Tough Questions for the Good and Welfare

I’m wide awake at 5:30 a.m., my kids are still sleeping, and I’m alone at my computer trying to figure out how to use a free trial version of DiagnosisPro (MedTech.com’s terrific self-help medical diagnostic program for doctors and hypochondriacs like me) so that I can see if this lesion on my hand is really anthrax. Meanwhile, I can’t stop wondering if I should be writing this article you are about to read.

Well, my dad always told me that his fraternity used to have a process called “Good and Welfare” in which you could proclaim your gripes with other frat brothers without being ostracized afterwards (because it was for the good and welfare of the fraternity) — so here goes. I’m throwing down the gauntlet.

Are affiliates getting cheated out of commissions by affiliate merchants?

I’m pretty sure that in many cases the answer is an astounding YES. I’m not sure it is being done purposely, but I’m pretty confident that it’s happening. Part of the reason it happens is merely structural and unavoidable, and this article sets out to better understand the affiliate system of referred sales. Let’s lay down the foundation before we tear the system asunder and rebuild it.

Let’s start with understanding the problem of transitioning traffic to sale — that is, conversion rates.

Content providers — let’s call them “merchants” — use affiliate programs to drive traffic and, its natural byproduct in the commerce context, sales. This transition of a visitor (i.e., traffic) to a buyer or an action taker (i.e., sale) is colloquially referred to as a “conversion.” Your conversion rate measures your success in transitioning your visitors from the traffic mode to the sale mode.

Traffic is one thing, and sales is another; traffic does not equal sales. Indeed, targeted traffic does not necessarily equal sales, either — a problem I’ve addressed in my last three articles.

Merchants who understand this problem of “converting traffic” have developed a variety of methods to improve their conversion rates over the long term.

Here are three popular techniques affiliate merchants use to improve conversion rates after a visitor leaves.

Email-capture technique for email offers. This first method is to entice new visitors to give the merchant site their email addresses in exchange for the following types of incentives:

• Free newsletters — usually by email because it costs practically nothing to deliver
• Gifts — either samples of the merchant’s products or products delivered by affiliate partners who actually pay the merchant to give away these freebies
• Discount coupons — for future purchases of either the merchant’s or an affiliate’s products and services (this one should be obvious)
• The satisfaction of participating in a poll or survey and having your opinion count

So far this sounds great. So what’s the problem you ask?

Simple. When the visitor leaves her email address, does the affiliate site’s affiliate ID get attached to the email address in the merchant’s database so that any future correspondence to this visitor’s email address will be attributed to the affiliate site? Absolutely not.

This potential problem is exacerbated when merchants already have an email address from a visitor who converted at an earlier time (even if the original conversion was attributed to an affiliate who earned a commission on the first sale). Do sales from future correspondence with this customer get credited to the original affiliate?

Are affiliates being exploited by merchants after the original sale takes place?

The upgrade technique. This widely touted method is when merchants who already have someone’s email address contact their customers with upgrade offers to their initial purchases.

Let’s say that Haley made a September purchase of emailing software on the merchant’s site via Andrew’s Affiliate site (and Andrew got a commission for that September sale).

Now in October, the merchant sends out an email to Haley with an upgrade invitation to the newest version of the email software. Does Andrew get credit for this upgrade? Wouldn’t you like to know?

The upsale technique. This is a very wonderful variant of the upgrade technique. The merchant instead sends out an email in October that entices Haley to purchase a related piece of software that “perfectly matches” Haley’s original software purchase. Does Andrew, the original affiliate, get credit for this upgrade? What do you think?

Is the affiliate system intrinsically flawed, and can it be fixed? Or is it just fine?

Again, I want to reiterate that I’m not suggesting that any of these conversion rate improvement techniques are purposefully or intentionally being used to prevent affiliates from earning their commissions. What I am suggesting is that merchants, at the very least, may be doing this without realizing it. I’m also suggesting that affiliates consider these questions as well.

Certainly one of the problems for affiliates is that they are merely conduits and do not receive the email address of the eventual purchaser. Thus, affiliates have no mechanism to contact their referred traffic and actually increase their own affiliate conversion rates. Nor can affiliates make upgrade and upsale offers because they don’t have access to that original sale information. And this is where affiliates get cheated more than anywhere else.

Given all the above, one huge problem worth mentioning still remains, and it is this problem that encourages me to ask for your help. If merchants could improve tracking capabilities to credit affiliates on email offers, upsales, and upgrades, what should merchants do in this situation:

1. Affiliate Andrew sends Haley to Merchant site to buy Diagnosis Pro.
2. Affiliate Sarah sends Haley to Merchant site to buy Hypochondriac Pro.
3. Merchant now has two orders for Haley but only one email address. Merchant wants to send Haley an email offer for its new software (Eat Healthy For Less).
4. Who does Merchant credit in the email? And this problem gets worse with multiple affiliates.

I am inviting all affiliate merchants and affiliates to write in to ClickZ with suggestions on how to improve conversion rates for affiliates and merchants so that everyone makes more money. If affiliates knew they were getting credited for emailed offers as well, they would probably do a better job of helping merchants capture email addresses.

In closing, I would like to add an email I received last week from one of this column’s readers. He asked me to include this idea in this article: “Are merchant sites attaching an affiliate ID to the phone number that displays on the Web site?”

By the way, please remember that this is for the good and welfare. I look forward to your suggestions.