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Having fielded a lot of questions based on this, I hope my experience helps out. Affiliate Marketing is a great way for companies to broaden their reach on the internet but you do indeed need to be careful... here are some exerpts from a recent guide I wrote addressing some of the issues to be aware of...
The number one thing is just to pay attention to your program, pay attention to who your affiliates are - how they drive traffic to you - and how productive those relationships are to you. If you pay attention, almost all issues can be spotted easily and handled without too much headache.
Affiliate program or not - the concern over credit card fraud will always be there. With the
addition of an affiliate program, a Merchant needs to be aware that rogue affiliates may try to
purchases something with a stolen or invalid credit card - with no intention of receiving the
actual product, but instead a commission for selling that product. Things to look out for
include:
1. Use caution when shipping internationally - This is near common sense, but worth
mentioning. Most of the time, the signs for fraud are obvious: Larger than average order
size, Express delivery requests, etc.
2. Check the IP - Your provider should give you a listing of the IP address for the buyer. This IP
address can be used to research the true location of the shopper by using a service such as the
ARIN database (http://www.arin.net/whois). Although this information is approximate, it is
very helpful. If the IP address is located in Europe for example, but the shipping address is
in North America - extra caution should be used.
3. Your provider should also provide you with a link to the "Page where the banner was clicked",
which will help you to understand the traffic coming from a specific affiliate.
4. Conversion percentages should not deviate too far from the norm, either high or low. Too
high of a conversion rate can indicate that the affiliate is either using incentives, or may
simply be placing fraudulent orders. Too low a conversion rate, and it could indicate that an
affiliate has placed your link or banner in a "banner farm", or within a desktop application.
Some of the troubles concerning affiliate fraud, can be prevented early in the process by
screening your affiliate applications. When looking at a site for potential acceptance, you
should be lenient but cautious. One of the mistakes that you do not want to make is to decline
an application that could turn into a profitable relationship. However, some applications will
come through with "free hosted" sites, or sites that are simply banner farms. Look around the
site, check the "About Us" or "Contact Us" page, and look for any anomalies. A WHOIS search on
the domain name, may reveal if the site is registered in the same country as the affiliates
account - and a mismatch is a "red flag" for that affiliate.
With few exceptions, the majority of your affiliate-generated sales will come from an elite group
making up a small percentage of your overall affiliate base. You should make it a habit to review
and know who these affiliates are - not only because this communication and knowledge will help
you motivate your best affiliates - but because it will become easier to identify any bad ones. If a
brand new affiliate is able to break into your "Top 10" for the month, for example, you should
check out the site and the orders that came through for any anomalies or patterns.
If you receive an affiliate-generated sale which appears to be fraudulent, there is a sequence of
steps to take. First, the affiliate that referred the sale may have had nothing to do with the fraud
- so immediate accusations are not suggested. Second, you should be able to void the commission through through your provider's interface, so that it is not paid out to the affiliate. The third step would be to attempt to gauge if the fraud is a
deliberate attempt by the affiliate to earn commission, or is simply an unrelated event.
Nearly all cases of credit card fraud BY the affiliate in an effort to earn a commission are very easy to spot - there will be low numbers of orders andl low numbers of clicks for example. 2 clicks, fraudulent 1 sale - more likely to be an affiliate issue... 30,000 clicks, 500 valid sales, and 1 fraudulent sale - much less likely that this is anything affiliate related...
A WHOIS search on the domain name, may reveal if the site is registered in the same country as the affiliates account - and a mismatch is a "red flag" for that affiliate.
Hello, I'm from Portugal. I don't agree 100% with this sentence. Why I'm telling this?
If I want to register a .pt or .com.pt domain here with a portuguese company, I must pay about 87 euros to 105 euros! So maybe I consider to register a .com domain. If I want to register a .com domain here with a portuguese company, I must pay about 12 euros to 40 euros! So, I go and register a .com domain in the US by less than 10 usd, and I'm from Portugal.
Best regards
PSAZF
I am referring to the contact information listed in the WHOIS record... meaning, if you are from Portugal - you can register the domain with any company that you wish, but the contact information should match your country of residence, which would be Portugal.
Obviously, there are exceptions to every rule, but these guidlines are good things for merchants to keep their eyes on.
Do you have an example of a well executed program I could study? I was reading a case study about... Oakley I think it was. They were talking about how they restricted the affiliates to only a few top notch folks. From what I've read, it seems that the best bet is building relationships with each of a few affiliates and not outsourcing to a firm like CJ who isn't as concerned about our success as , obviously, we are.
I also want to focus the affiliate program on one product family. We already do really well in our core business, but we want to branch out into new lines. If affiliates start taking business to our site that was going to wind up on our site anyway we don't want to even start the program. Is it worth while for affiliates if we offer a payout for only some of our products, our new line of pink widgets and not our industry standard blue grommets?
Thanks for your help.
The only way you can have a successful program is to design it so that it's win-win, so that you and the affiliate both make a profit. So that you both make increasing profits as affiliate sales increase. So that you want to be cutting big affiliate checks every month. If you're more concerned that affiliates don't become too successful and start siphoning off money that is rightfully yours, then you probably shouldn't have a program.
P.S. What kind of "fraud" on the part of affiliate marketers are you talking about? I have never heard that this is a problem, for per-sale programs anyway.
I don't want to spite the affiliates, and I'm happy to pay them for the business they bring to the table. I authorize payment to Google et al. for quite a lot of money every month and I'm happy to do so. I want any program we set up to be successful, and I've done enough business to know that scalping our partners is a bad idea.
There are two kinds of fraud that I have found. The first is where an affiliate will place false orders, or have others place false orders on a site for the commission. The second occurs when there is a CPC component to the commission, then they will click on the ads, or have others click on the ads for them. I have heard some marketers gripe about these activities and I have even stumbled across a forum where a small time site owner was discussing the second type of fraud with all his friends and counting the money they defrauded out of the merchant (they didn't think of it as fraud, of course). The kids in the forum only got a couple hundred dollars, but if it can be done on a small scale it can certianly also be done on a large scale.
I have recently read about a third type of fraud which involves replacing a cookie, but I admit I don't understand that one at all.
As for fake orders, fraud is a huge problem on the Net and you have to be incredibly vigilant about what kind of payment you accept and where you ship. I'm not aware that affiliate fraud in particular is a big industry, but it's possible. I'd recommend speaking personally with every affiliate if possible. I personally know the affiliate reps for all the programs I promote (except Amazon), and I've even met with the presidents(!) of a couple of the companies face to face.
Ie, you pay your affiliates after 30 days, after reviewing their order history and excluding orders that didn't go through.
There's a lot less incentive for making a quick buck through order fraud.
Also, what commission rate is standard? From what I've read so far for other affiliate programs in our space something like 4-5% is standard. Assuming that is true would affiliates be interested in our program if we offered 2.5% commission on our core business (what I don't really want them selling) and 5% on our new line that I want to emphasize? I don't want to offer CPC because of the fraud, as you folks have agreed.
My next question is about the cookies. I have read that affiliates like long lasting cookies that can't be overwritten by other affiliates. I don't quite understand what that means. Lets say that affiliate Mary sends customer Dan who looks at a pink widget and then leaves without buying. Later, Dan visits affiliate Robert's site, follows a link and then buys a pink widget and a blue grommet. Who gets credit for what?
I'm trying to wrap my head around this one and I just don't get it. I can't get the cookie replacement fraud thing either. From what I've found P2P programs somehow install programs that watch for certian cookies and then swap them for other cookies.
You could implement Affiliate program through software installed on your server (what I'm planning), or through a third party network (too expensive for me). Both ways implement most of what we've talked about including cookies, manual approval, cooling off period, etc.
In your question, you are usually able to choose whether the first or last affiliate wins. Although there are other good reasons for choosing the first affiliate, for practical reasons usually the last affiliate wins. If an affiliate refers someone that buys right away and they don't get credit, they can lose trust.
About cookie replacement fraud, I don't know what is done to prevent it. You could check out the security features of the software or network to see if they mention it. Perhaps someone with more experience can talk about this.
I don't mean that to sound too negative, but from a practical point of view: what is it about your product that would make me give up impressions from one of my existing workhorse programs, and invest time and money in trying out yours?
About the commissions, you can always clearly state that certain products don't qualify for commissions at all. 5 % is too low for almost anything except large ticket item like antique furniture or autos. I think auto dealers usually offer a flat fee as commission though.
Maybe there is hope for an affiliate program for us. I'll keep poking at the idea and see if anything comes of it. But with our thin margins and the threat of fraud it looks like it isn't worth an affiliates time to work with us.
Dell only offers 1% if I remember correctly and many people are happy with that, but many e-books and the such offer %75 commission.
