No week passes by without a news that an advertiser is either contemplating, or has already implemented a commission/payout drop as a way to penalize violating affiliates.
There are at least three considerations that are worth spelling out in this regard:
I. Non-Preventive Mechanism
Lowering the violator’s commission rate does not prevent further violations. If they are driving conversions due to a prohibited (or unwanted) activity, the only way to get rid of the activity is to get rid of the source of the activity — or the violator (him)/(her)self. Whether you ban on the first occurrence or follow a two-strike policy, it’s your call; but a commission drop is not going to prevent future violations.
Example: You prohibit misrepresentation of your offer via click-to-reveal-the-deal buttons. A coupon affiliate is found in violation of the rule. You lower their commission. This does nothing to their brand-focused discount-oriented long-tail SEO (in plain English: end users will still find their website when searching for [your brand]+[coupon code]) and they keep getting paid for it.
II. Effect of Reverse Penalization
By keeping the violator in the affiliate program (regardless of how low you drop their payouts), you are, actually, hitting the good guys! Most affiliate programs, nowadays, attribute conversion based on the last cookie set. So, unless used in conjunction with additional attribution rules (which would compensate any other value-adding affiliate(s) earlier in the click-stream), a commission decrease does nothing to prevent the violator’s cookie from being the one that overwrites the other/preceding good affiliates’ cookies.
Example: You disallow trademark-bidding in paid search. An affiliate is caught violating. You warn them once. They keep doing it. On the second catch you lower their commission… Now imagine a situation where a(nother) affiliate (say, a content-producing one) appears to had introduced a prospect to you. Deciding to “sleep on it” the customer doesn’t return to you until the next day when he/she just searches the web by your (already-known) brand name. They see the violating affiliate’s paid search ad, click on it, and the violator’s cookie overwrites the good affiliate’s cookie. End result: you pay nothing to the valuable content producer.
III. 0% Commission Problem
Some advertisers decide that setting the violator’s commission rate at 0% is sobering enough of a penalty to deal with the situation described in Scenario I above, and to discourage the violators from keeping breaking the rules. Whether it’s effective or not is, actually, somewhat secondary. The reason being that the moment you institute a penalty like this, you are sending a wrong message to all the legit affiliates in your program. If your affiliate program operates on the “last cookie wins” rule, our Scenario II is still very real, and the only one who benefits from the 0% commission cases is you. Violators are most often the last ones to touch the customer before conversion. So, with their 0% commission, no one (including the good affiliates who may have affected the end user’s decision earlier in time) gets paid.
The only effective way to deal with an outright affiliate violator is their complete removal from the affiliate program.
As always, further discussion is greatly encouraged (via the “Comments” below)↓