc by analyzing visual behavior of the consumer

• Concept testing - to test the acceptance of a concept by target consumers

• Coolhunting - to make observations and predictions in changes of new or existing cultural trends in areas such as fashion, music, films, television, youth culture and lifestyle

• Buyer decision processes research - to determine what motivates people to buy and what decision-making process they use

• Copy testing – predicts in-market performance of an ad before it airs by analyzing audience levels of attention, brand linkage, motivation, entertainment, and communication, as well as breaking down the ad’s flow of attention and flow of emotion. (Young, p 213)

• Customer satisfaction research - quantitative or qualitative studies that yields an understanding of a customer's of satisfaction with a transaction

• Demand estimation - to determine the approximate level of demand for the product

• Distribution channel audits - to assess distributors’ and retailers’ attitudes toward a product, brand, or company

• Internet strategic intelligence - searching for customer opinions in the Internet: chats, forums, web pages, blogs... where people express freely about their experiences with products, becoming strong "opinion formers"

• Marketing effectiveness and analytics - Building models and measuring results to determine the effectiveness of individual marketing activities.

• Mystery Consumer or Mystery shopping - An employee or representative of the market research firm anonymously contacts a salesperson and indicates he or she is shopping for a product. The shopper then records the entire experience. This method is often used for quality control or for researching competitors' products.

• Positioning research - how does the target market see the brand relative to competitors? - what does the brand stand for?

• Price elasticity testing - to determine how sensitive customers are to price changes

• Sales forecasting - to determine the expected level of sales given the level of demand. With respect to other factors like Advertising expenditure, sales promotion etc.

• Segmentation research - to determine the demographic, psychographic, and behavioural characteristics of potential buyers

• Online panel - a group of individual who accepted to respond to marketing research online

• Store audit - to measure the sales of a product or product line at a statistically selected store sample in order to determine market share, or to determine whether a retail store provides adequate service

• Test marketing - a small-scale product launch used to determine the likely acceptance of the product when it is introduced into a wider market

• Viral Marketing Research - refers to marketing research designed to estimate the probability that specific communications will be transmitted throughout an individuals Social Network. Estimates of Social Networking Potential (SNP) are combined with estimates of selling effectiveness to estimate ROI on specific combinations of messages and media.

All of these forms of marketing research can be classified as either problem-identification research or as problem-solving research.

A company collects primary research by gathering original data. Secondary research is conducted on data published previously and usually by someone else. Secondary research costs far less than primary research, but seldom comes in a form that exactly meets the needs of the researcher.

A similar distinction exists between exploratory research and conclusive research. Exploratory research provides insights into and comprehension of an issue or situation. It should draw definitive conclusions only with extreme caution. Conclusive research draws conclusions: the results of the study can be generalized to the whole population.

Exploratory research is conducted to explore a problem to get some basic idea about the solution at the preliminary stages of research. It may serve as the input to conclusive research. Exploratory research information is collected by focus group interviews, reviewing literature or books, discussing with experts, etc. This is unstructured and qualitative in nature. If a secondary source of data is unable to serve the purpose, a convenience sample of small size can be collected. Conclusive research is conducted to draw some conclusion about the problem. It is essentially, structured and quantitative research, and the output of this research is the input to management information systems (MIS).

Exploratory research is also conducted to simplify the findings of the conclusive or descriptive research, if the findings are very hard to interpret for the marketing managers.

Marketing research methods

Methodologically, marketing research uses the following types of research designs:

Based on questioning:

• Qualitative marketing research - generally used for exploratory purposes - small number of respondents - not generalizable to the whole population - statistical significance and confidence not calculated - examples include focus groups, in-depth interviews, and projective techniques
• Quantitative marketing research - generally used to draw conclusions - tests a specific hypothesis - uses random sampling techniques so as to infer from the sample to the population - involves a large number of respondents - examples include surveys and questionnaires. Techniques include choice modelling, maximum difference preference scaling, and covariance analysis.

Based on observations:

• Ethnographic studies -, by nature qualitative, the researcher observes social phenomena in their natural setting - observations can occur cross-sectionally (observations made at one time) or longitudinally (observations occur over several time-periods) - examples include product-use analysis and computer cookie traces. See also Ethnography and Observational techniques.
• Experimental techniques -, by nature quantitative, the researcher creates a quasi-artificial environment to try to control spurious factors, then manipulates at least one of the variables - examples include purchase laboratories and test markets

Researchers often use more than one research design. They may start with secondary research to get background information, then conduct a focus group (qualitative research design) to explore the issues. Finally they might do a full nation-wide survey (quantitative research design) in order to devise specific recommendations for the client.

Business to business market research

Business to business (B2B) research is inevitably more complicated than consumer research. The researchers need to know what type of multi-faceted approach will answer the objectives, since seldom is it possible to find the answers using just one method. Finding the right respondents is crucial in B2B research since they are often busy, and may not want to participate. Encouraging them to “open up” is yet another skill required of the B2B researcher. Last, but not least, most business research leads to strategic decisions and this means that the business researcher must have expertise in developing strategies that are strongly rooted in the research findings and acceptable to the client.

There are four key factors that make B2B market research special and different to consumer markets:

• The decision making unit is far more complex in B2B markets than in consumer markets
• B2B products and their applications are more complex than consumer products
• B2B marketers address a much smaller number of customers who are very much larger in their consumption of products than is the case in consumer markets
• Personal relationships are of critical importance in B2B markets.

Marketing Research in Small Business and Nonprofit Organizations

Marketing research does not only occur in huge corporations with many employees and a large budget. Marketing information can be derived by observing the environment of their location and the competitions location. Small scale surveys and focus groups are low cost ways to gather information from potential and existing customers. Most secondary data (statistics, demographics, etc.) is available to the public in libraries or on the internet and can be easily accessed by a small business owner.

Below some steps that could do by SME (Small Medium Entreprise) to analyze the market

Step 1.Provide secondary and or primary data (if necessary);

Step 2.Analyze Macro & Micro Economic data (e.g. Supply & Demand, GDP,Price change, Economic growth, Sales by sector/industries,interest rate, number of investment/ divestment, I/O, CPI, Social anlysis,etc);

Step 3.Implement the marketing mix concept, which is consist of: Place, Price, Product,Promotion, People, Process, Physical Evidence and also Political & social situation to analyze global market situation);

Step 4.Analyze market trends, growth, market size, market share, market competition (e.q.SWOT analysis, B/C Analysis,channel mapping identities of key channels, drivers of customers loyalty and satisfaction, brand perception, satisfaction levels, current competitor-channel relationship analysis, etc),etc.;

Step 5.Determine market segment, market target, market forecast and market position;

Step 6.Formulating market strategy & also investigating the possibility of partnership/ collaboration (e.q.Profiling & SWOT analysis of potential partners, evaluating business partnership.)

Step 7.Combine those analysis with the SME's business plan/ business model analysis (e.q.Business Description, Business process, Business Strategy ,Revenue model, Business expansion, Return of Investment, Financial analysis (Company History, Financial assumption, Cost/Benefit Analysis, Projected profit & Loss, Cashflow, Balance sheet & business Ratio,etc).
Note as important : Overall analysis is should be based on 6W+1H (What, When, Where, Which, Who, Why and How)question.

International Marketing Research

International Marketing Research follows the same path as domestic research, but there are a few more problems that may arise. Customers in international markets may have very different customs, cultures, and expectations from the same company. In this case, secondary information must be collected from each separate country and then combined, or compared. This is time consuming and can be confusing. International Marketing Research relies more on primary data rather than secondary information. Gathering the primary data can be hindered by language, literacy and access to technology.

Commonly used marketing research terms

Market research techniques resemble those used in political polling and social science research. Meta-analysis (also called the Schmidt-Hunter technique) refers to a statistical method of combining data from multiple studies or from several types of studies. Conceptualization means the process of converting vague mental images into definable concepts. Operationalization is the process of converting concepts into specific observable behaviors that a researcher can measure. Precision refers to the exactness of any given measure. Reliability refers to the likelihood that a given operationalized construct will yield the same results if re-measured. Validity refers to the extent to which a measure provides data that captures the meaning of the operationalized construct as defined in the study. It asks, “Are we measuring what we intended to measure?”

Applied research sets out to prove a specific hypothesis of value to the clients paying for the research. For example, a cigarette company might commission research that attempts to show that cigarettes are good for one's health. Many researchers have ethical misgivings about doing applied research.

Sugging (or selling under the guise of l.market research) forms a sales technique in which sales people pretend to conduct marketing research, but with the real purpose of obtaining buyer motivation and buyer decision-making information to be used in a subsequent sales call.

Frugging comprises the practice of soliciting funds under the pretense of being a research organization.

Selecting a research supplier

A firm that cannot conduct an entire marketing research project in-house must select an external supplier for one or more phases of the project. The firm should compile a list of prospective suppliers from such sources as trade publications, professional directories, and word of mouth. When deciding on criteria for selecting an outside supplier, a firm should ask itself why it is seeking outside marketing research support. For example, a small firm that needs one project investigated may find it economically efficient to employ an outside source. Or a firm may not have the technical expertise undertake certain phases of a project or political conflict-of-interest issues may determine that a project be conducted by an outside supplier.

When developing criteria for selecting an outside supplier, a firm should keep some basics in mind. What is the reputation of the supplier? Do they complete projects on schedule? Are they known for maintaining ethical standards? Are they flexible? Are their research projects of high quality?

What kind and how much experience does the supplier have? Has the firm had experience with projects similar to this one? Do the supplier's personnel have both technical and nontechnical expertise? In other words, in addition to technical skills, are the personnel assigned to the task sensitive to the client's needs and do they share the client's research ideology? Can they communicate well with the client?

The cheapest bid is not always the best one. Competitive bids should be obtained and compared on the basis of quality as well as price. A good practice is to get a written bid or contract before beginning the project. Decisions about marketing research suppliers, just like other management decisions, should be based on sound information.

Careers in marketing research

Some of the positions available in marketing research include vice president of marketing research, research director, assistant director of research, project manager, field work director, statistician/data processing specialist, senior analyst, analyst, junior analyst and operational supervisor.

The most common entry-level position in marketing research for people with bachelor's degrees (e.g., BBA) is as operational supervisor. These people are responsible for supervising a well-defined set of operations, including field work, data editing, and coding, and may be involved in programming and data analysis. Another entry-level position for BBAs is assistant project manager. An assistant project manager will learn and assist in questionnaire design, review field instructions, and monitor timing and costs of studies. In the marketing research industry, however, there is a growing preference for people with master's degrees. Those with MBA or equivalent degrees are likely to be employed as project managers.

A small number of business schools also offer a more specialized Master of Marketing Research (MMR) degree. An MMR typically prepares students for a wide range of research methodologies and focuses on learning both in the classroom and the field.

The typical entry-level position in a business firm would be junior research analyst (for BBAs) or research analyst (for MBAs or MMRs). The junior analyst and the research analyst learn about the particular industry and receive training from a senior staff member, usually the marketing research manager. The junior analyst position includes a training program to prepare individuals for the responsibilities of a research analyst, including coordinating with the marketing department and sales force to develop goals for product exposure. The research analyst responsibilities include checking all data for accuracy, comparing and contrasting new research with established norms, and analyzing primary and secondary data for the purpose of market forecasting.

As these job titles indicate, people with a variety of backgrounds and skills are needed in marketing research. Technical specialists such as statisticians obviously need strong backgrounds in statistics and data analysis. Other positions, such as research director, call for managing the work of others and require more general skills. To prepare for a career in marketing research, students usually :

• take all the marketing courses.
• take courses in statistics and quantitative methods.
• acquire computer skills.
• take courses in psychology and consumer behavior.
• acquire effective written and verbal communication skills.
• think creatively.

Career ladder in marketing research:

1. Vice-President of Marketing Research: This is the senior position in marketing research. The VP is responsible for the entire marketing research operation of the company and serves on the top management team. Sets the objectives and goals of the marketing, research department.
2. Research Director: Also a senior position, the director has the overall responsibility for the development and execution of all the marketing research projects.
3. Assistant Director of Research: Serves as an administrative assistant to the director and supervises some of the other marketing research staff members.
4. (Senior) Project Manager: Has overall responsibility for design, implementation, and management of research projects.
5. Statistician/Data Processing Specialist: Serves as an expert on theory and application of statistical techniques. Responsibilities include experimental design, data processing, and analysis.
6. Senior Analyst: Participates in the development of projects and directs the operational execution of the assigned projects. Works closely with the analyst, junior analyst, and other personnel in developing the research design and data collection. Prepares the final report. The primary responsibility for meeting time and cost constraints rests with the senior analyst.
7. Analyst: Handles the details involved in executing the project. Designs and pretests the questionnaires and conducts a preliminary analysis of the data.
8. Junior Analyst: Handles routine assignments such as secondary data analysis, editing and coding of questionnaires, and simple statistical analysis.
9. Field Work Director: Responsible for the selection, training, supervision, and evaluation of interviewers and other field workers.