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What Happens When Merchants Don’t Play By Affiliate Marketing Rules?

As an affiliate marketer, I have to deal with challenges (or you might view them as opportunities) during the course of your campaigns, but when happens when you find out a merchant has been sticking it to you?

A case in point, I’d be promoting web services for a merchant through their in-house affiliate program. It paid about $60 per customer who signed up for their services.

And I discovered a couple of days ago that they’re running the same offer on one of the biggest affiliate networks and paying out $90 a customer.

Boy, I was fuming.

I can understand a $5-10 gap differential when the same offer is listed across various affiliate networks (the networks might be willing to cut out a chunk of their profits to give more to affiliates).

But when there’s a near 50% commission payout gap I feel it unconscionable.

There is an unspoken affiliate marketers’ code of conduct, but there isn’t a formal regulatory body which presides over affiliate networks and merchants.

In other words, who watches the watchmen?

Some might say that in a capitalist society, you are welcome to vote with your feet.

I tend to view business as a series of long term business relationships with real people.

I can only guess that:

  • The various marketing/ad departments within the merchant or the network aren’t talking to each other, such that you have a 50% gap in affiliate payouts.
  • The service provider faced some stiff competition and upped their payouts in real-time to remain competitive. But wouldn’t you be talking to your in-house team too?
  • Affiliates? Who cares.

For the purpose of this post, I prefer not to name the merchant, nor the network, nor the type of service and focus on the core issue instead: Trust.

So does that mean affiliates are going to have to set up a multitude of Google News Alerts to keep track of offers, in addition to promotions, competitive offers and depending on your traffic source – search rankings or PPC campaigns?

Having to look behind my back one less time will certain help me focus more fully on what I want to do: affiliate marketing.

Although I wasn’t bringing in a huge amount of volume to the merchant, I think my contribution was fairly decent.

And now I have to decide if I’m going to bite the bullet and switch to the higher paying program, or choose some alternatives.

I know a number of affiliate network people and affiliates visit this blog, so I’m curious to hear your feedback in the comments.

25 comments on What Happens When Merchants Don’t Play By Affiliate Marketing Rules?

  1. Mark
    July 26, 2007 at 1:16 am (4971 days ago)

    Andrew, did you contact the merchant in question and ask them about the discrepancy? It would be interesting to hear their response. I can see the argument from both ways. If you sign up for a cell phone plan for $50/mo, you wouldn’t expect the carrier to automatically drop your price (even after the contract is over), if they are signing up new customers at $30/mo.

  2. Andrew Wee
    July 26, 2007 at 1:34 am (4971 days ago)

    Hi Mark,
    I haven’t had a chance to call them.
    Calling a US merchant for me usually involves waking up in the middle of the night in Singapore to make the call to the US.

    I think the cell phone analogy doesn’t quite apply.
    With a telco contract, you’re ‘locked-in’ for the life of the contract.

    In the aff marketing/CPA world, there’re promos, offer cancellations all the time. I feel that CPA marketing is closer to a trading floor at a forex or commodities exchange, and the rules are constantly changing.

    Keeping one side of the offer static, while moving the other about does not create happy affiliate campers…

  3. Geordie Carswell
    July 26, 2007 at 1:59 am (4971 days ago)

    This could be a combination of factors between both the network and the advertiser. On one hand, the advertiser could have offered a smaller payout to the network you prefer to work with, perhaps because historically that network doesn’t move as much volume. Typical volume discount scenario there….

    On the other side, if the network received the same advertiser payout as the higher commission network, they may be taking advantage of the relationship they have with their affiliates thinking that even if they keep a higher percentage for themselves on this offer, the affiliates will keep promoting with them due to preference or past relationship. That’s a business call on the network’s part, but it’s risky as you could alienate your affiliates.

    My gut tells me the advertiser cut a better deal to the higher commission network, that happens all the time. Assuming the network you’re currently with has a solid history of not getting greedy on their cut of the advertiser CPA, I would tend to think it’s the advertiser.

    I would ask your current network about the huge discrepancy and see what they attribute it to. At the very least they should get some answers from the advertiser.

  4. Andrew Wee
    July 26, 2007 at 2:13 am (4971 days ago)

    Tks for the analysis, Geordie.

    It’s the merchant that’s paying out about $60 through their in-house program and paying $90 through the network.

    With the increased distribution costs through the network, I can’t figure out why they’re hitting the affiliates promoting the in-house program.

    I guess I’ll just have to find the relevant person at the merchant to sort this out.

  5. Geordie Carswell
    July 26, 2007 at 2:25 am (4971 days ago)

    Sorry, I missed that it was in-house and not two networks. That’s retarded. Tell them to retroactively apply the network rate to your in-house sales from the date they started that network rate. If they won’t, dump them..

  6. Robyn
    July 26, 2007 at 2:47 am (4971 days ago)


    I attribute the fault in this to the affiliate manager/team handling your account. It is he or she’s job is to make sure affiliates (super or not) are taken care of. That person should have given you the choice as to which network you promote their program through, or at least told you about both offers. You are a well known affiliate and blogger and you should have been informed of both options. The affiliate marketing managers of Pepperjam are in constant contact with the affiliates who make a difference our programs. We build and form relationships to gain trust. The affiliate manager who was assigned to you did not do that.

    Robyn Martin
    Director of Affiliate Marketing

  7. chickenhole
    July 26, 2007 at 4:06 am (4971 days ago)

    Hey Andrew,

    First off, let me say i like your blog and what I know of you.

    However, you got hosed and it is your own fault. This IS the standard practice and fully within the marketers code of ethics. (I can see the shit flying at me already…)

    If you go to the electronics store and pay $1500 for a TV, then find the same TV across the street for $1000, who’s fault is it you paid too much? ALWAYS shop around. Always, always, always.

    In House programs are notoriously low payers. They are also usually the most poorly managed of the places you can pull a particular offer from. CPA networks have schwacks of experience with a wide variety of offers, merchants and publishers. In house affiliate managers are often the webmaster as well, and quite possibly the night doorman to boot (not always — **dodges shit** –).

    Dude, you might as well pull all your offers off of CJ and linkshare. I can list you 20 programs on CJ that have $4 payouts on programs that can easily be found with $12-$16 payouts at most CPA networks. Is that CJ’s fault? Well yes and no… They may well be getting $16, but is that fact that they payout $4 and you run it their fault? Hell no. It’s called… sucka! In house affiliates and CJ/Linkshare affiliate types are willing to promote the offer at $4 – so hell, let em do it! When you decide to sell your house do you say, hmmm what is a fair price that will make the buyer happy? Hell no! You say, hmmm what is the MOST I can possibly get for this run down old shack. If a guy walks into your shop and want to pay $1500 for a TV that you bought for $600 wholesale… SELL HIM THE TV!

    As a CPA network owner, I am dealing with the most savvy of affiliate marketers (in general, somedays not so much…) and a competitive stage, being a medium size fish trying to compete with the azoogles and CPAempires. So, I have to run tighter margins, offer superior customer support, and prompter payouts.

    You got hosed. If you were doing well at $60, think how much better you’ll at $90. Hell if the CPA network is offering at $90 on the street and you can push some volume, I’ll bet the can get $95 no sweat. Suck it up. Don’t make that mistake again. Lot at the bright side – You just got a $30 pay bump!

    Join all the big networks and shop around. Get them fighting each other for your traffic. You have to be the squeaky wheel to get the big payouts. Logging into CJ to see what is new doesn’t cut it.

    Join all of these networks and shop around before you promote anything.
    etc etc etc
    But of course Millnic is the best of the bunch =)
    Feel free to replace all of those links with your refferal links.

  8. Amit
    July 26, 2007 at 4:58 am (4971 days ago)

    Wow! $90 through the network and $60 in-house! Sounds like a case of a greedy merchant! Or a merchant who doesn’t know what the market value of offer is to affiliates and may think $60 is a great payout (I highly doubt this scenario).

    I’d have to say there are more than a few shady merchants out there trying to make a quick buck off affiliates. They don’t understand the trust and building a strong relationship with the affiliates is really the key to long term success.

    I will work with a merchant, even if I know I will make less money, if I feel I can trust them, vs a merchant that I know is deceiving me.

    Merchant should be required to disclose to affiliate what networks their offers are running on + in house offers and what the respective payout are. Affiliate have a right to know. This could be done through industry self-regulation.

  9. chickenhole
    July 26, 2007 at 10:04 am (4971 days ago)

    Amit… If they did that no one would ever run in house.

  10. Jeannine Crooks
    July 27, 2007 at 12:56 am (4970 days ago)

    Before I began working for LinkConnector Affiliate Network, I was the affiliate manager for a few different companies. I considered it one of my responsibilities to keep our payouts consistent between the in-house program and the network programs. If anything, our in-house program sometimes had a higher payout because no additional fees were involved. I would never have considered that disparity between commissions – that’s just shooting yourself in the foot. I think you’ve been quite the gentleman in not naming names in this instance!

    Now that I’m with LinkConnector, I have the opportunity to see it from this side of the fence. Although I can only speak about the way we do things, we regularly monitor campaign payouts to ensure that our affiliates are receiving a fair deal. We consider this to be one of our responsibilities since the affiliates have chosen to work with our merchants through our network. And while we can’t force a merchant to change their payout, we’re not afraid to have the tough discussion on the impact of an inconsistent payment structure.

    Additionally, I’m surprised the network didn’t have a talk with that merchant, unless their only goal was to see the in-house program die in an effort to move all the affiliates to the network campaign. Even if that was the case, there are better ways to do so than just angering affiliates, who not only sour on the in-house program, but on the merchant as well.

    Jeannine Crooks
    Affiliate Sales Manager

  11. Shawn Collins
    July 27, 2007 at 11:25 am (4970 days ago)

    I’d attribute this to one of two things:

    1) lack of communication between two people that are handing things at the company. I was on the short end of this at a previous job when I managed the affiliate program. There was somebody else in the company doing “media buys” for a higher caliber of publisher than i was getting. Turned out they were cannibalizing some of my biggest affiliates for 50% more than I was permitted to pay.

    2) pure idiocy. Some companies really don’t think affiliates will connect the dots when they wildly vary payouts in different places.

    Either way, tell them you expect $100 a lead now.

  12. Andrew Wee
    July 27, 2007 at 10:10 pm (4969 days ago)

    Hi Robyn,
    The aff network is fine, cos they’re doing the higher payout.

    It’s the in-house prog that underpaying by 50%.

    I just called the company and a sales guy picked up. He was going me some weird answers and when I asked for some real answers, he tells me the affiliate guy will be in in 2 hours (That’s 10am on a Friday and their affiliate/business development work hours are listed as 8am – 5pm).

    So there you have it…

  13. Andrew Wee
    July 27, 2007 at 10:16 pm (4969 days ago)

    Hey Jason/chickenhole,

    Thanks for the education to my rude awakening.

    Yep, the reality check is always the hardest to take.

    > “you got hosed and it is your own fault. This IS the standard practice and fully within the marketers code of ethics. (I can see the shit flying at me already…)”

    My major beef with this, is that if I adopt a “I don’t trust you and I’m gonna check out everything you say” attitude, it’s going to waste a lot of my time that could go on something else.

    I’ll probably join all the major networks now, and do a whole lot more comparison shopping in my niches.

    Regarding the “ethics”, I don’t think it’s ethical to do a two versions of the same prog.

    I think in-house affiliates are probably more loyal than network affiliates (on account of having more choices available).

    If a merchant doesn’t gives them a second class rates, then voting with their feet is the next best thing to do.

  14. Andrew Wee
    July 27, 2007 at 10:23 pm (4969 days ago)

    >> “I will work with a merchant, even if I know I will make less money, if I feel I can trust them, vs a merchant that I know is deceiving me.”

    Same here. This “having to look over my back” stuff gets old, very quickly.

    “Merchant should be required to disclose to affiliate what networks their offers are running on + in house offers and what the respective payout are. Affiliate have a right to know. This could be done through industry self-regulation.”

    Like you mentioned, lack of an industry body and self-regulation.

    It’s not only merchants running roughshod over affiliates, you’d hear instances of rogue networks doing the same too.

  15. Andrew Wee
    July 27, 2007 at 10:27 pm (4969 days ago)

    Hi Jeannine,
    Good to hear that opinion.

    “I considered it one of my responsibilities to keep our payouts consistent between the in-house program and the network programs. If anything, our in-house program sometimes had a higher payout because no additional fees were involved. I would never have considered that disparity between commissions”

    That totally make sense. Before I got into Internet Marketing, I was involved in operations and supply chain management and the logic would be that in-house would cost less than outsourced to a network (with its associated management fees, but made up with a bigger reach to affiliates).

    If the in-house aff manager is also the sales manager, lead programmer, server admin, then obviously it’s a whole diff bag of beans…

    > If they were looking to anger affiliates, they sure have succeeded…

  16. Andrew Wee
    July 27, 2007 at 10:29 pm (4969 days ago)

    Hmm, good insight behind that massive wall.

    I vote for “pure idiocy”.

  17. Stephen Ralph
    July 28, 2007 at 4:51 pm (4968 days ago)

    I concur Anrew, “pure idiocy”. I’m assuming you’ve dumped them by now correct? I mean, is that a company you want to do business with?

    IMO it’s not worth your time or effort to try and fix a merchants affiliate program when there are so many properly managed ones on the net. Cut your losses, mark them down in your book and swap out those links.

  18. Andrew Wee
    July 28, 2007 at 5:58 pm (4968 days ago)

    I’m finding out more funky stuff as I’m doing more research, you can be sure a follow up post is in the works.

    PS: Regarding links, the difficulty is I have hundreds of them out there on multiple sites.

    Lesson to self: centralize link management.

  19. Bling
    August 8, 2007 at 10:32 pm (4957 days ago)

    CJ markets to affiliates… and higher payouts are promoted to attract super affiliates. Merchants know super affiliates peruse the CJ Web site, much more than any super affiliate would be willing to go to each individual web site and investigate an affiliate program one at a time. As such, it’s quite common to offer a higher incentive through an affiliate network, where you stand to attract super affiliates easier than promoting it from your home page.

    Not only that… but it’s especially prevalent in web hosting, which is an extremely viral market. Promoting a $90 affiliate program off your home page isn’t a good idea when you can get a better return on your money paying $60, and not have to worry as much about paying such a high commission to your customers who have a good probability of referring anyway (the host you’re talking about enjoys large amounts of viral marketing).

    The burden of research always falls on the affiliate. While it would be great for a hosting company to proactively award their super affiliates (and I believe they should), that’s not necessarily an argument that their affiliate network commission should be the same as their home page commission. If you’re bringing a decent amount of traffic over to this merchant, the affiliate manager probably should have proactively contacted you to make sure you’re happy where you are. Of course decent is relative, and with the business you’re talking about (which I’m pretty sure I know what is, given your previous posts), your decent amount may be a rather pittance considering their growth rate.

    CJ = Affiliate territory… you’ll get a better return on your money by attracting the super affiliates that have experience moving product. You achieve this through a higher payout.

    Home page = The majority are inexperienced affiliates/existing clients. Why pay a higher commission to people that don’t have experience moving your product and would likely have referred for free? Not only that, but you’ll get a better return on your money by paying the lower amount than the higher.

    Some merchant don’t offer an affiliate program from their home page at all. This is especially prevalent in industries with large amounts of service referrals. Why pay a commission to someone at all if they will refer your product regardless? The answer is, “Will they promote my product MORE if they receive a commission?” And that will be dependent on the industry.

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