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  1. #1
    Resident Genius and Staunch Capitalist Leader's Avatar
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    How To Spot It When A Merchant's Program Is Ready to Implode
    I decided to make this thread after a post in the NetShops forum mentioned:

    Quote Originally Posted by PeterPeter
    I don't really know if it's common for companies to default on their affiliates
    (For the record--From my perspective, it's not too common lately.)

    But, while thinking about that statement,
    I realized that it'd been a while since I'd been in the way of the implosion when one of these deadbeats fell in on itself, and that I have found quite a few "101 level" signs I see as indicators that it's time to get out of a program. I thought I'd share some of them in a new thread, since they're not specific to NetShops. Also this isn't the main point of the other thread.

    For these signs, I'm not talking about whether a program can/is/isn't a "good performer"--I'm only referring to actual IMPENDING DISASTER signs. The kinds of things that mean RUN AWAY--AND RUN AWAY RIGHT NOW! These are what I could remember at this time. Feel free to add your own "signs of impending disaster" to the thread.

    RUN AWAY, IF (most of these will not show up alone, but some do):
    Affiliate-side:
    Sales become sporadic at companies where they used to be steady, and there's no good reason for that change that can be seen (check your traffic, your traffic sources, and YOUR site before, along with any other reasons that sales would reasonably drop off, before assuming shenanigans. Sometimes the merchant is simply temporarily out of their bestseller, a sale just ended [a lull will usually follow a sale], or you've lost traffic/ranks, or picked up an unexpected source of crap traffic, or even an election is coming up and people are jittery etc. etc. etc. etc).
    Sales mysteriously dropping FOR NO VISIBLE REASON AT ALL is what is the sign of doom here. If you're really new to spotting market fluctuations, etc. it can help to ask here on ABW if there are any "normal" possible causes in your scenario. Often there are legit reasons.

    I was leery about posting the above point because of all the "ifs", but unfortunately, one of the bad causes of stopped sales is the merchant turning crooked and removing the Tracking Code. So it had to be mentioned.

    (The following reversal- and payment-related ones are pretty much sure signs of doom!)

    Reversal percentages increase substantially (and to extreme levels), often with a semislow ramp-up effect, but sometimes suddenly and jarringly.
    Reversal reasons may become increasingly far-fetched and unbelievable. Or sometimes, the reversal reason starts being always the same. Legit reversals have variety, just like the rest of real life.
    Payments become erratic, slow, etc.
    Payments eventually stop entirely. (Duh. And, this is definitely fatal in itself! No point in leaving links up when the pay has stopped!)
    The AM (if in-house) heads for the high hills, or (if outsourced) is suddenly "no longer managing the program". Alone, this may mean nothing at all--people change jobs all the time and the average client-life of an AM seems to be only 1-2 years in most cases. But if the rest of the merchant's house isn't in order either, it's an added indicator.

    PPC Activity warning sign: If it's a competitive market and the products have commissions high enough to justify PPC ads--but you notice that for some inexplicable reason nobody's willing to spend PPC money on that particular company even though they allow PPC bidding, or the bids for their items are eerily super-cheap--it reeks of trouble either with payment or reversals.

    Even if you don't intend to ever bid yourself, you can spot some duds just by seeing if OTHER people are bidding. (Remember the commission-level caveat: People won't bid on stuff that has a small bottom-line commission even if the merchant's great, because there won't be enough money in it to cover the bids.)

    If the merchant don't allow any (or just severely restricted) PPC bidding, it's another warning sign, because that usually indicates competition between their affiliate channel and their own efforts. Always remember the saying, "blood is thicker than water." Such places will often hobble, and sometimes outright kill, what would have been a good affiliate program rather than admit to the fact that their in-house efforts are junk. IOW they put their ego before the well-being of their company.

    Then, some things are
    Customer-facing:
    An increase in customer complaints (can be seen on some comparison sites and sites that rate merchants)--especially complaints about really slow shipments (takes weeks, but was promised in days), outright nonshipment, not coming through with refunds, stuff like that. Customer-service type threads appearing on ABW due to the company becoming totally unresponsive, causing regular customers to go to Google and post on whatever comes up under CompanyName out of frustration (only counts when the customer has waited a good amount of time for a response, and isn't just some idiot who wants a response 2 seconds after they wrote in at 3AM...).

    You may also see this: First an increase in PR from the company about "short term difficulties" and other such attempts at keeping customers coming, but without actually correcting the shipment problems...but then later on, a surprising, deafening, out-of-character silence as complaints mount ever higher. (If you see this pattern, RUN LIKE H*LL!!)

    On-site: Company becomes Sold Out of nonseasonal stuff, and isn't getting any more in even after weeks or months. And, all the other merchants in the category DO have these items, and keep on having them (meaning that there hasn't been a logjam somewhere on the supply-side).

    Suddenly the merchant only has stuff from Brand Z, to the point that they seem like they're probably a subsidiary of Z, even though they used to have a whole slew of different brands. What's going on is probably that the supplier of Brand Z is the only one who's still willing to sell to the merchant! This DOES NOT apply to niche merchants who only had Brand Z to begin with. Just to ones who used to have a lot of brand variety, but suddenly don't.

    Links on large sites start to become broken, and aren't fixed (what happened to the Webmaster?). Other tech stuff that breaks and stays broken (where did the IT person go?).

    Getting KICKED OUT of any network (rather than any form of leaving voluntarily) is a definite sign of disaster. If they've been booted, they're either a megacrook or they don't even pay the network's fees, let alone the affiliates--or both. Run from any booted merchants, and if LS (or CJ) are the ones that booted 'em, forget merely running, grab a seat on the first jet.

    Anyone has any others, feel free to add 'em. Comments are welcome as well, of course.
    Last edited by Leader; March 9th, 2007 at 08:02 AM. Reason: Clarified the reversal part some.
    There is no knowledge that is not power. ~Hemingway

  2. #2
    More Cheesier Than Ever Cheesehead's Avatar
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    Are you saying that some merchants simply shut off tracking to address a cash-flow problem? And this is a warning sign of financial collapse?
    This World is Not My Home
    We're gonna go inside, we're gonna go outside, inside and outside. . . And then we're gonna go go go and we're not gonna stop til we get across that goalline! Quotes from the movie Rudy, 1993

  3. #3
    ABW Ambassador purplebear's Avatar
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    Thank you Leader. That should be very helpful and am definitely gonna try to pay attention to what you've said.

  4. #4
    Resident Genius and Staunch Capitalist Leader's Avatar
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    Edited this post to add:
    I think I forgot to mention this in the first post: Not all the signs have to be present at the same time (and some don't have to be present at all) to indicate Impending Doom. Some of the signs are, alone, indicative of very bad things. But there are a couple signs that are mainly indicators when seen as part of an overall bad picture.

    In the original post, I did my best to note any that I thought likely to cause confusion, but figured I'd add this note here just in case.

    Quote Originally Posted by Cheesehead
    Are you saying that some merchants simply shut off tracking to address a cash-flow problem? And this is a warning sign of financial collapse?
    It has happened. I remember quite well that there have been threads about some duds (and I've run across some duds) who--for no outwardly-discernable reason, have had less and less sales, until finally they go under.

    Then it comes out that 1) Test purchases aren't tracking! and 2) The affected merchant's finances were in the dumper.

    Edited--Now I remember one now that I STRONGLY believe started to mess with their tracking. But I can't *prove* it, so I won't name 'em. I will note that they are now out of business, so they won't be getting free sales from anywhere. It was a classic good-gone-bad, then gone out of biz, case.

    So yeah, there are sometimes some crooked merchants who convince themselves that deleting the commission expense (by shutting off tracking) will somehow solve their monetary ills. It's just a more direct version of the "reverse everything" method of ripping off the commission. If the merchant wasn't a crook from the start, but becomes one later, it often turns out to have happened during a time of financial trouble--something which, unfortunately, drives some to desperation and loss of financial ethics.

    Of course, not all crooks become that way out of desperation. Some baddies start that way.

    What *all* crooks forget is that with no reported sales, affs will quit promoting them, and then they'll TRULY have less sales, thereby bringing their company to ruin faster!
    Last edited by Leader; March 9th, 2007 at 07:50 AM.
    There is no knowledge that is not power. ~Hemingway

  5. #5
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    Someone asked: > "Are you saying that some merchants simply shut off tracking to address a cash-flow problem?" <

    Personally, my perception is that 90% of the time, when tracking stops working, it is unintentional -- typically, someone new starts working on the web site and is not aware of the purpose of the sale-transaction tracking code. However, if the problem is not quickly detected by the merchant, it is generally a strong signal that "something is wrong" -- perhaps the AM is gone, or the company has stopped paying attention to the affiliates. Whatever the reason, when any one thing stops working right, it's fair to assume that other things are probably also not working right (which could cause problems in inventory tracking, order fulfillment, etc.).

    Turning off tracking is highly unlikely to generate significant profit for the merchant, because if there are affiliates with meaningful sales histories, they are usually going to notice the drop to zero; if there are few or no affiliate sales, then cutting off tracking isn't going to save money anyway. As Leader notes, truly crooked merchants are much more likely to engage in "reversal games" instead of disabling tracking.

  6. #6
    Member Core's Avatar
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    Some merchants I have dealt with in the past definitely shut off tracking or just say they don't owe you the commission. When I used to do affiliate marketing full time I had an issue where a merchant (who no longer exists btw) owe me $1200 in commission for a month. I emailed and called the affiliate manager who said they were going to pay me soon. They were on CJ and extended the transactions. I called CJ and asked what was going on and they said they can't talk about it. I called CJ back and got a nicer person who said that they are having financial issues. This person also agreed to do a conference call with me and the affiliate manager regarding payment. The merchant said the money was coming. I waited another month and nothing. I called the affiliate manager who hung up on me. I had my lawyer call the affiliate manager who turned out to be friendly. The owner of the company later called me to apoligize and to let me know that payment to CJ has been made and that the affiliate manager has been fired.

    There are some shady people out there. But remember that there are also some very good companies out there! Try to give people benefit of the doubt.

    Core

  7. #7
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    Leader, Great thread idea.

    I would add a decrease in commissions. I recently had a clothing merchant decrease commissions from 4% to 2%. Then they closed their aff program. A couple of others have followed this course.

    I have also noticed that the companies become more shrill and demanding. Such as telling me what keywords I can optimize on my web pages - nothing to do with PPC. And demandng that I stop promoting their competitors on my website.

    Usually because of this irritation, I stop promoting them. (Feel a little bad at this point) and then feel not so bad as I watch them close their programs.

  8. #8
    Moderator MichaelColey's Avatar
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    That's a pretty definitive list. All of the indicators I would have listed are in there. The biggest three I've seen are:
    • Large Increase in Customer Service Complaints
    • High Turnover for Affiliate Managers (or other employees)
    • Payments Becoming Later and Later
    Michael Coley
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    "Education is the most powerful weapon which you can use to change the world." Nelson Mandela

  9. #9
    ABW Ambassador Ron Bechdolt's Avatar
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    For those of us in the business for many, many years, much of this is kind of instinctive (we've been burned enough times to get the hint). This thread is a great resource for the newbies and those only in the business a few years who may not have experienced some of this.

    Great post, Leader. Thanks for taking the time to put this together and for sharing it.
    Ron Bechdolt | Affiliate Program Management Consultant
    7 Days A Week Marketing

  10. #10
    Troll Killer and best Snooper!
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    Great thread!

    I've rarely been burned and the few times it's happened it hasn't been for much money, fortunately. I guess I have good radar but I never really sat down and thought about what the signs were that I perceived that made me uncomfortable.

    A few things I'd like to add to the list:

    - A formerly responsive AM who stops returning phone calls or emails.
    - Network hopping.
    - Argumentative, defensive, combative or confrontational AM.
    - AM who's obviously spinning a line of BS or who's been caught in a lie (yet continues to deny it).

    It'd be interesting to talk about some specific companies or affiliate programs that imploded and what signs preceded the implosion. I can think of a few like Kitchens Etc., What On Earth, eToys and I'd be interested to hear what warning signs others saw with specific companies.

  11. #11
    Moderator MichaelColey's Avatar
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    Another, even more insidious sign is when the merchant starts offering far better deals and far better commissions. I've seen a handful of merchants do everything they can to squeeze some extra exposure and sales when they know they're going under. They realize that the customers will never get their orders and the affiliates will never get their commissions. That's just wrong.
    Michael Coley
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    "Education is the most powerful weapon which you can use to change the world." Nelson Mandela

  12. #12
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    MichaelColey wrote (in part): " when they know they're going under (merchants) realize that the customers will never get their orders and the affiliates will never get their commissions. " <

    Which is yet another reason to use a trusted intermediary like ShareASale, which ALWAYS collects the affiliate's money up-front, and never sends a customer to a merchant site if there isn't any money to pay what's promised.* While this doesn't help customers (who must rely on their credit card company or PayPal to refund money), it's certainly an extra layer of protection for affiliates.

    */ Note that there is a small "gap" in the SAS system, since a merchant may have a low balance which is inadequate to pay the commission on a "very large" order -- for example, if the merchant has only $50 on deposit and a $1,000 order is placed with a 10% commission, the $50 isn't enough to cover the $100 commission; but in this (quite rare) situation, the merchant would immediately go offline, so no more traffic would go through SAS to that merchant until the account was replenished.

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