How to Manage Risk in Affiliate Marketing

Manage Risk in Affiliate Marketing

‌To build a strong affiliate program, it’s important to keep some factors in mind when approaching your prospective partners. If you don’t keep all potential jeopardies in mind, you could end up damaging your brand, profitability, and return on investment.

To avoid any potential trouble, here are some of the most common problems that could impact your partnership’s profitability and overall effectiveness.

‌What Are Some Potential Risks in Affiliate Marketing?‌

To learn how to manage risk in affiliate marketing, you must first understand what’s at stake. This way, you can take full advantage of the many benefits a well-implemented affiliate program can produce for you — think return on investment and brand awareness. The most common examples of issues to watch out for are:

1. Customer Poaching and Coupon Trading

‌Beware of affiliates whose promotional techniques are based on capturing the buyer’s eye at the very last minute — when they’re already in the shopping cart looking for a discount code, or are already looking for your brand’s specific product over a competitor’s.

You don’t want them taking credit for purchases that were already going to happen with or without them appealing to or approaching the customer. Otherwise, if you’re not careful, you’ll end up paying a juicy commission to partners who are not bringing anything to the table. This will ultimately result in a lower-than-expected return on investment, which is the last thing you want from an affiliate program. 

2. Affiliates Who Misrepresent Your Brand

Some affiliates might use deceptive tactics to attract more customers. Stay away from partners that make false claims about your product or service to sell it and gain commissions. Your affiliates should be fully committed to taking care of your brand’s image and avoid making statements they’re unsure about. Consumers don’t like being lied to, and if an affiliate has unethical practices it can give your brand a bad reputation. 

3. Affiliates Who Act Fraudulently

When setting up your affiliate program, you can run into unethical people who won’t hesitate to use sketchy tactics to reach their goals. Affiliate fraud is any false or unscrupulous activity an affiliate can partake on to make commissions from your program.

Besides ripping you off, these fraudulent partners could harm your brand significantly with their actions. Fraud can result in a direct reduction of revenue and cause you to lose customers or drive potential new ones away, which can cause lasting damage to your brand and reputation. 

How Can You Manage Risk in Your Affiliate Program?

Once you’re aware of the potential problems you can encounter, managing risk in your affiliate program should be much easier. Below you’ll find some reliable techniques to keep issues at bay as you try to set up a healthy affiliate program. 

1. Screen Affiliates Effectively

You need to stay on top of your screening process to avoid trouble down the road. By becoming more discerning about who you onboard in your affiliate program, you’ll avoid stumbling upon partners that misrepresent your brand. Do your research and only take in quality partners that have similar goals to yours and who will respect your rules.

Reject applications of affiliates who don’t provide enough information or purposefully make it difficult for you to check their promotional methods by not sharing their site or social media handles with you. Always visit their website and social media profiles, study how they promote other brands and how they engage their audience, and pay attention to potential red flags like lack of original content or very little engagement. 

You don’t want to end up associated with trademark bidding or even fraud. Always promote transparency in your brand-affiliate relationships, or, in other words, stay honest to your affiliates and demand the same from them. 

2. Monitor Affiliates’ Activity

Maintaining a successful affiliate program requires you to monitor your affiliates and stay vigilant on the actions your partners take to promote your brand. This way, you can give them prompt feedback on their campaigns, enforce your program’s rules, and identify what’s working for your brand and what is not driving traffic or sales. 

3. Remove Affiliates if Needed

Partnering up with an affiliate doesn’t mean you have to keep them in your program forever. You need to weed out those affiliates who you think will not drive good enough results for your brand so that you can focus on optimizing the partnerships that do. Don’t be afraid to let people go.

Remember, affiliates work on commission, and if the partnership’s not working for you, chances are it isn’t for them either. Removing affiliates will give you a better chance of focusing on those who’re actually bringing in traffic — and possibly pay them better. You don’t need that many affiliates to run a successful program.

4. Tie Your Commission Payouts to Actual Results

Driving sales is and will always be one of the ultimate goals of having affiliates. Still, returns are bound to happen from time to time, and high return rates have a significant impact on advertising costs. 

To minimize the harm made by product returns to your return on investment, you could set up a hold period strategy. Leaving your affiliates’ payment status as pending through your customers’ return period will give you time to process any returns and pay your partners only what they’ve earned.

The Bottom Line

Much like with any other promotional strategy, running a successful affiliate program may involve risks to a certain extent. Yet, as long as you keep an eye out for the problems listed above and work on timely solutions when you face them, you’ll be set up for success. 

If you need help managing your affiliate program to keep potential risks at bay, take advantage of the solutions and tools LeadDyno has for you. Our all-in-one affiliate tracking solution has everything you need to launch and grow your affiliate program. Visit our site now and start your 30-day free trial today.

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