Affiliate
Earning/ Profit: Are You Losing Money?
Dear Webmaster,
I have bad news for you: You are probably losing
money and you didn't pay attention to it! Let me explain...
When you joined affiliate programs you probably
considered the following factors:
- The commission
- The conversion rate
The profit formula looks like a child play:
Commission x Conversion Rate = Your Profit
In fact there are three big pitfalls here and
if you don't manage them properly, your profit is at risk. Let
consider them:
- Price: A high price means a higher affiliate
commission for every sale but it may result also in a lower
conversion rate… If the product is too expensive, nobody
will buy. You shouldn't be blinded by the promise of a very
high commission. You should keep in mind that the best price
is not the one that gives you the highest commission but the
one that makes the highest profit. An optimized pricing that
makes satisfied customers and satisfied affiliates is what you
should look for.
- Refund Rate: Refunds can kill your marketing
efforts! What are worth the sales you see in your account if
customers request their money back? A lot of sales mean nothing
unless you keep the money!
This is the whole responsibility of the merchant
to keep refunds as low as possible. A site that sells well is
good. A site that also keeps refunds very low is much better!
There is only one way to keep refunds very low: To deliver very
high quality services meeting customers' expectations or going
beyond what they could expect!
- Product quality: Quality is king! Quality
makes superior conversion rates! Quality enables higher prices
and better commissions! Quality keeps refunds as low as possible!
In a word: Quality should be your compass. Don't associate your
business with low quality products or services. On the top of
your list, promote only the very best. It will also keep your
profit on top.
How much money are you losing today?
The money you earn and lose is significantly
determined by the quality of the affiliate program you have
selected as your top pick.
The question is: How do you measure what is
more qualitative and what is less?
There is an objective criterion to use for answering
this question and for optimizing your profit: The refund rate
of your top affiliate program!
A high refund rate express clearly that lots
of customers are not satisfied with what they get and that affiliates
lose money on their sales. On the contrary, a low refund rates
indicates a high level of satisfaction among customers and safe
earning for affiliates.
If you get many refunds with your top affiliate
program, you should understand that the quality of this program
isn't sufficient for keeping these customers satisfied and it
doesn't do the necessary job for securing your profit…
You are losing money!
What are good, medium and poor refund
rates?
Refunds can't be totally avoided. There will
always be customers that are not satisfied even for the most
qualitative product or service. So, expecting a zero refund
rate on the long run is not realistic. You should wish a refund
rate as low as possible in your industry. It's important to
consider that there can be significant variations from one industry
to another but as a rule of thumb you can use the following
scale:
2% or less: Excellent
3% - 5%: Good
6% - 10%: Medium
11% - 15%: Poor
16% - 20%: Very Poor
21% or higher: Run away!
With a 5% or less refund rate you can be happy.
Your affiliate program is reliable and your profit is secured.
With a 6%-10% refund rate, you should monitor closely your merchant
performance to ensure it doesn't get worst. It would be advised
to scan the market for a better alternative if you can find
one. With an 11%-20% (or higher) refund rate you should be very
concerned with your profit. Whatever your industry is, you are
bleeding and there is probably a better affiliate program to
promote.
What is the refund rate of your top affiliate
program?
There are two ways to find the refund rate of
an affiliate program:
1) Look at the stats supplied by your affiliate
program
Do your math as following: Refunds / Sales =
Refund Rate
Let say you make 1000 sales per month, you get
a $23.50 commission per sale and about 160 customers request
their money back every month. Your refund rate is 160 / 1000
= 16%. In that case it means that you should have earned $23,500
for your sales but you will get only $19,740 because of the
refunds. You lost here 16% of your profit or $3,760!
You can ask yourself: Is it only I or all affiliates
for this program get similar numbers? If you use Clickbank to
promote affiliate programs, you can get the big picture about
the whole community of affiliates that promote an affiliate
program.
2) Using Clickbank payout stats to calculate
the average refund rate of a program.
In its marketplace, Clickbank publishes payout
stats for affiliate programs. The $Earned/Sale factor gives
us exactly what we need to calculate the average refund rate
of a program.
The $Earned/Sale is the average net amount earned
per affiliate per referred sale. This number is mainly impacted
by refunds and it reveals the real commission earned by affiliates.
With this number, you can have an inner look at the real performance
of affiliates programs.
The average refund rate of an affiliate program
is:
(Commission - $Earned)/Commission = Average Refund Rate
What is the refund rate of popular affiliate
programs at Clickbank?
As an example, we have looked at three affiliate
programs selling paid surveys databases. We have found their
refund rates very high! You will be surprised at discovering
how much money affiliates can lose when promoting these programs:
- SurveyScout: 16.2% refund rate!
- Survey Platinum: 20.9% refund rate!
- My Consumer Survey: 35.2% refund rate!
To get into the details, on November 29th 2005
figures were as following:
SurveyScout
Affiliate Commission: $23.50
Average $Earned/Sale: $19.69
Refund Rate: (23.50 - 19.69) / 23.50 = 16.2%
Example: For 100 referred sales you should earn $2,350. In fact
you will get only $1,969 because 16 customers out of 100 have
requested their money back!
Survey Platinum
Affiliate Commission: $23.50
Average $Earned/Sale: $18.58
Refund Rate: (23.50 - 18.58) / 23.50 = 20.9%
Example: For 100 referred sales you should earn $2,350. In fact
you will get only $1,858 because 21 customers out of 100 have
requested their money back!
My Consumer Survey
Affiliate Commission: $40.84
Average $Earned/Sale: $26.43
Refund Rate: (40.84 - 26.43) / 40.84 = 35.2%
Example: For 100 referred sales you should earn $4,084. In fact
you will get only $2,643 because 35 customers out of 100 have
requested their money back!
Remark: My Consumer Survey has a poorly designed site and a
higher price for buyers. We estimate its conversion rate to
be significantly lower than other paid surveys programs. Despite
its high commission, affiliates will lose the most money with
this program.
We learn three lessons about these paid surveys
affiliate programs:
- A lot of customers are dissatisfied.
- Affiliates lose big money.
- The quality of these programs is very questionable.
What should you do to stop the bleeding?
You have no influence on the quality of the
affiliate programs you promote. Your only real influence is
on the quality of your recommendation!
Giving your top recommendation to a very professional
affiliate program that delivers the utmost quality services
to customers will keep your profit as high and as safe as possible.
In the field of paid surveys and mystery shopping
jobs, the most professional program available today is Maximum
Paid Surveys.
Maximum Paid Surveys is a premium database of
paid surveys and mystery shopping jobs. It delivers a superior
value to both registered users and affiliate partners due to
its very high quality.
How to identify quality in affiliate
programs?
Defining quality is a difficult job. In general,
people can't define clearly what quality is but they recognize
it when they see it. So what should you look at in affiliate
programs?
The most qualitative affiliate programs find
the right balance between the value they offer to customers
and the value they generate to affiliates:
1. Value to customers – It includes:
- Rich content
- Good looking website
- State-of-the-art organization
- Friendly functionality
- Affordable Price for most visitors
- Detailed documentation
- Bonuses strengthening the main offer
- Timely Customer Support
2. Value to affiliates – It includes:
- High conversion rate
- High commission
- Low refund rate
- Commission paid on time
- Good affiliate support
|
