Clickbank Refunds And Chargebacks

Many product owners on Clickbank have been wondering why they were recently kicked off the marketplace and had their merchanting shut down. Most of them were kicked off because they had high chargeback or refund rates. However, some of these offers actually had LOW refunds and chargebacks, but STILL got kicked off. The purpose of this thread is to teach those of you who have offers on Clickbank EXACTLY how Clickbank calculates your chargeback rate (since that's all they really care about), so you can take measures to reduce the rates earlier.

If you log into your Clickbank account and look at your analytics, you will see an overall chargeback rate listed in the lower right hand corner of the analytics spreadsheet. That number is calculated over 90 days in the following fashion (WARNING - there is some math involved here):

Let d1 = Today minus 90 days
Let d2 = d1 + 1
Let s1 = # sales you made on day d1
Let s2 = # sales you made on day d2
Let c1 = # chargebacks for sales made on day d1
Let c2 = # chargebacks for sales made on day d2
Let cr1 = chargeback rate on day 1
Let cr2 = chargeback rate on day 2

Then cr1 = c1/s1 and cr2 = c2/s2

90 day rolling Chargeback Rate = (cr1 + cr2 + ... + cr90)/90

So for example if you made 10 sales on day 1, and then 1 of them charged back on day 10 and 1 of them charged back on day 34:

cr1 = 2/10 = .20

This calculation of chargebacks makes perfect sense. It is the average of all chargeback rates over 90 days. The important thing to grasp here is that the chargeback rate for a particular day is calculated by the number of sales ON THAT DAY divided by the number of chargebacks FOR SALES MADE ON THAT DAY.

However, the chargeback amount listed in your analytics is NOT what Clickbank looks at to determine if they will shut down your account. What they look at is a number calculated in a COMPLETELY DIFFERENT way:

Let d1 = Today minus 90 days
Let d2 = d1 + 1
Let s1 = # sales you made on day d1
Let s2 = # sales you made on day d2
Let c1 = # chargebacks registered on day d1
Let c2 = # chargebacks registered on day d2
Let cr1 = chargeback rate on day 1
Let cr2 = chargeback rate on day 2

And cr1 = c1/s1, cr2 = c2/s2

So in this case, if you made 10 sales on day 1, and then 1 of them charged back on day 10 and 1 of them charged back on day 34 and made 1 sale on day 10 and 1 sale on day 34:

cr1 = 0/10 = 0.00
cr10 = 1/1 = 1.00
cr34 = 1/1 = 1.00

Do you see the difference? The way Clickbank calculates chargebacks for your account is by dividing the number of sales MADE THAT DAY by the number of chargebacks ON THAT DAY, regardless of when the sale was made! So if you launch your product and get 1000 sales four days in a row, then one month down the line you get 1 chargeback, but your launch is done so you only get one sale... your chargeback rate for that day is 100%!!!!!!

That's the number Clickbank looks at to determine whether or not to terminate your account. Refunds work the same way.

The math above might be a little complicated, but here is the summary: If you launch a product on Clickbank, you better make sure you have a steady stream of traffic to wind down the launch, because if you don't your chargeback rate will SKYROCKET after 60 days or so.

If you want me to try to re-explain in different language let me know.

Ways to solve this problem are:
a) have a steady stream of traffic so your rates never change
b) use a merchant or wholesaler who knows what the f*** they're doing
c) just be a darned affiliate