Should you pay Affiliates on Repeat Customers?

One question that comes up all the time for Merchants with Affiliate programs is “Should we pay Affiliates on Repeat Customers and Repeat Purchases?”.  Merchant’s say no and Affiliates, OPMs and Networks say yes.  But in reality what is the right choice? Let’s break it down and think of the good and the bad with paying out on repeat purchases and repeat customers.

The first thing to consider is your program’s goals, terms and conditions.  You have to decide if your program is for building new Customers, keeping Customers coming back, Customer satisfaction, etc…  Once you have decided that you need to look at your terms and conditions and clearly state what you will pay out on and what you will not pay out on.

If you decide to pay on repeat sales and customers, whether it is in the original cookie life or on a second cookie life if they reclick the Affiliate’s link, then you don’t need to really add anything to your Terms of Service (TOS).  If you decide that you don’t want to pay out on a Customer that had already shopped with your before or if they came through the same site twice within the cookie life or after a second click then you need to clearly state that and let Affiliates know in your TOS.  It will create some very bad publicity for you if you don’t clearly state this and don’t make them aware.

Now, if you decide to not pay out on the second sale or repeat customers, you have to really consider who you let into your program and how limited your reach will be.  Let’s use Loyalty Sites and Bloggers for our examples.

The purpose of a Loyalty Site is to build a community of shoppers who get something back or remain loyal to that site.  They go back to that site to look for deals and many people start their shopping there by looking for recommendations, other people’s feedback or where to buy a specific product.  Although they may have shopped with you before, they may have rediscovered you through that site and only gone back to you because they found an old post in their forums or because of a feature or mention in a newsletter.

Since almost all stores have a competitor, that Loyalty Site can promote your competitors or promote you instead.  Many of the sales from these sites will be repeat customers and if you are not going to pay out on the second sale or repeat sale because they were already a Customer, then the Loyalty site is not going to promote you or give you the extra exposure to their Community to remind them to shop with you.  In fact they may remove you completely since they will lose money on each sale that they don’t get credit for, even though the person may not have remembered you or come back to you without the Loyalty Affiliate and their recommendations.

You also have to realize that because the customer didn’t get credit for the sale (because you didn’t pay the Loyalty Site), they may also get frustrated with you since you did not make good on the promise from your partnership with the Loyalty Affiliate and your Customer may not want to shop with you again, or they may look for a competing store where they can get their reward.

You basically need to think about if you will work with Loyalty sites when you make your decision on paying out on repeat sales and make sure they are aware so that there are no surprises and you don’t create more work and bad publicity for your company when they out you for “Shady Practices”.

Now lets consider the lack of exposure and reminders from Bloggers if you decide to not pay out on repeat sales or current customers.

A Blogger’s goal is to drive sales through an audience of fans from their blog.  Sure they also work for SEO for products, but they also need their fan base to keep coming back to make them profitable and successful (For the most part).

Suppose you are a party supply store and you only pay out on first sales and non repeat Customers. The Blogger that was working with you finds your store, loves the program and is excited to work with you and put your links on their site.  They make a post for a SuperBowl party and mention some of their favorite Football Party Supplies in their post which their readers can find at your store.  They end up selling a bunch of Football party supplies for you all because their readers agree that you have awesome products so everyone wins.  You got new Customers and the Blogger got his/her Commission.  Sounds good.  Now, it is a couple months later and Mardi Gras is coming up.

The Blogger goes to look up vendors and sees you again and sees you have some amazing products for Mardi Gras Parties.  Then they decide to recommend your store again to their reader base.

The Blogger makes the post and those same readers now return to your store because of the recommendation.  However this time around the Blogger then sees the sales get reversed and gets confused.  If you didn’t make it clear that you wouldn’t be paying out on these sales, you have now created a very negative situation and will more than likely start seeing a post on some of the major Affiliate Forums.

When you think about it, the only reason those people remembered your store or came back to shop with you is because the Blogger made a post about the holiday or where to buy party supplies for that particular party and recommended you again.  They did their job and brought traffic and customers back to you.  They could have easily recommended one of your competitors and sent them the sales but they decided to send to your store instead to make their purchases.  In my opinion this Blogger should be credited for the sale because they did add value to you and your store again.  Unfortunately, many Merchants don’t see it that way and lose out on future sales and promotions.

Now lets think about this another way and from the Merchant’s standpoint.

The goal of the Affiliate program is to build a new customer base and reach out to a market that they would not have been able to reach out to on our own.  We welcomed the Loyalty Site in because they have an audience and we wanted the exposure.  They sent us their community and we paid them for it.  Now they already know about us and we can remarket to them without the Loyalty Site so why should we have to pay if they came through our Newsletter but then went to you for a coupon or cash back or some other incentive?  In the Merchant’s mind you are no longer adding value after you sent them that visitor and the visitor only went to your link because they wanted additional cash back making it not as profitable or not profitable for the Merchant.  Whether you agree or not is another story but if the Merchant decides to reverse the Commisions it becomes your job to educate that Merchant if you think the reversal is unfair.  If the Merchant’s goal is to grow their customer base and not pay out on repeat Customers and they were clear with it in their TOS, then technically you both did your parts and you should have read their TOS more carefully.

They paid you like they agreed to for sending your Community to them and you got paid for your initial referral.  Whether or not you can convince them of the value of paying out on repeat visitors from referrals is another story.  For many it is just educating them and letting them know the added value and how you can send them back to them or send the same people to their Competitors since the Competitors will pay out and the Customers can still get their Incentives.

In the case of Bloggers, I think the Bloggers have an even better case and chance to get this decision reversed.

The Merchant says thank you, you gave us exposure and a nice review.  Thank you also for adding your support and showing your Readers that you support us.  Unfortunately since they now know about us and we can now bring them back over and over, why should we pay you again when we can now reach them and get sales from them on our own?

The Blogger can more easily show why the Customers are coming back and can also more easily show why they got those particular sales.  They just have to show the dedicated post and if their Readers comment on it, they can also show that their recommendation is the only reason those sales were made and why they got them.  (Loyalty Sites can do this to to an extent and pretty much just as easily, but it also depends on how their own internal system is built).

Sure some may have seen the Merchant’s Newsletter, but without the added trust of the Blogger’s recommendation and ideas on how to use the products, they probably wouldn’t have gotten the sales without the Blogger.  The Blogger can also show how they could have promoted the Merchant’s Competitors just like the Loyalty Site and if they really wanted to drive their point home, send over their next couple of posts and sales numbers that they sent to their Competitors.

If you decide to not pay out on repeat customers or on multiple sales within the cookie life, then you miss out on getting extra exposure from many types of Affiliates.  You won’t get as much activity and you won’t get as many extra pushes during important seasons like Q4, 4th of July, Labor Day, etc… since the Affiliate won’t get paid by you if their regular Readers had already bought from you.

Instead of promoting you now, they’ll begin to promote your Competitors and you only got that one nice sales boost from them.  Sometimes you’ll even find that you may have angered them enough to actually pull back their recommendations as they now no longer trust you.  This can be very damaging for you and your brand.  You will have been able to increase your Customer base by the initial sales so you are getting what you are looking for, but at the same time you will miss out on extra pushes, Newsletter Blasts, Promotions, etc… since they won’t get credit from you but their will from your Competitors.  This is more of a win lose situation for the Merchant.

You win because you get the initial sales but you lose because you no longer get posts about your store or recommendations to shop for specific products because the Blogger no longer has a reason to recommend you, unless you are the only vendor of that particular product and there is absolutely nothing else to write about.

If you really think about the good and the bad with paying out on repeat Customers and Sales, there is definitely a line between good and bad.  Just think about your Margins when you launch and plan ahead.  Don’t give 100% of your Margin on the first sale if you cannot afford it and leave room for profit for repeat sales and Customers if you decide to move forward and pay out on repeat sales and Customers.

There are benefits to both sides and I always favor paying out on repeat Customers and Sales, which is obvious by this post, but it may not be within the Marketing plan for your company.  Either way you go, make sure to make it very clear what you will and will not pay out on within your program TOS.  That way if someone calls you out in public or raises an issue, you can show them that they agreed to your TOS when they signed up or continued to promote you and they need to read more carefully before they join and promote a program.  That doesn’t mean it is right or wrong, just that they need to be more careful and you may need to be more clear.

This post is just my personal opinion and if you have a different opinion or thought, please feel free to share it by leaving a comment below.