Forging e-partnerships

Burgeoning e-partnerships – the order of the day  

Over the last decade, the IT revolution sparked off by the Internet has opened up a plethora of opportunities. These opportunities include revenue-sharing models that add value to the programme and service groups globally. The key point of focus continues to be in selecting the right partners. Though the conventional affinity programs have been the best bet in terms of revenue generation and nurturing member retention, it is being increasingly offset by e-partnerships, thanks to the surging Internet business in recent times. Amazon.com was the pioneer in this regard with the introduction of its maiden revenue-sharing program in 1997. In general, a revenue sharing program is an excellent and the quickest way to conduct online business.

The Internet includes various online joint ventures that make referral payments-on a click, lead, or sale basis – for buying products and services that may or may not be associated with the objective of the partnering companies. A few of these online partnerships are the result of conventional royalty or commission-based affinity programmes that have moved to the Internet. Others have come into being due to enormous e-commerce opportunities and various dotcom companies.

A revenue sharing model is one in which an online trader pays a royalty or commission to the partner (in this case, the owner of the website). Payments are made on the basis of clicks, leads or sales that refer customers to the trader through the website. Pay per click refers to the amount paid each time someone clicks onto the site; pay per lead refers to the royalty or commission to be paid for each referral; and pay per sale is the fixed fee or percentage of the amount of each sale referred.

Revenue-sharing models are economical for customers to buy a product, register for a service, fill a form, or visit a website. Associations may be formed with the revenue-sharing partner or provider of products/services that the Net-based companies intend to promote.

Modes of Payment

Different modes for payment of royalties and commissions:

• Royalties and commission model under which payment is made on the basis of sales of the trader’s products as is followed by Amazon.com. In this model, the website visitor needs to come out of the partner’s site to close the deal.

• Fund-raising revenue sharing model in which a part of the sales proceeds are contributed to charitable organisations. This model is adopted by GOTSchool.com, Schoolpop.com, ShopforSchool.com and GreaterGood.com These sites assume the role of directories or malls having all types of click-and-mortar traders that sell products, which may be beneficial to the school of one’s choice. Associations are also trying this revenue-sharing model. For example, University of Maryland Medical Systems Foundation and Williamette Valley Down Syndrome Association, two non-profit associations have joined hands with MyAssociation.com, to offer a package wherein buyers purchase various products – ranging from flowers to computers – and a part of the sales proceeds go to the charitable organisation.

• E-commerce model holds back the site visitor on the partner’s site or a co-branded site, that  is, the visitor need not leave the partner’s site to close  the deal. A typical example of a dot.com company using this model is BizBuyer.com.

• Two-tier model enables revenue-sharing partners to tie up with more revenue sharing partners under them. This enables the primary partner to earn a small commission as referral fee when second-tier partners receive a commission. Typical examples of this model are ClickBank.com and Aweber.com.

Issues to be considered

The issues that need to be considered before adopting any of the above models include:

• Financial feasibility of the tie-up in terms of the following:

1. Type of product/service traded

2. Cost of the product/service traded

3. Reliability of the revenue-sharing programme

4. Level of participation in the programme

5. Hard and soft costs. These include the financial and staffing obligations made by the association, costs incurred to monitor the programme, and so on.

6. Hidden costs vis-à-vis real value, that is, the effect of the partnership on the association’s reputation and goodwill must be kept in mind.

• Tax and liability of the tie-up

• Technical issues that include set-up and backup.

• Reporting of commission statements

• Formulating a marketing strategy that is in line with the association’s mission.

• Trader’s decision on the mode for payment.

Conclusion

Online referral payments are a distinct advantage of the digital age provided the above issues and related options are kept in mind before selecting the actual mode of partnership.

Related reading

Developing e-partnerships: Association Management: Washington Nov 2000: Trask, Richard