Developing the concept for an affiliate shopping site: a case study : Defining the customer segment acquisition and pricing strategy for a two-sided platform

Abstract

The aim of the thesis is to complete the business plan for an affiliate shopping site, which goes under the working title of Sopimo. The research question is to find out, what kind of a revenue strategy is profitable, attracts the shoppers to the portal and makes sure that the merchants approve the request to do affiliate co-operation. Because the shopping site in question generates value for the shoppers only when the buyable products are in place, co-operation with the merchants is necessary. This interdependency between customer segments differentiates shopping sites from most other types of affiliate publishers and it is the reason why the theory of multi-sided (or two-sided) markets was chosen as the theoretical framework for this thesis. It is analyzed, how the theoretical framework can be applied to the specific case of Sopimo and the findings are validated with practical examples of affiliate marketing and studies about affiliate marketing from merchants’ and publishers’ perspectives. The practical sources are also used to examine the risks involved in an affiliate marketing model. The analysis reveals that the business plan should involve at least three phases. In the launch phase, it is important to get the first anchor merchant on board with a free trial period and to acquire the first shoppers through careful examination of the target market. In the second phase, new merchants will be obtained through the affiliate network with three selling points: there are shoppers on the site, there is an anchor on board, there is validated data about the target market. Also, in phase two the revenue streams will be diversified by joining an advertisement network. In phase three, growth should be sought by selling premium campaigns to the merchants and third party advertisers. After the initial phases, odds are the affiliate model has proven an unprofitable foundation for a business model. The possibilities for a pivot are: integrating the conversion path in the platform, developing the platform into a personalized style service (which would add value for the shoppers so much that they would be willing to pay for the service) or sell the validated business concept to a third party.