Suresh Dakshina, president, Chargeback Gurus
Affiliate marketing is growing in popularity with SMBs, e-retailers and established brands alike. According to marketing firm Custora, it now drives as many e-commerce purchases in the US as email marketing.
There are benefits on both sides of the table. For brands, affiliate marketing offers a steady flow of new revenue at minimal effort. Affiliate marketers, who are given special hyperlinks that they can post to draw traffic to e-stores or brand websites, have the chance to earn a good wage from the percentage of any sales which originate from their hard work.
This new type of marketing is perfectly designed for the modern consumer, who naturally values recommendations. Studies show nearly 60 percent of purchase decisions for consumer electronics are influenced by peer review, and that 65 percent of consumers use social media to find the perfect gift.
However, while affiliate marketing could potentially draw a lot of traffic and thus sales, there are some important things for brands to consider to maximize the chances of success:
1. Negotiate Net 10 Payment Terms
When bringing on a network of affiliate marketers, it is important to find a payment model which works on both sides.
“Whilst the advertiser needs to work everything back to a cost per sale to ensure they are spending within their margins, the affiliate needs to ensure that they are making the most revenue possible for the traffic they receive on their website.” says Vicky Bruce, account director at affilinet.
Cost per acquisition (CPA) is the most popular payment model used today. This is the safest option for brands, as affiliate marketers are only paid when a sale is completed. If the marketer doesn’t drive a completed purchase, then an advertiser has no obligation to pay them.
Considering purchases can come anytime, it is important for brands to agree flexible payment terms with affiliates. In our experience, setting a 10 or 20 day net payment policy gives the brand the flexibility needed to make payments comfortably, while offering a steady income flow to marketers.
Affiliate networks are generally willing to negotiate the payment terms, provided a brand intends to be in the affiliate space long-term and affiliates are paid on a regular basis.
2. Abandoned Cart Follow Up
While CPA may be the most popular model for brands or stores, it is less popular with marketers. No brand wants to get lumbered paying for abandoned cart transactions, but one way to keep both sides happy is to pay for the final click to conversion under the CPA model, but also to pay a small fee to marketers who have been involved in the customer journey. However, abandoned cart transactions are the low hanging fruit for e-retailers and should be tackled head on.
One of the best ways to turn an annoyance into a potential gold mine, is by utilizing a strong on-shore call center who can follow up on these abandoned customers and generate sales on a performance basis.
It is important to monitor the conversion rates of affiliate marketers, and also call center staff to make sure that this arrangement remains profitable for the business. We have found that 60 percent conversion rate for call center staff seems to be a fair assessment of whether someone is doing their job well.
Also, to make sure that your company is not being scammed by tricky marketers, be sure to monitor the refund and void percentage for all campaigns. If you notice that any particular marketer or call center member has particularly high rates, something might be fishy. Scams whereby fake customers ‘buy’ products, only to cancel them immediately, to boost incomes for affiliate marketers, are not unheard of. If the refund percentage exceeds 15-20 percent that’s a red flag of fraudulent behaviour.
3. Monitor Chargeback Ratio by Affiliate
It’s also important to keep your eyes peeled for high levels of credit card chargebacks, as these can also be the telltale sign of fraudulent behaviour. To reduce the risk, companies should employ an effective reporting tool or rely on third party chargeback management providers who can monitor your chargeback threshold in real time.
High levels of chargebacks can have devastating effects on retailer’s bottom lines, so it is of paramount importance to set thresholds on your merchant accounts which alert if chargebacks spike. If a spike is detected, try to identify the root causes, and whether the chargebacks are linked to leads from a particular affiliate marketer. If the chargeback threshold for any affiliate is above 3- 4 percent, it would be best to terminate your relationship.
Affiliate networks offer brands a potential steady flow of great customers, and when done correctly can offer a great source of income for a both brands and their networks. However, if you are going to do something, do it right by following these three tips.
Chargeback Gurus provides fraud-prevention technology that helps e-commerce companies fight chargebacks.
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