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  1. #1
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
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    The Way to Build a Program?
    Email from merchant received this morning:

    Hi XXXXX,

    We have seen tremendous growth with our affiliate program thanks to your efforts. We'd like to announce some changes to our program effective February 1st 2011. In an effort to increase our conversion rate we have lowered all pricing sitewide. This allows us to pass on additional savings to consumers. We have seen a lift of 20% in conversions during our tests. This being the case, we will be lowering our commission rate to 6% {25% decrease} to accommodate our lower prices. Overall, with our new structure, you will be getting much more sales that will make up for the decrease in commissions.

    Thanks,
    Clueless Merchant
    1. THANKS for building our program into such a success; and
    2. Screw you
    Since June 10, 2012 a vegan aarf but still writing the Hound Dawg Sports Blog
    "If you don't have time to do it right, when will you have time to do it over?" -John Wooden;
    "Raj, there’s no place for truth on the internet." -Howard Wolowitz[/SIZE]

  2. #2
    ABW Ambassador writerguy's Avatar
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    Quote Originally Posted by AffiliateHound View Post
    Email from merchant received this morning:



    1. THANKS for building our program into such a success; and
    2. Screw you
    Really, though, nobody said it has to make sense, right?
    Generate more fake news.

  3. #3
    ABW Ambassador beachcom's Avatar
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    2. Screw you
    Last edited by beachcom; January 12th, 2011 at 07:09 PM.

  4. #4
    The Seal of Aproval rematt's Avatar
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    I like the idea that the AM thinks that an increase in sales will "make up for" the lower commission. Heaven forbid you should actually get ahead for "your efforts". It apparently should be enough to break even, I suppose that's what we should all strive for.

    Now this brings up an interesting question. I'll admit that I never attended business school, hell my degree is in music. However, it was always my belief that all things being equal, it is better to sell fewer products at a higher margin than a lot of product at a lower margin. You know there are all those extra costs associated with more inventory; warehousing, picking, packing, shipping and all that necessary crap that adds expense and lowers profits.

    Maybe by "tremendous growth" he means a wart.

    -rematt
    "I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon

  5. #5
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
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    Yea. I was not a business major either but I did take some econ classes, and they drummed it into our heads that business' FIRST RESPONSE to the need to lower costs is to CUT PRODUCTION, NEVER to lower prices.
    Since June 10, 2012 a vegan aarf but still writing the Hound Dawg Sports Blog
    "If you don't have time to do it right, when will you have time to do it over?" -John Wooden;
    "Raj, there’s no place for truth on the internet." -Howard Wolowitz[/SIZE]

  6. #6
    Outsourced Program Manager Chris -  AMWSO's Avatar
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    Obviously the AM failed math at school else they would have worked out that lower prices mean lower payouts anyway. Such is the path of the dodo.
    Affiliate Marketing by AMWSO. Skype - chrissanderson ::: TEL 1-720-336-1784 ::: www.amwso.net
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  7. #7
    The Seal of Aproval rematt's Avatar
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    Ahhh, the noble Dodo.



    I should have known.

    -rematt
    Last edited by rematt; January 12th, 2011 at 08:59 PM.
    "I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon

  8. #8
    OPM and Moderator Chuck Hamrick's Avatar
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    Its all math people! If they lower commissions by 25% then 25% of affiliates will leave the program. Then with a 25% increase in conversion they will make more money?

    If you have sustained sales then tell them you require an VIP commission or you will take your business elsewhere.

    On a parallel note I had a merchant of three years want to shutdown their program. It was not a big part of their business. I showed them that affiliates made up 100's of organic rankings for their trademark. I told them that when they shut down their program not only will they lose those but they will go to their competition. Needless to say they renewed their contract, gave me the affiliate deals we had asked for for years and the program has grown.

  9. #9
    Affiliate Manager
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    Won't this scenario come down to how each individual affiliates conversion rate and average order shake out with the lower prices?

    With lower prices, you'd assume conversion rate goes up and average order goes down. If the conversion rate goes up, and average order doesn't go down drastically, the affiliate makes more money overall regardless of the commission drop right?

    There's a lot of unknown factors here (how big is their price drop, types of products being sold, cookie duration, buying cycle of the product, what competitors the affiliate works with, etc) but if the merchant goes from being one of the most expensive in their vertical to one of the lowest priced in the vertical, a drastic swing in conversion rate could be quite lucrative for affiliates.

    Am I seeing this wrong?

    Bob

  10. #10
    ABW Ambassador
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    Quote Originally Posted by Robert Drumm View Post
    Won't this scenario come down to how each individual affiliates conversion rate and average order shake out with the lower prices?

    With lower prices, you'd assume conversion rate goes up and average order goes down. If the conversion rate goes up, and average order doesn't go down drastically, the affiliate makes more money overall regardless of the commission drop right?

    There's a lot of unknown factors here (how big is their price drop, types of products being sold, cookie duration, buying cycle of the product, what competitors the affiliate works with, etc) but if the merchant goes from being one of the most expensive in their vertical to one of the lowest priced in the vertical, a drastic swing in conversion rate could be quite lucrative for affiliates.

    Am I seeing this wrong?

    Bob
    You got it right. In the end, actual affiliates of the merchant have to look at what they were doing at 8% commissions and higher prices vs. 6% commissions and lower prices. Whichever scenario has the higher EPC for each affiliate, is the winner.

  11. #11
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
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    I don't buy it for one second.

    They have 85,000 products, and I find it hard to believe that they will actually lower all product prices or that they will keep them down. I suspect that they will creep back up after the lower commission rate goes into effect, and that new product prices will be commensurate with their "old" pricing.

    The vast majority of merchants that offer the segment of their product line that I am involved with, including discount retailers, generally pay 8% to 12%.

    I originally joined this merchant because they carried one specific brand line that I could find nowhere else, and those products are the only products from this merchant that I have promoted.

    With this email and the last couple of replies here, I have looked at other products on their site, compared some pricing, and this is what I have found: Their pricing for products in my niche is about 40% HIGHER than other merchants that I promote for these products, and even if they reduce their prices 20%, they will STILL be priced significantly higher than their competition, than the merchants that I regularly promote for these products, who convert well, and who pay 8-12% commissions.
    Last edited by Phil Kaufman aka AffiliateHound; January 13th, 2011 at 02:22 PM.
    Since June 10, 2012 a vegan aarf but still writing the Hound Dawg Sports Blog
    "If you don't have time to do it right, when will you have time to do it over?" -John Wooden;
    "Raj, there’s no place for truth on the internet." -Howard Wolowitz[/SIZE]

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