Who Controls the Balance in Affiliate Marketing?

by on February 23, 2012

Affiliate Marketing Balance

Who Tips the Scale in Affiliate Marketing?

Affiliates versus affiliate managers versus merchants. Who wins? Don’t we all have to balance together to be successful? Although I would argue that we do, I don’t think everyone would agree.

This week while I was complaining about merchants who lower commissions without notice or cause (HBO, Discovery Channel, etc), an affiliate manager was complaining to me about affiliates who demand higher commission rates without proving that they can convert. We went back and forth each telling our “war stories” of the week and complaining about the other side. “Don’t merchants understand that we as affiliates can just choose to promote someone else?” “Don’t affiliates understand that affiliate marketing is about paying for performance?”

What it boils down to is that we all need to be fair with our expectations. Sometimes things will happen unexpectedly to skew the balance. But on the whole there should be a fairness on each side and an understanding that we will all earn more if we work together better. When a merchant lowers its commission rate  to save money, it needs to know that it might end up losing a lot of affiliates and with that a part of its reputation. Is it a risk the merchant is willing to take? When an affiliate refuses to promote a merchant because the merchant will not give an exclusive coupon code or VIP commission, the affiliate needs to think about the reasons why that merchant cannot or will not give those things and if the affiliate truly deserves them.

Affiliate marketing is about business relationships but also personal relationships. It’s about negotiation and compromise. Should the merchant hold all of the cards because at any time it can cut the commission of the affiliate to 1% with a 5 hour cookie (I’m talking to you, FAO Schwartz)? Does the affiliate hold all the cards because he can out-SEO the merchant and send customers to a competitor?

Too many people think that their side is the one in complete control in affiliate marketing and refuse to take the time to see the opposite perspective. Do you think one side or the other controls the balance in affiliate marketing? If so, is it justified?

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Thanks for reading! I am a lawyer, blogger, affiliate marketer, and consultant most known in the industry for my cashback site, SunshineRewards.com. You can reach me on Twitter @sunshinetricia.

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{ 9 comments }

Facebook Apps April 4, 2012 at 4:13 am

The benefit of affiliate programs for publishers and advertisers is that it can be used to market physical products, software or services. It can take a bit of time, patience and even trial and error to find what works and what doesn’t but it is a growing area for businesses. There are typically an affiliate marketing program are:
1: Click Bank
2: Link Share
3: Google Affiliate Network.

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Bobbi Quincy February 27, 2012 at 11:59 am

I am not worried when an Affiliate merchant reduces their commissions, simply because the lower the commission the few the the affiliates and the fewer the affiliate thelower their presence in the market place and the lower their sales. Eventually many of them return to the old commission rate, if the reduction was to step in the first place. The final decision is based on the bottom line.

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Greg Hoffman February 27, 2012 at 1:18 pm

http://www.youtube.com/watch?v=KQgfgB-vgT0

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Sarah Bundy February 24, 2012 at 1:17 pm

I think as you said it’s about understanding and compromise. It’s not about the stronger power or the most stubborn position, but rather what would make sense for both parties to create a synergistic win win situation. In most cases a comfortable balance can be found, and that is not always in the form of increased or decreased commission. It can sometimes be found in longer cookie days, exclusive or co-branded creatives or the promise of particular positioning to a target audience not always offered to every other merchant. The question should always be “how can we help each other”. Usually a reasonable answer can be found.

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Liz Gazer February 24, 2012 at 10:39 am

A successful Affiliate/Merchant relationship is symbiotic. They rely on one another and you can’t have one without the other – at least not successfully, not in affiliate marketing.

Each party needs to respect the role of the other and how what they contribute to the overall big picture affects the bottom line. The biz is supposed to be about mutual win not the “You need me more than I need you, so why should I care about your success?” win.

Merchants can’t afford be too cocky about the fact that they’re funding the channel when Affiliates are the ones willing to put forth trust in that they’ll be paid for working for FREE up front. Their time is money. Their efforts are money. They are often experts in areas a merchant isn’t. And even if the merchant has the same expertise, they will pay a lot more for the same results vs. via the affiliate. I’d say that’s worthy of a little respect.

On the other hand, Affiliates also need to respect that they aren’t the *only* concern for a merchant; that the merchant has a whole business to worry about along with the responsibility of managing costs in order to keep the business alive and that commissions are not to be taken for granted. Tricia, if every affiliate operated like you do no merchant would have concerns. Unfortunately there are a fair # of affiliates who try to take advantage by stuffing cookies, or popping ads where they shouldn’t be, which cost the merchant a whole lot of $$ where they often should never have had to pay out a commission at all – or where it should have gone to someone else, who actually took the time to add value to the merchant’s strategy and goals somehow. It drives up the cost of the channel and angers Sr. Execs, causing a bad rap for affiliates on the whole. On the other hand there are unfortunately some merchants who resort to underhanded tactics to avoid paying legit commissions as well, so it goes both ways. All the more reason for folks on both sides to reach out and give their partners a reason to trust them.

Like others said – mutual respect is key. One role is not more important or worthy of respect than the other. Yes, it is a partnership so should be treated as such in order for it to truly work.

Good article Tricia and good points from many who commented above.

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Greg Hoffman February 24, 2012 at 10:19 am

I think it boils down to a mutual understanding and respect of both sides. When someone “demands” me to do it their way, I tend to bite back or walk away. If its a productive and respectful conversation, I will always be reasonable and open minded. The power is in the balance.

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Adam Riemer February 24, 2012 at 8:51 am

It depends on the type of Affiliate as well. Some poach of Merchants while others have their own traffic streams. Coupon sites rely on merchants while bloggers can promote anyone they want.

Merchants need to realize who adds value, who poaches their carts and who uses tactics that aren’t benefiting them. Then they need to decide what type of program they would like. One that adds value or one that isn’t Affiliate friendly for legit Affiliates. If the Affiliate has their own traffic and is not merchant dependent, they can go anywhere and there is no shortage of merchants with high commissions. They don’t need the large brands or have to rely on them. This is why some content Affiliates have moved to only promoting small merchants who have no coupon code box and that are willing to remove adware Affiliates.

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Joe Sousa February 23, 2012 at 4:10 pm

I think it becomes way too easy for both sides to think they are the ones in power. Somehow affiliates, managers, and merchants all need to come to realize it is a partnership. One bad move by any one of the parties will hurt the other two in some way.

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Mehul February 23, 2012 at 3:00 pm

Although Unjustified, I believe the power currently lies with the merchant. Many an instances, when personally have faced situation that the merchant would decide not to honor certain leads, or reduce the commission from 2.5% to 0.5% and since as an affiliate you have already delivered sales/leads cant do much about them not honoring.

Also in a scenario (I am specifically talking abt eCommerce space in India) where the number of advertisers are limited the bargaining power clearly lies with them in most of the instances

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