Tracking affiliate commissions

My article Don't put your trust in cookies in newsletter #33 has attracted four useful responses:

1. Taking advantage of affiliates

By Ken Evoy

Hi Allan,

Another super article!  Current affiliate programs are at the “take maximal advantage of affiliates” stage.  The responses you got confirm this…

[Editor's Note: Ken starts by quoting what I said in my article.]

 

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1. Don't put your trust in cookies
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Michaela of eToys, which pays businesses a 25% commission
and personal sites 12.5%, replied:

“Our affiliates do receive credit for repeat visits if these  repeat visits were originated from their site. Affiliates  should therefore encourage their visitors to visit their site repeatedly and use their links to go to eToys. Please visit our Helpful Hints page located at etoys.com/html/affiliate6.shtml to learn how to improve performance of your links. We do not plan to credit our affiliates for visits originated from bookmarks or typing in the URL.”

Phew, no bones about it.  “Send us a lifetime customer, and we'll pay you a $3 commission.  In two years, we'll have thousands of new customers, and you'll have… uh… nothing.”

How much longer until affiliates smarten up? Companies simply have no reason to change (other than it's the right thing to do, of course) until they realize that this is no way to build a long-term business with equity.

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“The reason that there is no mention on the site is because the system, as presently constituted, is not THE solution, Jaffer said.  “Cookies do not work well. People delete them and if they have them turned off, the system cannot track them. Cookies often expire.”

Only a small percent delete cookies.  Over the years, of course, there will be steady attrition for a variety of reasons.  So you do need a backup system.

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“We have asked our provider to do a database match. This is The ONLY way to do it properly,” Jaffer said. “They are considering it. I do not think the industry will go to this as a standard because most companies do not have the margin to do this. As long as discounting is the way that most sales are made to the consumer, this eats into product margin.”

I disagree with this.  Nowhere is it written that a residual commission must equal the “first-buy” commission.  Simply adjust to what your margins can afford.

We're setting up SQL-database matching. It'll be 99% – we can't find the customer who changes physical address, e-mail address, phone number, AND who uses a different credit card all at the same time (we keep the last seven digits of credit card numbers in the SQL database, but not the entire card number, for obvious reasons).

It's not the easiest protocol to set up, but once it's done, there are no costs involved – so I'm not sure how database-matching eats into margins…

… unless he means that a residual commission eats into margin. That's true of course, but there are easy solutions that turn this “lemon” of an issue into lemonade for both vendor and affiliate.  They simply choose not to use them.

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It looks as though 1999 will be a fascinating year as more and more businesses launch associate programs and compete strongly for the attention of webmasters. The generous ones will catch my attention – and yours, too, no doubt.

Allan, I respectfully submit the following …

• it's not so much the “generous” ones as the “fair” ones – a great program is a fair, symmetrical one.
• If an affiliate chooses on the basis of “outstanding generosity,” he may not realize that great generosity comes at a price…
• is the company desperate?
• is the company fiscally irresponsible, and not destined to last more than a year? Or will reality smack it in the forehead and force it to reduce commissions?
• or worse, is it a bad-faith “bait-and-switch”? Will they reduce commissions after you've spent a year building up the business?
• is the “generous” commission built into the price of the product? If so, you have an overpriced product. Overpriced products do not last long on the Web.

[Editor's Note: Ken Evoy's affiliate program has gone from strength to strength. In spite of what Ken says, I tend to think of his program as “generous” because I earn four-figure monthly commissions from it. In contrast, the eToys program ran into strife and died.] [UPDATE: If you're planning to join Ken's affiliate program, you really MUST read the affiliate agreement. His program is unique. The residual and lifetime commissions you can earn are conditional. Each month, you have to achieve a certain sales level before you receive them.]