Should Affiliates Lose Commission For Refund?

36 replies
NOTE: I AM NOT SAYING THE SYSTEM IS FLAWED, JUST LOOKING FOR BETTER SOLUTIONS.


Let's say that I am promoting a $20 product that gives 50% commission.

I,therefore, would make $10 for each sale of the product. Understandably, some refunds happen, so I lose my $10 for each refund.

But, isn't the job of the affiliate to make sales and the job of the product creator to provide a good product?

So, if you are using a vendor (clickbank, for example), there are three people that profit from the transaction.

1. The product creator
2. The Vendor
3. The Affiliate


Is the affiliate the "low man on the totem pole"?

Is there a better system which places more responsibility on the product creator?
#affiliates #commission #lose #refund
  • Profile picture of the author Will Perkins
    Originally Posted by Mike Hlatky View Post

    NOTE: I AM NOT SAYING THE SYSTEM IS FLAWED, JUST LOOKING FOR BETTER SOLUTIONS.


    Let's say that I am promoting a $20 product that gives 50% commission.

    I,therefore, would make $10 for each sale of the product. Understandably, some refunds happen, so I lose my $10 for each refund.

    But, isn't the job of the affiliate to make sales and the job of the product creator to provide a good product?

    So, if you are using a vendor (clickbank, for example), there are three people that profit from the transaction.

    1. The product creator
    2. The Vendor
    3. The Affiliate

    One of those three members has to take the $10 hit for each refund.

    Is the affiliate the "low man on the totem pole"?

    Is there a better system which places more responsibility on the product creator?
    The system could probably be a bit better, but in all honesty, what can you do?

    Make the creator lose $20 when they only were going to make $10 in the first place?

    Not really fair, now is it?

    The system might not be perfect but it's the best it will probably ever be, oh well :/
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    • Profile picture of the author bdm
      If affiliates don't risk refunds, there is no incentive to improve traffic quality. This is not a big deal for low volume affiliates, but think of the affiliate who does big numbers. The refunds add up.

      Of course is it up to the creator to always improve the product and sales/after sales process to reduce the number of refunds.
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      • Profile picture of the author Bill Farnham
        How long would a system last that could be gamed whereby affiliates could generate non-recourse commissions for sales?

        Would affiliates Twitter about it to get more sales that could be refunded with no money taken out of their pocket?

        Would they tell all their FB friends about this opportunity?

        Would they just spam the living daylights out of the internet just to get sales where they are in no jeopordy of having to give the money back?

        How long would that system last?

        ~Bill
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        • Profile picture of the author Mike Hlatky
          Originally Posted by Alexa Smith View Post

          It isn't a $10 hit for each refund, if the product's been sold for $20. It's a $20 hit, of which the affiliate should take $10-worth, if that was his share.
          Yes, my bad. I should have made that clearer.

          Originally Posted by Bill Farnham View Post

          How long would a system last that could be gamed whereby affiliates could generate non-recourse commissions for sales?

          Would affiliates Twitter about it to get more sales that could be refunded with no money taken out of their pocket?

          Would they tell all their FB friends about this opportunity?

          Would they just spam the living daylights out of the internet just to get sales where they are in no jeopordy of having to give the money back?

          How long would that system last?

          ~Bill
          Maybe the wording in my original post was bad judging by both your response and others.

          I understand that the system would be bad if the system that is implied by your post was the system that everybody was using.

          I guess the question that I was asking was more along the lines of who should take the most responsibility for refunds, the product creator or the affiliate. Obviously, by most responses here, it is evident that people think that affiliates should take the most responsibility.

          I apologize for any misunderstanding
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          • Profile picture of the author Kay King
            Obviously, my most responses here, it is evident that people think that affiliates should take the most responsibility.
            No one said that. The people who earn money from the sale are responsible for returning that money when there is a refund. It's equal responsibility for the funds.

            This is true of sales offline or online. Unless you are a salaried salesperson (a job) you will lose the commission if there is a return or cancellation of an order.

            For an affiliate to earn money, there must be money paid. If the money is refunded, the affiliate refunds only the share he was paid.

            kay
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          • Profile picture of the author Bill Farnham
            Originally Posted by Mike Hlatky View Post

            I understand that the system would be bad if the system that is implied by your post was the system that everybody was using.

            I guess the question that I was asking was more along the lines of who should take the most responsibility for refunds, the product creator or the affiliate. Obviously, my most responses here, it is evident that people think that affiliates should take the most responsibility.
            Hi Mike,

            Who should take responsibility for the traffic an affiliate sends to an offer? The product creator or the affiliate?

            I think it is easy to make the arguement that the affiliate should be responsible for their own traffic. In fact, the affiliate is responsible for what offers they choose to promote.

            Refunds are a function of a number of things not the least of which is the quality of the product. Any good merchant (read affiliate in this case) needs to be aware that refunds are simply part of dealing with the public. And a good merchant will learn to cull out the bad products on the shelf and replace them with good products or suffer the loss of their customer base.

            Affiliates shoulder the most responsibilty for their traffic, and product creators shoulder the most responsibility for the product itself. Those two are distictly different in that the product creator is many times not in control of the affiliates who promote for them, but the affiliates are always in control of what products they promote.

            ~Bill
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  • Profile picture of the author Andy Fletcher
    It's the affiliate's job to find great products to promote and provide high quality leads.

    If there's a lot of refunds because the product is rubbish the responsibility lies just as much with the affiliate not to promote it as it does for the product creator.
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  • Profile picture of the author R Hagel
    Being an affiliate comes with risks. One of those risks is that you'll have to return the commission if the buyer asks for a refund. Otherwise, dishonest affiliates could enjoy big paydays by having their friends buy up a ton of merchandise... and then requesting refunds later.

    (Side Note: Sometimes refunds happen for reasons that have nothing to do with the product quality. For example, the buyer realizes he or she already has the product. Or maybe the buyer purchased software for a Mac but he has a PC. Or any number of other legit reasons.)

    Generally, with great reward comes a bigger risk. If you want a smaller risk, then you need to be willing to settle on a model that also provides a smaller reward.

    For example: Put AdSense on your site. You're not responsbible for anything except getting a click. There's no worry about refunds. All in all, it's a smaller risk... but that also means a smaller reward.

    Cheers,
    Becky
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  • Profile picture of the author Alexa Smith
    Banned
    Originally Posted by Mike Hlatky View Post

    isn't the job of the affiliate to make sales and the job of the product creator to provide a good product?
    Yes, exactly that.

    Originally Posted by Mike Hlatky View Post

    One of those three members has to take the $10 hit for each refund.
    It isn't a $10 hit for each refund, if the product's been sold for $20. It's a $20 hit, of which the affiliate should take $10-worth, if that was his share.

    Bear two things in mind (I'm speaking as an affiliate):-

    (i) the proportion of sales refunded depends primarily on the sales process (i.e. mostly the affiliate), according to how the product was pre-sold, not on the vendor, as you can see from the fact that different affiliates typically have hugely differing refund-rates for the same product;

    (ii) if the affiliate didn't somehow have to repay/lose his $10 share, the system would be open to abuse/fraud (his "friends" can all buy and refund, and he effectively pockets the difference from the vendor).

    Originally Posted by Mike Hlatky View Post

    Is there a better system which places more responsibility on the product creator?
    I wouldn't want to see a system where the vendor was responsible for the pre-selling sins of the affiliate, or a system that's more open to fraud than the ones around now.
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  • Profile picture of the author jasonmorgan
    If you make a sale, everybody get's a piece of the pie.

    Have a refund, everybody has to give their pie back.

    I understand your thinking that it's the affiliates job to refer a customer and after you've done that, your job is finished but that's just not the way it works.

    It's the same in the offline retail world.

    If you buy a TV, the salesman gets a commission and the store and manufacturer get their cut. If you return that TV, the salesman loses his commission and the store and manufacturer also lose their what they've made.
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  • Profile picture of the author Paul Myers
    Mike,

    Consider: Affiliate "promotes" product to audience that he knows will refund. Maybe he even encourages it. (Yes, this does happen.) Affiliate makes commissions and basically steals the money from the product creator under your scenario.

    Or the affiliate buys through their own account, refunds, and gets the product and their commission, PLUS costing the merchant cash out of pocket.

    Then there are instant commission products paid using RAP and similar products. If the affiliate doesn't refund sales processed through their accounts, there are serious potential problems. For example, if someone buys through Paypal using a checking or credit card account, and the merchant "refunds" those orders, the money doesn't go back into the original account.

    That's likely to end up creating chargebacks against the affiliate and double-dipping by the buyer.

    On top of those issues, there's the fact that making the affiliate responsible for their end of refunds helps to reduce the incentive for them to lie about the products they promote.


    Paul
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  • Profile picture of the author Sardent
    Sounds like you're confusing the roles of being an affiliate with that of a lead-generator.

    Look at the definition of the word affiliate -

    • A company with a minority interest in another company.
    • To adopt as a subordinate partner, associate, or branch.
    • Past participle of affiliare to adopt as a son.
    So...the problem lies with the breakdown you made of the participants. As an affiliate, you become a minor co-creator of the product.

    What you've described is actually the process breakdown for a CPA lead generator.
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  • Profile picture of the author TheFreebieGuy
    Affiliates do also have a role to play in the problem. There are some people that know how to send a large amount of Crappy leads. This is why some affiliates have a much higher conversion rates than others.

    If I nurture a solid relationship with my subscribers and I send them an affiliate link recommending a product, they are more likely to take it seriously and my conversions will be higher than an affiliate that spams their list with a bunch of low quality stuff.

    So the responsibility is not only on the product creator, but also on the affiliate, so I do think they both should have some level of risk in the system.

    Also, I think it's our responsibility as affiliates to recommend high quality products. If we recommend crappy products, then that's also on us.
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  • Profile picture of the author Alexpablate
    Well, we can also sell any products and services if we don't want vendor to take money from our sales.
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  • Profile picture of the author Branlan17
    So an affiliate can misrepresent a product and claim it is something it isn't, then shouldn't have to lose money when the customer finds out it's BS and refunds?
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  • Profile picture of the author AverageGuy
    if the refund does not include the affiliate's commission, then the affiliate marketing will lose control very quickly and becomes dead. simply because most sellers won't be able to afford it anymore.


    david
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  • Profile picture of the author SpamHat
    It's a 2 way street, and trust is involved.

    The affiliate can lower refund rates by honestly representing the product and only promoting this he knows and believes in.

    The merchant 's got to have a good product and support.

    If no one gets stupid or greedy then it's all ok.
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  • Profile picture of the author jasonmorgan
    I guess the question that I was asking was more along the lines of who should take the most responsibility for refunds, the product creator or the affiliate. Obviously, by most responses here, it is evident that people think that affiliates should take the most responsibility
    Everybody is taking equal responsibility.

    If a product costs $20 and you get a $10 dollar commission:

    On a refund, you (the affiliate) returns $10 and the program (sponsor) returns $10. It's equal. The affiliate is not getting screwed, losing an unfair amount of money or taking any additional responsibility.

    Slapping up a banner or a link and collecting a percentage of sales... affiliates have it easy
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    • Profile picture of the author Mike Hlatky
      Originally Posted by jasonmorgan View Post

      Everybody is taking equal responsibility.

      If a product costs $20 and you get a $10 dollar commission:

      On a refund, you (the affiliate) returns $10 and the program (sponsor) returns $10. It's equal. The affiliate is not getting screwed, losing an unfair amount of money or taking any additional responsibility.

      Slapping up a banner or a link and collecting a percentage of sales... affiliates have it easy
      That's only on 50% commission.

      If it were that easy, wouldn't everybody here be a millionaire? :p
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  • Profile picture of the author TomBuck
    I think you have a point, as if you promote a product and work really hard to find out the product sold is rubbish then you have essential worked for nothing. On the other hand when you buy a rubbish product you want the comfort of knowing you can get a refund.
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    • Profile picture of the author Alexa Smith
      Banned
      Originally Posted by TomBuck View Post

      I think you have a point, as if you promote a product and work really hard to find out the product sold is rubbish then you have essential worked for nothing.
      That's why you always check out the product before you do that work, Tom, so that you don't end up promoting and recommending something that might be no good, because that way you damage your reputation (that's your most important business asset of all!) as well as your bank account.
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  • Profile picture of the author jasonmorgan
    That's only on 50% commission.
    Yeah, with that example, you get half and the product sponsor gets half. If there is a refund, you give your half back and they give their half back.

    It's overly simplified since the product creator/sponsor is paying for billing services etc... who always get paid and that is coming out of the creator/sponsors pocket.

    If it were that easy, wouldn't everybody here be a millionaire?
    In a nutshell, affiliate marketing is that easy.

    Not saying it's going to make you a millionaire and yes, there certainly is more involved if you want to make consistent sales or make a living from affiliate sales but what it all comes down to is affiliate has a website with a link to sponsor -> customers follows link -> makes purchase -> affiliate gets commission.

    Affiliate sales is easy. Build a website, throw up your links, get a gazillion backlinks, you will make money. Guaranteed. You don't need to buy an ebook or find a mentor to explain how to make money as an affiliate. Success varies but it doesn't get any easier than that.
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  • Profile picture of the author Colin Palfrey
    The point is the affiliate should have tried out the product before promoting it. Alexa said it earlier, but to guarantee the message gets across I'll have another go.

    If you are going to sell something you need to know exactly what it is. Lets replace the word "ebook" with the word "Lamborghini".

    Now if you are going to sell a Lamborghini then you damn well better know what it feels like to drive one, what it makes you feel like as you drive past your friends, the emotions it inspires... If you don't then you will have a hard job selling one, and if someone asks about the sticky door you will know what to say. Actually you will know the concerns they have, and have headed them off before they start.

    Sales is not a game it's a dirty knife fight, and if you haven't tried the product you don't know if you have a knife in your pocket or a banana!

    In short: don't promote anything you haven't tried, and if you do then don't complain about the refunds, as you will not have known which target market to promote it to.

    As to who takes the refund hit when a customer refunds, it isn't a hit at all. It is an undoing of the sale. It's best to think of it as a sale that didn't close.

    My 2c,
    Colin Palfrey
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  • Profile picture of the author WillR
    Where's the confusion? If someone purchases a product, you as an affiliate receive a percentage of the money that customer has paid - as does the vendor. If the customer then wants a refund, you as an affiliate have some of that customers money, as does the vendor - so you both need to return it to the customer.

    I don't think this is unfair. In most cases, adding a money back guarantee will increase conversions of the product. Concentrate not on how much money you have had to give back because of the refund policy, but instead focus on how much extra money you have made because of the refund policy.

    That aside, there are always going to be some products that suck and don't live up to the sales hype. But it's up to you as an affiliate to weed those products out. If this game were easy then everyone would be doing it.
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  • Profile picture of the author Black Hat Cat
    Banned
    Originally Posted by Mike Hlatky View Post

    One of those three members has to take the $10 hit for each refund.
    I guess I missed it...when did they make a rule saying the seller gets to keep his half on refunds?
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  • Profile picture of the author Mike Hlatky
    I already mentioned that that statement was wrong.

    Guess you did miss it.

    http://www.warriorforum.com/main-int...ml#post2959080
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  • Profile picture of the author Nathan Walker
    Originally Posted by Mike Hlatky View Post

    NOTE: I AM NOT SAYING THE SYSTEM IS
    1. The product creator
    2. The Vendor
    3. The Affiliate


    Is the affiliate the "low man on the totem pole"?

    Is there a better system which places more responsibility on the product creator?
    In my opinion, there is no such thing as a "totem pole". It's more of a roundtable to me. Everyone involved in the sale process is vital. If you remove one, the structure inevitably fails of suffers considerably. So in turn, this would mean a refund would have to affect everyone in the process. If you agree with this look at the sales structure, then you would have to agree that a refund will require everyone involved in the process to lose what they made. Penalizing one person in the process over the other would undermine the flow of business and create bad tension.
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  • Profile picture of the author seasoned
    Originally Posted by Mike Hlatky View Post

    NOTE: I AM NOT SAYING THE SYSTEM IS FLAWED, JUST LOOKING FOR BETTER SOLUTIONS.


    Let's say that I am promoting a $20 product that gives 50% commission.

    I,therefore, would make $10 for each sale of the product. Understandably, some refunds happen, so I lose my $10 for each refund.

    But, isn't the job of the affiliate to make sales and the job of the product creator to provide a good product?

    So, if you are using a vendor (clickbank, for example), there are three people that profit from the transaction.

    1. The product creator
    2. The Vendor
    3. The Affiliate


    Is the affiliate the "low man on the totem pole"?

    Is there a better system which places more responsibility on the product creator?
    The Affiliate deserves the commmission REGARDLESS! SO, 50% commission....

    NO refund on a $15 dollar product...

    $15-0*.5=$7.5

    WITH a refund....

    $15-$15*.5=$0!

    FAIR!

    See, it ALL works out! A commission is a fee based on a SALE! If there is a refund, it basically nullifies the sale. The seller has the SAME problem.

    HEY, ANYONE can sell something for $20. The TRICK is to do it HONESTLY so the honest customers let you keep the money.

    Steve
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    • Profile picture of the author Biz Guru
      Not much you can do about this I am afraid.

      The biggest problem with NOT taking money from the affiliate would be the potential for fraud.

      What if some joker told 100 of his friends to buy something then return it? The crooked affiliate would make $10 X 100 sales = $1000

      There wouldn't be many vendors left 3 months after that. lol

      ONLY 3 Ways to Fix this:

      1. We just have to Stop HYPING stuff and send better traffic/customers

      2. Vendors need to have better funnels and products.

      3. You go to CPA where you just get paid for sending the traffic/customer to do an ACTION!!

      Action completed .... Pay Me

      Cheers,

      Kevin
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      Cheers To Your Success,
      Kevin
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    • Profile picture of the author x3xsolxdierx3x
      The affiliate either overly hyped up the product to the point it didn't meet the buyers expectations (the affiliate and, arguably, the sellers fault)....or....the seller failed to make a quality product (in which case, the affiliate 'should have' pre-screened/used the product prior to promoting it....I know there are TONS of affiliates out there that promote products that they have never once used...)

      So...personally, I think there is joint responsibility involved...and, for this reason, I believe a refund would negate the sale and the commission should not be had. The seller loses out, as well.

      Originally Posted by seasoned View Post

      The Affiliate deserves the commmission REGARDLESS! SO, 50% commission....

      NO refund on a $15 dollar product...

      $15-0*.5=$7.5

      WITH a refund....

      $15-$15*.5=$0!

      FAIR!

      See, it ALL works out! A commission is a fee based on a SALE! If there is a refund, it basically nullifies the sale. The seller has the SAME problem.

      HEY, ANYONE can sell something for $20. The TRICK is to do it HONESTLY so the honest customers let you keep the money.

      Steve
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