From the March 2001 issue of Entrepreneur

To really make it in e-tailing, you've got to keep customer-acquisition costs down. You have to find creative ways to move merchandise and increase sales. And you must add value to your customers' shopping experiences.

The secret to achieving all of the above-and more-may lie in a reliable strategy employed by the most innovative dotcoms. Known as reciprocal marketing, the tactic basically allows you to offer your paying customers discounts at your online partners' sites as well as provide discounts to your partners' customers on your site. To illustrate: If your customers spend $40 on your Web site, they then receive a gift certificate or discount coupon to use at a partner Web site. "Reciprocal marketing programs are a win-win-win for customers and any participating merchants," says Shel Horowitz, a low-cost marketing consultant and author of Grassroots Marketing: Getting Noticed in a Noisy World (Chelsea Green Publishing Co.). "You add more value to the customer's purchase and, at the same time, allow the partners in the deal to tap into each other's customer bases."

One company that's found fantastic success with online reciprocal marketing programs is Proflowers. com, a San Diego Internet flower company. In 2000, for example, in an effort to increase sales-as well as motivate customers to purchase their products before the Christmas rush-the 102-person business launched a reciprocal marketing program with The Bombay Company, Gap.com, Omahasteaks.com and Wine.com.

Here's how it worked: Customers who ordered a product from Proflowers by December 13 received an order confirmation e-mail containing a special URL to access gift offers. Those offers included $20 off a purchase of $75 or more at Wine.com and free shipping for customers who spent $75 or more at Gap.com. Customers who clicked on the links could enter the partner sites and redeem their holiday gift offers. Proflowers, in turn, has marketing arrangements with each partner. In some cases, it has links on its partners' pages allowing those customers access to special deals and discounts.

The company had also found success launching an earlier reciprocal marketing program prior to the holiday season. Last spring, Proflowers implemented a strategy for Mother's Day, the largest flower-buying occasion of the year. Here, when customers ordered from Proflowers in time for a delivery no later than the Thursday before Mother's Day, they received $10 off any purchase at Gap.com. At the same time, customers of Gap.com who spent $40 or more received a discount of $10 to use at Proflowers. "The programs were very successful," says Steven Bellach, Proflowers' chief marketing officer. "We shipped many products early as a result of the offers, and we also increased sales. We met both of our objectives."

In addition, the programs were relatively inexpensive to implement. "This is probably one of the lowest-cost marketing deals that we do," says Bill Strauss, 42-year-old co-founder and CEO of Proflowers. "In many cases, there is virtually no cost associated with them. We only offered a discount to our partners' customers, which frankly is an acquisition tool for us."

But despite the clear benefits and cost savings, Bellach says reciprocal marketing is just starting to catch on in the online world. "These kinds of deals are the way the Internet will be working, going forward. The beauty of it is that no cash changes hands between merchants, and you get people when their wallets are still open."



Melissa Campanelli is a technology writer in Brooklyn, New York, who has covered technology for Mobile Computing & Communications and Sales & Marketing Management magazines. You can reach her at mcampanelli@earthlink.net.

Making It Work

A key factor in launching a successful reciprocal marketing program, however, is choosing the right partner or partners. Experts say you shouldn't pick a company similar to your own, but instead select one that naturally com-plements your philosophy and product line. Essentially, Proflowers took this tack. "We developed an extensive grid with a lot of criteria around things like the number of visitors a particular Web site gets regularly, what category they are in, what their brand image is, and obviously, they had to be noncompetitive sites," explains Bellach. "Then, the 10 or 15 criteria we chose were weighted, and we ranked potential partners."

While you don't have to be as recognizable as Proflowers to launch a successful reciprocal marketing program, it helps to have its level of marketing know-how. "When we first started out, nobody knew us," says Bellach. "But we understood how to put together successful reciprocal marketing programs. For example, we made an effort to really understand our partners' needs and be creative in helping them accomplish their objectives while at the same time accomplishing ours."

A good way to find partners is the tried-and-true method of networking. "Attend conferences," says Strauss. "Talk to people. And, most important, know what you can offer and understand what might be of value to potential partners."

Proflowers insists that because of all the successful reciprocal marketing deals it has set up, the site actually gets a lot of inquiries now from other Web sites wanting to establish deals. "The best way to get potential partners interested in doing reciprocal marketing with you and your site is simply to be out there, actively proposing win-win arrangements," says Horowitz.

However, for your reciprocal marketing program to succeed, make sure you're not cluttering your site with discounts for a dozen other retailers. It's a risky move, because customers might begin to confuse your site with an online mall. "I am not a believer in filling up the home page with reciprocal marketing or affiliate marketing or affiliate marketing programs," says Horowitz. "When you take the trouble and time and money to bring someone to your Web site, you want to keep the visitor there as long as possible. Off-site links interfere with this." Proflowers prevents this confusion by including on its home page a "Specials and Promotions" link to the programs taking place.

Another tip: Horowitz says netpreneurs shouldn't base their revenue models solely on their reciprocal marketing programs. "Think of it as a little extra gravy and not the primary moneymaker," he suggests. However, that doesn't change the fact that reciprocal marketing remains a great way for netpreneurs to grow-especially in today's risky dotcom environment. "I believe it is in the best interest of all businesses to expend the energy developing reciprocal and affiliate marketing programs with companies that can synergistically help each other's efforts," says Chris Anne Wheeler, vice president of information services for online market research company ActivMedia Research LLC. "By failing to do so, companies will lose revenues."


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