Affiliate Profit: Are you losing money?

Dear Affiliate,

I have bad news for you: You probably lost money and 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’s play: Commission x Conversion Rate = Your Profit.

There are three big pitfalls here, and your profit is at risk if you don’t manage them properly. Let’s consider them:

Affiliate Profit: Are you losing money?

– Price: A high price means a higher affiliate commission for every sale, but it may also result 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 remember that the best price is not the one that gives you the highest commission but makes the highest profit. Optimized pricing that makes satisfied customers and satisfied affiliates are what you should look for.

– Refund Rate: Refunds can kill your marketing efforts! What sales do 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 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. At 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?

Affiliate Profit: Are you losing money?

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?

An objective criterion to answer this question and optimize your profit is the refund rate of your top affiliate program!

A high refund rate clearly expresses that many customers are not satisfied with what they get and that affiliates lose money on their sales. On the contrary, low refund rates indicate a high level of satisfaction among customers and safe earnings 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 avoided. There will always be customers that are not satisfied even with the most qualitative product or service. So, in the long run, expecting a zero refund rate is unrealistic. It would help if you wished for 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!

Affiliate Profit: Are you losing money?

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 closely monitor your merchant performance to ensure it doesn’t get worst. You should scan the market for a better alternative if you can find one. You should be very concerned with your profit with an 11%-20% (or higher) refund rate. 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’s say you make 1000 sales per month, 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, 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 who 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 an affiliate 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, revealing 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?

Affiliate Profit: Are you losing money?

For example, we have looked at three affiliate programs selling paid survey databases. We have found their refund rates very high! You will be surprised to discover 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 follows:

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. You will get only $1,969 because 16 customers out of 100 have requested their money back!

Affiliate Profit: Are you losing money?

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. 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. 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 high price for buyers. We estimate its conversion rate significantly lower than other paid survey 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 do not influence 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 paid surveys and mystery shopping jobs, the most professional program available today is MaximumPaidSurveys.com.

Maximum Paid Surveys is a premium database of paid surveys and mystery shopping jobs. It delivers a superior value to registered users and affiliate partners due to its high quality.

How do you identify quality in affiliate programs?

Affiliate Profit: Are you losing money?

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

– It good looking a website

– State-of-the-art organization

– Friendly Functionality

– Affordable Price for most visitors

– Detailed documentation

– Bonuses strengthen 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