I asked Geno what he believes are the 5 worst things that can happen to your affiliate program, and of course, how to prevent them from happening. Here's how he responded:
Coupon Code Box
When I reach a "coupon" or "promo code" box in the checkout process, it is natural for me to go to a search engine and look for a coupon. So it is for nearly every online shopper. As a result, some merchants tend to view coupon affiliates as a "nightmare." The visitors they refer almost never pay the full price, plus, in addition to the discount, the merchant has to pay a part of the final price back to the affiliate in commissions.
Two solutions work well in this regard:
- Don't use discount-off-total-price coupons, rather offer those that will work better for your profit margin. Examples would be "free shipping" type promos, or "buy 2, get 3rd free" offers, or other similar deals.
- Allow the consumer to search for any available coupons or deals without leaving your shopping cart. For example, in early 2009 Macy's added a "Find one now" link next to the promo code box.
Some affiliate programs decide to avoid coupon affiliates altogether. This isn't necessarily the best solution, in my opinion. There are numerous situations when they can add value, and besides, the line between a pure "couponer" and an affiliate that employs other marketing tactics, but also uses a coupon to enhance conversion, isn't always that clear.
Cutting Ties with Affiliates
"Hasty" has never been synonymous with "wise", and this is especially true when talking about affiliate manager decisions to terminate affiliates. If while reviewing your affiliates' performance statistics, you notice that a particular affiliate is sending you many clicks, but few, if any, sales, this sometimes leads managers to suspect such an affiliate of fraudulent behavior. Assumptions, however, are only assumptions unless proven to be fact. So while you are looking into the clicks history, talk to the affiliate network/platform on which your program is run, and/or contact the affiliate prior to making any decisions.
Same applies to terminating affiliates due to inactivity. In fact, this is probably one of the largest mistakes that affiliate managers routinely commit. I've seen this happen with numerous Internet Retailer Top 500 merchants in nearly every major affiliate network [good example here]. An inactive affiliate doesn't hurt your program! And the fact that they're inactive may very well be your fault. Have you motivated them persuasively enough (through bonuses, cookie life increases, tiered commissions, other opportunities) to get active with your program? Some say "focus on the top producers, and terminate the rest." I say "don't rely on existing super affiliates only, but grow your own super affiliates." I've seen this happen before. It does work.
Needless to emphasize that trademarks are among the most important assets of any business. It is for this reason (unless generic words are involved) I'm generally for protecting trademarks while running an affiliate program. The two main areas where you want to protect them are paid search campaigns and domain names. The former (when an affiliate is targeting trade names specifically) nearly always provides high CTR results, while the latter ensures quick organic SERP rankings. Both provide high conversion rates as the referred traffic ends up being highly targeted and already well-familiar with the merchant's product/service.
Now before you call an affiliate a "violator," you want to clearly specify what is prohibited. That is done in your affiliate program agreement which each affiliate is required to concur with while applying into your affiliate program. If you haven't taken the time to prohibit trademark PPC bidding or registering domain names with your trademarks, then how would they know that it's not permitted?
Also, if / when you decide prohibit trademark use (either in PPC ads or in domain names), you'll want to police and enforce your rules. For paid search monitoring, I personally use Brandverity's PoachMark, while for domains name policing CitizenHawk is a good one to use.
As I was managing a program for a major ecommerce brand, we had an affiliate apply in our program. They ran a popular game app on Facebook, and we decided to give this relationship a try. The click numbers were great, and so was their conversion rate. However, as we analyzed the sales they drove in, we uncovered a troubling pattern: over 85% of the orders they referred got cancelled within the "free trial" period. Thankfully, our "locking periods" were set long beyond the free trial period, and we were able to reverse the unnecessary commissions. But we learned an important lesson there: not every type of affiliate is right for every affiliate program.
Every time a sale occurred the above-quoted affiliate was rewarding its members with "virtual currency." Other types of loyalty affiliates may have cashback patterns in place, or remunerate their users by other mechanisms. All of that is fine as long as it is compatible with your business model. If you're online retailer, and your affiliates reward their users with points, cashback, or even charity contributions, that often works well for both parties. If, however, you run a pay-per-lead affiliate program or a sell a service with a long free trial period, such type of affiliate may not work for you. At the end of the day, you want the end user's actions to be motivated by an interest in your product/service, and not a virtual currency credit, or any other remuneration.
On December 1, 2009, new Federal Trade Commission's endorsements/testimonials rules came into force. In essence, these FTC's rules say that when there is a sponsor-endorser relationship between an advertiser and a marketer who publishes a testimonial about the advertiser's product/service, such a relationship must be clearly disclosed on the marketer's website. This includes affiliate marketing (i.e. merchant-affiliate) relationships as well. Every merchant with an affiliate program is expected to educate and equip their affiliates to comply with these rules, as well as for police and enforcing such compliance. The sad reality is that many merchants are still not compliant with these rules (which already results in high amount fines paid to the FTC). To avoid trouble you want to include the necessary language in your affiliate program description and program agreement, as well as equip affiliates with sample disclosures, regularly reminding them of the importance of these, as well as policing affiliate compliance with the FTC's requirements.
In conclusion, let me say that no problem is unresolvable. However, every merchant getting into affiliate marketing must understand one thing from the very outset: your affiliate program is a marketing campaign which requires management. It's not an auto-pilot way for you to get hundreds of salespeople to work for you on performance basis. It's a campaign that must be managed. Only then you will avoid the pitfalls/nightmares, and succeed with it as a marketing option.