Managing risk in affiliate programs has been a growing concern in the industry at large. Luckily, there are some actions you take!
The techniques and actions described below can help you minimize the risk in your program, and help build a healthy program that is fair and clear for your affiliates.
The most effective way to manage risk inside of an affiliate program is to stop it before it starts. By researching, pursuing, and approving only quality partners that align with your company goals and will adhere to your guidelines, a program is less likely to experience abuse and should be positioned well to avoid fraud within the program. It is also understandable if a proactive only recruitment plan may not be realistic.
If you do publish your affiliate program application online on your site or open your program up to a marketplace or network, it is important to not enable any automatic approval rules, and instead opt to review each application by visiting the affiliate’s website, checking to see how they are promoting other brands and even message them if you have any questions before you approve them if you are not familiar with them.
Once affiliates join your program, it is important to learn what suspicious activity looks like and keep an eye out for metrics that are questionable. Some examples of metrics that may indicate suspicious activity are:
Conversion rates that are significantly higher than your program average or the baseline for that specific affiliate that does not coincide with a special offer or promotion may indicate fraud.
The percentage of returned sales from a partner is higher than your regular rate of returns.
Order totals that are very high or higher than your average order value
Multiple orders from the same customer name or IP Address
This type of information can be seen through various reports within your dashboard. You can either check your dashboard on a regular basis or schedule important reports to be delivered to your email address as a reminder. There are also notifications that you can enable when different activities occur to notify you of potentially fraudulent activity in the custom notifications section of the dashboard.
Enforcement of Rules
Strange things happen, but if they happen often enough that a pattern develops don’t be afraid to remove offending affiliates from your program. If you do suspect fraud from an affiliate, you should reach out to them to try and find out what the situation is and work with them to help rectify the issues. However, if you have confirmed fraud, the best thing you can do is report it to your affiliate platform or partners so they can remove the offending affiliate from other campaigns in their network. Many affiliate solutions will have formal processes for managing the removal of affiliates in the even they are committing fraud.
The cost of fraud is two-fold, there is obviously the return of a sale and the associated fees in your online store, but there is also the commission owed to an affiliate. It is important to remember that these two costs are separate, and once you process the returned orders in your store, you must also reverse the related actions within the affiliate platform. Affiliate solutions offer different ways to reverse sales to prevent commissions.
The most common is by enabling options for actions to “lock” before they are finalized and payments are owed to affiliates. In general, the locking period is usually around 1 month after an action occurs. Inside of Impact you can reverse actions one at a time from the pending actions screen or select multiple sales if you are suspicious of a media partner, as well as submit a formatted list of actions to be reversed via FTP.
No matter which option you choose, it is important to understand the timing of action locking to make sure you process any returns or mark suspicious actions before they are locked. If you are diligent you can reduce or eliminate the effect fraudulent orders have on your affiliate expenses.
Communicate with Your Affiliates
Communication with your affiliates is important for many reasons, but as it relates to fraud or risk in your program, it is especially important. Establishing clear guidelines and communicating them with your affiliates as to which promotional methods are allowed, and creating a no-tolerance policy for fraud in your program will go a long way to strengthen your program by setting a fair playing field for all affiliates.
Want to learn more about growing your business with the support of a full-service ecommerce partner and an affiliate program? Learn more about FastSpring’s Affiliate program, here.