Treat Me Right

Do you like to be treated right?

So do I.

The great Talmudic sage Hillel felt the same way more than 2,000 years ago, but apparently his message of “doing the right thing” hasn’t quite made it to some merchants operating affiliate programs. Well, the time has come to heed his message — and quickly — or else the entire cost-per-action (CPA) structure may disintegrate before their eyes (and ours, too).

Here are two ways in which affiliates aren’t treated right:

  • When merchants take actions to avoid crediting affiliates with commissions they might have otherwise earned
  • When merchants don’t pay affiliates who actually earn their commissions

I would like to tackle these two problems in reverse and propose a few solutions that would actually incentivise affiliates to take on even more CPA deals.

Suggestion No. 1: Merchants that don’t pay or that abuse their affiliates should be reported.

An independent organization such as the Better Business Bureau (BBB) should establish a ratings system, review merchants, and follow up on complaints. BizRate.com and Gomez do a great job rating e-commerce sites for things such as delivery, customer service, and pricing. Why not have an organization like the BBB that does the same thing for affiliate programs?

Refer-it.com (ClickZ’s sister publication) does offer a ratings system, and ReveNews.com and other bulletin board sites for affiliates are great resources, but there is still a lot of spamming and the risk of abuse by people who just want to trash other affiliates or merchants. Additionally, there’s no mechanism for following up on complaints.

These problems can be addressed by having both affiliates and merchants pay dues to belong to the service. The fees could then support a staff of reviewers who will watch out for abusive and false ratings reports. Merchants pay to be listed, which gives them credibility. Affiliates pay to have access to the ratings and the reports. It’s a win-win situation.

Suggestion No. 2: Have an independent escrow company act as an intermediary between the merchant and the affiliate. It would hold some of the merchant’s cash and make sure affiliates get paid.

These days everyone wants some good faith money up front. Here is a CPA scenario that answers that need and some others as well:

  1. Affiliate agrees to try to produce 1,000 sales at $50.00 per sale within a limited time frame.
  2. Merchant agrees to pay $20.00 per “confirmed and paid” sale.
  3. Merchant deposits $4,000 up front with the escrow company (20 percent of the expected commissions due to be paid).
  4. Once milestones are met (sales targets for example), Merchant deposits more money into the escrow account. At the same time, the escrow company delivers commission payments to Affiliate as he reaches certain milestones.
  5. By the time Affiliate has generated something like $30,000 in gross sales (60 percent of the original commitment), the full commission of $20,000 should already have been deposited into the escrow account. That way, Affiliate is guaranteed to receive his commissions even before he risks more time and money fulfilling the rest of the deal.
  6. Once the agreed upon time is up, the money left in the escrow account is distributed to the parties. Additionally, if milestones are not met during the course of the promotion, the Merchant can get the money back from the escrow company so that his money isn’t tied up indefinitely.

My company’s affiliate manager tries to negotiate CPA deals every week for the consumer side of MagMall’s magazine subscription service, and — even though our company has been online since 1996 — we still get questions about our ability to pay commissions. I think that the escrow option deals with the affiliate’s doubt and solidifies the integrity of the affiliate marketing structure, benefiting both the affiliate and the merchant.

Suggestion No. 3: Merchants need to stop circumventing their affiliates and include affiliate IDs in all email communications to customers originally referred by an affiliate.

Here is an example of how a new affiliate could potentially miss out on his very first commission, less than three days after joining an affiliate program.

My friend Bob joins an affiliate program. Bob’s welcome letter from the merchant looks perfect. It directs him to recommend new customers who would receive, for 10 days only, $15 off their first purchase. This incentive is right out of Lesson 1 in the affiliate’s universal marketing textbook: Give the customer something valuable, yet free, that can be used easily right away but has an expiration date (to create a sense of urgency).

Bob tests the program and “recommends” that I visit via his affiliate link. So, I sign up and enter my own email address to receive the $15 introductory coupon.

Sounds good so far, right? Guess what. Less than three days later, though I have not yet made a purchase, I get another email offer directly from the merchant (not from Bob) to save up to $100 off my next purchase for three days only. So, naturally, this being a far superior offer to the $15 savings, I place an order for $300 (to qualify for the maximum $100 discount) by phone.

While on the phone, I first ask if I could use the $15 welcome certificate in addition to the $100 certificate. The answer is no. I can only use one coupon per purchase.

So, I try again and ask the operator if Bob will receive his affiliate commission for sending me to their site. The answer is not what I expect:

  • If I use the $15 certificate, then Bob gets his commission.
  • If I use the $100 certificate offer, then Bob does not get his commission.

The conclusion to this story is that Bob, the affiliate who created this sales opportunity in the first place, just got burned. This isn’t fair to Bob, and it is easily reparable by the merchant. All the merchant must do is include Bob’s affiliate ID on that email offer for the $100 certificate, and then everyone will be happy, especially Bob.

There are merchants who don’t or won’t do this. It is time to put a stop to this. If you are wondering why CPA deals get such a bad rap from affiliates, look no further than the selfish merchant who circumvents the affiliate instead of figuring out a way to work with him to derive even more referrals and sales.

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