Practice Affiliate Monitoring to Reduce Chargebacks
By Chris Alarie on Oct 14, 2020
Affiliate marketing can be a valuable tool for merchants. A solid roster of affiliates can bring you new customers and help integrate your brand into a larger cosmos of trusted online merchants.
But affiliate marketing can also bring risks if you find yourself working with dishonest or incompetent affiliates. A bad affiliate can harm your business in numerous ways. For example, a new affiliate providing a large amount of new sales could initially seem like a boon only to later become a curse when you discover that many of those sales were acquired by fraudulent means. This will result in chargebacks and may harm your reputation.
In order to properly take advantage of the benefits of affiliate marketing, you must understand affiliate monitoring. This article will explain some of your options for affiliate marketing and offer advice on how proper affiliate monitoring can help you prevent fraud and chargebacks resulting from unscrupulous affiliates.
In-House Affiliate Programs vs. Affiliate Networks
In-House Affiliate Programs
There are two primary ways that a merchant can use affiliate marketing to sell their products and each requires its own form of affiliate monitoring. One option is to simply build your own program of affiliate relationships. The advantages of this approach are that it saves costs upfront and that it gives you greater control over which affiliates you choose to work with. The disadvantages are that it requires significant expenditures of time and effort and puts you at greater risk of having your business harmed by bad affiliates.
If you decide to run an in-house affiliate program, you must research the affiliates to be certain that they are real and have a good reputation. Alexa.com and Affiliate Watchlist are valuable tools for this sort of research. But even just looking up the affiliate on Google can provide you useful information about the affiliate’s reputation.
The other option is to use an affiliate network. Just like with choosing your own affiliates, it’s important that you make the right decision about the specific affiliate network with which you choose to work. But, provided you do your homework and pick a good affiliate network, managing your affiliates becomes much easier. While an affiliate network comes with additional costs, a good one is less likely to put you into business with bad affiliates. And in the circumstances in which problems arise with an affiliate, the affiliate network will reverse payments and remove the affiliate for you.
Whether you choose to work with an affiliate network or handle everything in house, you will need to implement strategies to make sure your affiliates don’t commit fraud, harm your brand, and send you down a path to excessive chargebacks.
Make Affiliates Fill Out an Application
Always require a new affiliate to fill out an application, and then follow up with additional questions via email and a phone interview. It’s a red flag if emails and phone calls are ignored. As a merchant, you should not start a relationship with an affiliate that is not readily available. Bad affiliates often prefer to avoid communication, so as to better escape detection for their scams.
When it comes to your application process, do not use any sort of auto-apply or auto-approve programs. These shady affiliates look for merchants that take just this sort of hands-off approach. Again, an application process can dissuade bad affiliates from a merchant’s site, depriving them of their preferred anonymity and inaccessibility.
Terms of Service Agreement
Crafting a clear and thorough Terms of Service agreement for your affiliates to sign is absolutely crucial. This document sets the parameters for your affiliates and serves as a legal document detailing which marketing strategies you consider to be legitimate for your company and brand. The agreement should be written clearly and in plain English. It should describe exactly which techniques are and are not allowed in your program. Should an affiliate violate the agreement, it must be clear that the terms were properly stated and that the affiliate knowingly disobeyed them.
A good affiliate agreement should do the following:
Require the use of negative keywords in pay-per-click (PPC) campaigns. If you do not allow brand-bidding in paid search, you should also require that your affiliates include your brand terms as negative keywords in their campaigns. This will prevent the search engines from broad matching their ads onto searches containing your brand. It will provide clear accountability should you find affiliate ads on your brand terms.
Prevent the use of trademarked terms in domain names, subdomains, usernames, etc. Allowing an affiliate to use your trademarks in any sort of internet naming system may forfeit your rights to that name.
Directly address incentive marketing programs. Consider the different forms of incentive marketing and clearly state which forms are and are not allowed.
Require disclosure. Affiliates—particularly those who are writing reviews of your product or service—absolutely must disclose, in a conspicuous manner, their relationship with you.
Address prohibited website content. If there are types of content that you don’t want your brand promoted alongside (adult content, hate-speech, etc.), identify that in your agreement.
Require CAN-SPAM compliant email. If you allow your affiliates to email your affiliate links require that every email be CAN-SPAM compliant.
Include language relating to prevention of anything detrimental to your brand. A generic clause that prohibits campaigns deemed detrimental to the merchant’s brand can be applied to future abusive techniques, providing you with protection from the ever-evolving state of affiliate poaching.
Give you the authority to delay and withhold payment. Your agreement should grant you the right to delay payments to affiliates. Affiliate fraud is often detectable through data monitoring, but verification of fraud can take several weeks to produce. By delaying payments, you give yourself the time to investigate potential fraud, collect the necessary data, and then deny or reverse payments.
This last point is especially important as it allows for payments to be reversed when there is a chargeback and/or refund. Properly delaying payments to affiliate and affiliate networks can save merchants a considerable amount of money. As Benjamin Edelman of Harvard Business School writes, “I estimate that a leading affiliate network could have invoked an optimal payment delay to eliminate 71% of fraud without decreasing profit.”
Ultimately, including these sorts of terms in your agreement minimize your risk of affiliate fraud, but do not by any means prevent it. A comprehensive fraud prevention program includes in-depth affiliate application reviews, regular communication with affiliates, and abuse monitoring.
As with anything, affiliate marketing provides a wide range of benefits and risks. Finding the best affiliate program for you requires knowing what your business needs, knowing what you’re capable of doing, and putting in the actual work to implement everything. But if you are able to find the right affiliate monitoring strategy, you can reap the benefits of affiliate marketing while minimizing chargebacks and other risks.