Many merchants and affiliate program managers do not know what incentive affiliates (aka loyalty affiliates) are. This, in some cases, results in low-quality affiliate program performance, whereas in others, ignorance regarding the essence of incentive affiliate marketing may bring about unwanted customer activity.
Incentive/loyalty affiliates are affiliates that facilitate the desired end-user action by offering them an incentive. Cashback offers, donations to charitable organizations, and contributions to scholarship funds are by far the most popular forms of incentives used by this type of affiliates. FatWallet.com, BigCrumbs.com and CashBaq.com would be classic examples of incentive affiliate websites.
Here’s how it works when it does work for the merchant:
- Merchant A pays 10% commission on all orders
- Incentive affiliate offers their visitors 5%
- Everyone (customer, merchant, affiliate) is happy
However, there are instances when partnerships with incentive affiliates do not work (and cannot work) for the advertiser/merchant. Let me model three contexts to illustrate such situations. If one of the below-described performance-based payment models describes your affiliate program, you better screen affiliate applications carefully to look for incentive affiliates.
- Merchant B (hosting company) pays 50% or $25 (whichever is greater)
- Incentive affiliate offers $15 cashback on all orders
- Problem: customer signs up for 1 month of hosting at $6.95
- Merchant C (diet supplements merchant) pays $35/sale (including orders for free trials)
- Incentive affiliate offers $20 cashback on all order (including free trials)
- Problem: customer orders a free trial
- Merchant D (credit relief company) runs a PPL affiliate program paying $20/lead
- Incentive affiliate offers $10 cashback to everyone who fills out the form on the merchant’s website
- Problem: obvious
The marketing model used by incentive/loyalty affiliates can work for you when your affiliate program’s specifics allow for such type of online marketing. In certain contexts — like the three scenarios that I have modeled above — affiliate program managers should keep the incentive affiliates out of their programs.
Additionally, let me emphasize that in cases when there is room for merchant partnerships with incentive affiliates, affiliate program managers should regularly monitor their behavior. Many incentive/loyalty affiliates are known for using cookie-overwriting toolbars, forcing clicks, and engaging in other unethical behavior. If you run a managed affiliate program, and your program manager takes his/her job seriously, devoting time to policing, and staying on top of all relevant news, you should be okay. Partnerships with kosher incentive affiliates can bring additional sales to your affiliate program (the question of value added deserves a discussion of its own, and I will not touch upon it in this post). Conversely, partnerships with the wrong types of incentive affiliates (for example, OneCause.com and We-Care.com) can do your program much damage (it will simply not grow beyond the level of sales that a handful of unethical affiliates can refer to you, interfering with the performance of your other online marketing channels; and no decent affiliate will want to work with you).
27 thoughts on “Incentive or Loyalty Affiliates – Definition and Specifics”
Why is it One of the Most Cost-Effective Ways to Advertise your Business Ever heard of affiliate programs? These are forms of Internet advertising that rewards the affiliates for driving traffic to the advertiser or for other transactions. The advertiser pays the affiliate to place a link on their website, and the affiliate sends traffic to the advertiser in return. Simply put, it’s about paying commissions to people who help you make sales. It’s that easy. NOT.
Affiliate marketing has its ups and downs.
I’m quite uncertain of the state of incentive sites today. However, back in the day there were some loyalty/reward sites that provided high volume/quality leads for big brand advertisers. In these cases, we were very honest with the advertiser on how the leads were collected.
The downside has always been that most advertisers (back then and today) are very concerned with brand damaging ad placements. It’s a shame, I believe there are still some fantastic coupon sites out there. Fortunately, I never worked with some of the shady sites mentioned above. GREAT POST!
Your comment makes little sense to me, as you seem to be talking about a pay-per-placement model, but then you say that “simply put, it’s about paying commissions.” Pay-per-placement is definitely something that some affiliates (especially, the ones with considerable amount of traffic coming to their websites) do. From my experience, merchants are generally skeptic about upfront payments for placements, but would much rather pay a higher commission based on performance.
Thank you again for your tweet, and the above comment too. Yes, I can definitely identify with the “brand damaging” that you have mentioned. One of the merchants, whose affiliate program I’m currently managing, specifically requested for us to write it into his program’s TOS that they prohibit optimization of affiliate websites/webpages for key-phrases like [merchant]+[discount], [merchant]+[cashback], [merchant]+[coupon], and so on. They do not want their brand to be associated with discounted merchandise, and affiliates respect it.
I am familiar with OneCause, which is one of the bad ones you listed (I am not affiliated with ANY of these, FYI). What makes this a bad site? They get schools to push the affiliate mall to their student’s parents, drive traffic to the merchants, and share money with the school (or other nonprofits). Their toolbar just ensures that the shopper gets the rebate amount for their nonprofit. This is similar to FreeCause which built the Pink Ribbon app on Facebook – with a toolbar download to ensure support for Susan G. Komen foundation. I just want to understand why you feel that this type of loyalty affiliate is not good for merchants.
That’s exactly the trick with the loyalty affiliates that have been caught overwriting other affiliates’ cookies, and popping their “offers” even on the merchant’s website — they hide behind such noble causes as scholarships, donations to non-profit organizations and charitable funds, supporting churches and ministries, etc, etc, etc.
If you look at things from the consumer perspective (that normally does not care about the marketing technicalities of it all, and is happy to “donate”, “support”, and “share”), my main concern isn’t close to your heart. If, however, you put yourself into the affiliate’s shoes (or even the merchant’s shoes), a whole new picture opens before your eyes — one of unethical marketing, cannibalization of channels, and stealing both from affiliates and merchants themselves.
Please see what I have written about it in the Spyware & Parasites section of my blog, and do not hesitate to ask me your further questions, John. I will make sure every one of them gets replied to.
So, the issue you are really against is overwriting another affiliate’s cookies. Even if there were no toolbars this is bound to happen. As an end user, I may go to Upromise one day and shop, then go to the Nascar shop on another day, and then on the third day I click through from Pink Ribbon. If I happen to shop at the same merchant all three times, then each time I shop the affiliate cookie will get overwritten.
That’s hardly the affiliate’s fault, is it? As the end user, perhaps I’m trying too hard to spread it around, but that’s not a crime. If the merchant program is specifically set up for recurring transactions – like all Upromise merchants must be – then why would the merchant care who gets the commission? Now, I’m sure that the first two affiliates above are not happy about being knocked out, but it could easily happen in reverse. The best publisher/affiliate program – at least for a consumer at a given point in time – wins. It’s not unethical that two affiliates try to entice the same user to shop at your store – it’s how consumer marketing works. If an affiliate builds a better program for you (more compelling) then good for him. If he gets the consumer to install a toolbar that ensures the consumer gets the reward they want, how is that unethical?
In the case where you get to a store by clicking a link on another affiliate’s site and then they lose the commission because of the toolbar, I do get why that would suck. The first guy may have paid to get that user to my site. Perhaps there should be some form of notification to the consumer that requires them to manually agree to the toolbar overwriting the other guy’s cookie.
I see this only getting worse and not better. There are more “malls” every day and toolbars seem to be a valuable “feature.” Again, perhaps there can be some form of voluntary system worked out where affiliates with tool bars put the decision on the user. If I, as a consumer, buy $300 of stuff from Home Depot and my purchases don’t generate a $12 donation, then I’m not happy and feel like I’ve been ripped off. I suppose I could see the link on the other guy’s site, go to OneCause directly, and click through from there. But that’s a hassle and not what I want as a consumer. It may be tough, but not sure what can/should be done about it.
There is no problem with having one affiliate’s cookie overwritten by another affiliate’s one. You are 100% correct in stating that it is “not unethical that two affiliates try to entice the same user to shop at your store — it’s how consumer marketing works.” I am all for an honest competition (the keyword here being “honest”), and it does my heart good when I see a hard-working affiliate outperform a lazier one. What breaks my heart though, is seeing how an honest affiliate’s cookies get overwritten by a toolbar affiliate whose toolbar was bundled up with another piece of software and self-installed on the end user computer (believe it or not, it happened to my wife just 4 days ago!!) and now blinks, and flashes, and cries out to that end user to “click to donate” a % to this or that organization/cause.
Your suggestion about “some form of voluntary system … where affiliates with tool bars put the decision on the user” is interesting, but I don’t see it working on two reasons:
1) The toolbar affiliate that is already playing it unethically (by calling out to the consumer to click their toolbar instead of continuing on with the other affiliate’s site) has no reasons to change their behavior and start asking for consumer’s consent
2) Normally (or when they go to the affiliate site directly), the consumers do not care who gets the commission. Things change when the toolbar starts flashing their “offer” manipulating with reasons like scholarship fund for your kids or donation to a missionary organization. Why turn such an offer down? They’ll probably click the “offer” (as now they do care who gets the commission, and they have no clue that it’s messing up some affiliate marketer’s campaign through an unfair competition).
Things get even uglier when the toolbar affiliate pops their offers when the consumer arrives directly to the merchant’s website (through merchant’s paid search campaigns or organically). Then the search marketing channels get cannibalized by a clearly unacceptable affiliate behavior.
Feel free to ask for any further examples and/or clarifications, John. It is an important topic.
PS: Please also see my Toolbars in Affiliate Marketing post.
Okay – thanks. The auto-install is evil, I agree. OneCause, based on what I see on the site, is not bundled. You have to download it from their site. The “get even uglier” comment is interesting, but I disagree. The consumer installed the toolbar because he/she wants the rebate behavior but appreciates the convenience of not having to go to an intermediate page (mall), find the merchant, and click through.
A diligent shopper sans toolbar would click through the link on Google or elsewhere, see if they want to buy, then go to their affiliate mall and click there to go back to the site so they get their rebate. The toolbar just gets rid of several steps. Anyway, interesting topic and I’m sure not something that’s going to go away anytime soon.
Take a look at this post, and click the videos that exemplify cookie stuffing when the consumer activity originates from merchant’s PPC campaign or an organic SERP, and let me know if you still believe it OneCause is okay.
Purely from the shopper’s perspective, I want the tool bar to do exactly what it does. As a marketer, I agree that it’s almost stealing to pay Goggle for the click but lose the commission. You can also make the argument that the arbitrage play by SEO-savvy affiliates is almost like stealing from the merchants by beating the merchant in the rankings for the merchant’s products (I know it’s more complicated than that and that some affiliates provide a lot of additional info and value). If all of the affiliates/publishers were willing to pay some of their earnings to my school or nonprofit, then it wouldn’t matter. Without the toolbar, I’d still do it manually – having the same result in terms of overwriting the cookie and hijacking the commission to donate to my charity or school. I don’t know what the answer is, but I can understand the frustration.
When SEO-savvy affiliates beat merchants in rankings for the merchant’s products — it’s a very different story. What you have seen in those videos is not “almost stealing”. It is stealing. It’s not about a frustration over a system where your affiliate beats you in their better marketing. It’s about a deliberate thought-through strategy where your affiliate intentionally stuffs their cookie onto the visitor’s computer when the end user came directly to you! Did you see that part?
When the traffic clearly comes from the merchant’s PPC campaign or their organic SERPs, OneCause’s technology intercepts into the marketing funnel, making it appear as if they were the last referrer of the visitor to the merchant’s site (hence, the commission should go to them). And we’re talking major brands here: Avon.com, 1-800-Flowers.com, Blockbuster.com, BabiesRUs.com, Cabelas.com, QVC.com, Walmart.com, the list could go on. Everything is documented by Haiko’s videos. If you have the time to read the whole thread, I highly encourage you to do so. I did not use the adjective “ugly” for no reason.
Okay, it “is stealing” in at least some respect. But they are not alone (if you read to the end)…
2 questions plus more commentary..
1. Assume that Consumer clicks a google ad (your’s or the merchants) and finds something they want to buy at 1800Flowers.com, and then manually navigates to CyberMonday.com and clicks the 1800Flowers button so they can raise money for their scholarship fund. In this case, Consumer has “cheated” whoever paid for that Google click. If it’s 1800Flowers, then they get a few $ less after commission. If it’s an affiliate, then the affiliate gets no commission (and 1800Flowers would have been out their $ anyway). All of this was direct action by Consumer to get some for their cause. Is anybody being evil in this case?
2. Now, assume that Consumer does this reliably 100% of the time they shop. Perhaps it’s CyberMonday.com, or perhaps they use Upromise and are trying to raise money for their kids college fund. It doesn’t matter. Now, assume that Upromise comes along and says to Consumer – “I can save you some steps here if you want. Just install this toolbar and we’ll take care of making sure you get credit in your Upromise account every time you shop. Less clicks, but the same earnings.” Do you agree that in this case, Upromise is providing a convenience but the affiliates or merchants are not getting any less than they were without the toolbar (because Consumer previously did this manually every time they shopped)?
Ultimately, the Consumer is making the choice. You may not like it, but they aren’t really evil in doing this. Neither are the toolbar providers really being evil IMO. They are making a solution to OPTIMIZE their user’s donations without having go through all of the manual steps from Q1 above. It’s what Consumer wants, after all.
If the Affiliate networks were to change the way they handle cookies and not allow overwriting in some very narrow window (such as 5 minutes), then the tool bar would stop working in these cases. The user could come back later when the overwrite prohibition ends, go ahead and shop anyway and forego the earnings/donation, switch browsers (e.g. go from IE to Firefox) and navigate to the merchant directly (forcing the reload from the toolbar), or find another merchant to buy from (if available). At the very least the consumer would have to make a choice. This would not help for a straight PPC or SERP play by the merchant since they would not have the same cookies.
I doubt that the merchants would care in the case where someone is getting an affiliate commission in either case, and they probably won’t push the networks to change their model since it does nothing to help them on their own PPC/SERP issues. The risk of the purchase not happening at all is also high so they will probably fight against any change that pulls the consumer out of the “buy now” mindset. The affiliates will need (on their own) to convince Linkshare, CJ et al to change their model, against the wishes of merchants, and we both know that that is an uphill battle.
For the record, as a non-affiliate, I disagree that intentionally beating a merchant in the search rankings for the merchant’s own products is really any different. You are intentionally taking money from the merchant and many affiliates often boost their rankings through less than honorable methods (link swapping is just one). For a merchant to HAVE to spend a lot more time and money (with agencies, software, people) optimizing their results to stay ahead of all of the affiliate listings is actually pretty evil if you think about it. I’m not against it — we’re all out here to make a buck. But it’s a bit self-serving to criticize toolbars like Onecause but not understand that many affiliates are doing economic damage to the merchants in the normal course of their “legitimate” business. Heck, a lot of the coupon sites earn commissions by signing up for email promos from the merchants and re-posting the promo codes to everybody (but with their affiliate code in the HREF tag). The merchants get a sale, the affiliates get a commission, the consumer gets a deal. Everybody is happy – but the merchant is out $ that they would not have had to spend in most cases. With Onecause, its the affiliate who loses. But these are really not much different in the respect that someone wins and someone loses but the customer gets what they want.
As always, thank you for taking the time to comment.
You are right in saying that “they are not alone.” The are not. There are plenty of other ones. One good page to look over would be the Ben Edelman’s Media Coverage one (search by “loyalty”). Also the ParasiteWare forum at ABW is worth your look.
To your questions:
1) No, I see nothing “evil” with the consumer manually keying in an affiliate’s URL into their address bar, and shopping through the affiliate’s links directly. That affiliate has obviously done their brand building work well, and they deserve the commission. This example, however, does not illustrate what I am talking about. See my answer to your second question for details.
2) Do I agree that toolbars can provide a convenience for the end user? Yes. But I am talking about something completely different. The problem is that the system is being frequently sabotaged by select loyalty affiliates. If the toolbar weren’t an affiliate toolbar that interfered with (a) other affiliates’ marketing activity, and (b) merchants’ own channels of marketing – it would’ve been a different story. When, however, it is obvious that commission hijacking and cookie stuffing are taking place, it isn’t good at all.
Yes, it is the consumer that has to (and will always) be the one to make their choice. But when technology is purposefully applied to design a system that pops up unasked-for ads and/or stuffs (or overwrites) cookies, we have a problem.
Yes, affiliate networks, and affiliate industry as a whole is to address the issue more seriously. The problem is that affiliate networks are always paid a % of every affiliate payout. History has proven this sad axiom: the larger the cumulative payouts to the unethical affiliates — the less motivation the affiliate networks have to deal with the unethical affiliate behavior.
PS: Not sure why we’re using CyberMonday.com as an example. Do they even have a toolbar?
PPS: The question of value brought (or not brought) to the table by different types of affiliates is another interesting subject to discuss, but I would much rather do it in a separate blog post, and keep this one focused on incentive and loyalty affiliates (good or bad).
Can you give me a good example of an affiliate toolbar that you do not consider to be unethical or evil? Or are all affiliate toolbars that detect when you’re on a merchant and help you get the rebate evil?
D johntreadway when you are done.
Sorry – no, CyberMonday.com does not have a toolbar. Just using them as an example.
Any affiliate toolbar that “helps you get the rebate” by stuffing their cookie, or overwriting other affiliates’ cookies (as in the above examples) is, as you say, “evil.”
Are there good toolbars out there, and it is possible to play it by the rules? I do allow for such a possibility, but it requires (a) a different approach by major affiliate networks, (b) a set of rules that all affiliates across the industry would have to comply with, and (c) a technology to police any unacceptable behavior. There’s a whole discussion of this question under the Toolbars in Affiliate Marketing post of mine.
Okay Geno – we’re going to just have to agree to disagree. I see zero ethical distinction between affiliate’s use of SEO and SEM (to get paid commissions for sales of products that would show up on search pages naturally from the merchant’s own efforts), and loyalty program’s use of tool bars to give user’s the rebate they want every time they shop. You just don’t like it because instead of you “taking” from the merchant, someone else is (and taking from you).
The key issue here is not what one person or a group of people deem to be unethical, it is simply that the toolbar is offering to share something that is not their property which, if you applied it to any offline activity would get you arrested. If the toolbar pops up and offers to let you buy with the previous shopper’s credit card that would be an even better deal, and just as ethical as offering to share a stolen commission with you.
The end user has been enticed by the toolbar ‘affiliate’ to download and use the toolbar to receive a kickback of the commission of another person. I’m sure the end user isn’t going to see anything wrong or evil with what they are doing, but they are actively enabling the theft of commissions from people who spend their time and money to promote merchants for the purpose of generating income. It’s their job. As returns diminish affiliates will stop promoting those toolbar partnered merchants, they have been dropping them like poison for a few months now that they are more aware. How is this helping the merchants?
Affiliate marketing is an arrangement that merchants enter into to increase their branding and visibility. A new customer is like gold to most merchants. Return customers are valuable as well, but a new customer, trying out a merchant’s products for the first time is worth far more. They will potentially (hopefully) refer friends and family to the merchant’s site. If every shopper brings along a toolbar that costs the merchant a commission, the merchant’s profits are eroded.
The worst aspect about toolbar affiliates is not that they steal from other hardworking affiliates, it is that they turn non-commissionable sales into commissionable (cookied) sales without bringing any value to the consumer. The few pennies that are donated (if any) to the causes these people claim to benefit are a source of aggravation to the recipients. John mentioned the Susan G. Komen Foundation, ironic since that is one of the foundations that has complained about these so-called donation tools. Read Pink Ribbon Promises in Time Magazine to see what damages the toolbar affiliates are doing to honest charities. They let people think they are doing their part and not looking any further into the real Komen Foundation issues because, “Oh, I donate to that through my toolbar”. Wrong, so wrong.
If the toolbar affiliate requires you to shop on their own site where they have paid for the site building and hosting and put up informative pages for you to shop through – IF they have done this work for you then it is a win-win situation for all concerned, well, except for the charities. Promoting theft by deception is not a nice way of saying what toolbars do, but that’s what they do.
Toolbars set a cookie, even when no affiliate link is involved. Say for example that your brother got a great deal on video games from Walmart and tells you about the special deal that Walmart has right now. You go visit the Walmart site, whether finding it through a search or just typing in the URL. Because you have a toolbar installed, they collect commissions for a sale that they did nothing to generate. No affiliate link anywhere, but they pop in the merchant’s shopping cart and claim (fraudulently) a commission. This activity skews the merchant’s information stream as well and can cause the merchant to make bad decisions because the information is not correct.
If the merchant looks only at the number of sales produced by toolbar affiliates they can only think that these are valuable affiliates. The fact that some of those sales figures actually belong to the merchant and the rest to other victims of theft is not apparent. So the merchants embrace their parasite affiliates until they have been consumed – or informed.
Throwing SEO or SEM into a discussion of toolbars is like asking the mechanic to diagnose your car’s problems on someone else’s car. Don’t act like a troll John.
Nancy – Troll? WFT? Let’s try to keep off the insults. Just because SEM or SEO is your favorite method to gain commissions out of merchants doesn’t mean it’s not relevant to the discussion.
I am fairly sure that Komen actually partnered with Freecause and promoted the toolbar download – the Time article is a different issue and toolbars are not mentioned. Facts matter, Nancy.
Coupon affiliates do something very similar to what you object to with toolbars. They get people to go to their sites to find coupons to save money on their purchases, and earn a commission. They market to people to “come here to get your coupons” even if the merchant created the demand through a paid search, online ad or even printed catalog. I have done this. At Christmas I used lots of coupons from sites like Coupon Mom for purchases I fully intended to make with or without a coupon. Sometimes I got to the merchant through another affiliate link or google PPC ad, left the site to get the coupon, and came back to the site on the coupon affiliate’s cookie. Good for me, not so good for the merchant.
So not only are coupon site affiliates getting a commission, but they are corrupting the purpose of coupons by making them a part of the purchase process 100% of the time.
Theft? If toolbars are legally stealing or committing fraud, then you and other affiliates may have a case to sue for damages on the principal of interference with a contract or some other theory. If you cannot prove in court that you are owed damages, then it’s not theft or fraud or some other actionable tort. Ethical, well that’s more a matter of grays than black & white. Frustrating – absolutely.
You say the charities don’t win? Why are they promoting services like OneCause, iGive, GoodSearch and others then? They get money – they win!
Deceptive? It’s not deceptive to the consumer if they install the toolbar to GUARANTEE that their purchases generate donations. It’s not deceptive to the charity who pushes this to their supporters for the same purpose. It is not deceptive to the merchants who provide programs through their affiliate networks that allow commissions on each and every sale. It is not deceptive to other affiliates – you’re not being deceived by anybody. You know exactly how you’re losing…
As long as merchants are willing to pay something to somebody for each and every sale — coupon sites, SEO affiliates, Upromise, OneCause, etc. do this — and as long as the affiliate networks don’t stop it, then it’s just a competition (as long as it’s legal). The best channel to the customer wins!
Side note: Upromise’s toolbar does not redirect traffic for merchants who prohibit toolbars in their terms of service (eBay, Zappos, etc.). Any merchant can set that policy and any toolbar affiliate who does not comply can be removed from the merchant’s program.
Re Law Suits: They do happen, but not as frequently as I think they should. See the Two Class Action Lawsuites Filed Against CJ and Proposed Settlement In ValueClick/CJ Adware Class Action Lawsuit posts.
Re Merchant TOS: I agree. Merchants should write it into their policies, and enforce it. But unless we tell them about it, they may never find out that they are being cheated.
Re Coupon Sites: Merchants that do not want to be promoted by coupon affiliates can also write it into their TOS. In fact, one of the programs that I manage actually has a clause like this in their affiliate agreement. So, at the end of the day, the choice of whether to work with coupon affiliates or not, is in the hands of the merchant.
Well, it was an interesting discussion and I have a greater understanding of the publisher’s perspective. I still think it’s unfair to label any one legal affiliate as a parasite when the merchants and consumers both know what’s going on. An adware installation that did this without the consent of the consumer would be the true parasite. Best of luck.
Some adware application do self-install on the consumer’s computer without their consent, and many merchants and affiliates really have no clue about what’s going it. Consumers, as you have mentioned above, often don’t care about cookie stuffing and cookie overwriting. However, this doesn’t mean that there is not problem. There is one, and both merchants and affiliates need to be better educated about it.
I am glad you’ve enjoyed our discussion, and thank you for your questions. As you already know, I’m now following you on Twitter, and I thank you for following me back.
I might be missing something here. Would you possible shed some light on my ignorance?
Merchant B (hosting company) pays 50% or $25 (whichever is greater)
Incentive affiliate offers $15 cashback on all orders
Problem: customer signs up for 1 month of hosting at $6.95
—> why is the fault here in the incentive program? I mean regardless of the cashback (or lack of it), the merchant is still in the losing end, is it not? I think (again, I might be missing something since I am not so familiar with incentive sites), the main fault in this scenario is the commission structure of the merchant.
Merchant C (diet supplements merchant) pays $35/sale (including orders for free trials)
Incentive affiliate offers $20 cashback on all order (including free trials)
Problem: customer orders a free trial
—> again, I think the problem is with payout including free trial. How would it be different if the order is not referred by an incentive affiliate?
Thanks in advance.
Thank you for your question.
Your question is somewhat confusing. You’re asking about “the fault in the incentive program”. Incentive programs (if we are using the term in the same way, implying programs run by incentive affiliates), as I have mentioned in my initial blog post, all follow the same idea — that of encouraging a sale (or a subscription) by offering the end-user an incentive. Incentives normally come in form of cashback or donations.
If (as in our scenario 1) a merchant that pays $25 per subscription, starts working with an incentive affiliate, and this affiliate offers cashback greater than the minimum order value, then the merchant is loosing money. They are paying $25 to the affiliate, the affiliate is paying $15 back to the customer, while the customer can simply use two months of hosting at $6.95 each and then leave not spending a penny on the merchant’s service (as $15 – $6.95*2 = $1.1 of the cashback they’ll still get to retain).
In the scenario 2, where the merchant pays cash for every free trial ordered, the problem with the incentive affiliate sharing a portion of this cash with the end user is obvious: the end user gets both cash and the free product (they may not be interested in the product at all, but solely motivated by the cash). It is not necessarily a “problem with payout”. If cash weren’t involved, the free trial would have been ordered mostly by those genuinely interested in trying the product out.
I am amazed how fast you reply through your blog. I hope I have the same dedication towards my blog.
Thanks for making it clear for me.
God bless and congratulations for being voted as the best OPM for 2008!
Thank you for your congrats, and glad I could be of help.