Affiliate Management and the Danger of Paying Too Little

Affiliate Management and the Danger of Paying Too Little

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Often remembered for his contributions to Victorian literature, philosophy, and art criticism, John Ruskin was also keen on social economics. Among his many observations, he brilliantly highlighted the problem of cost. His concept is often called Work Balance Common Law and it goes like this, continuing:

“It’s not wise to pay too much, but it’s worse to pay too little. When you pay too much you lose some money – that’s all. Sometimes you lose everything when you pay too little, because what you buy cannot do what it was bought. The general law of the balance of work forbids paying less and getting more – that cannot be done.”

Affiliate Management Cost

Fast forward two centuries and imagine witnessing an exploratory interaction between the Marketing Manager (CMO) of an online business and an outsourced affiliate management agency (OPM). The pattern is repetitive enough for us to highlight how these discussions often go. CMO requests an affiliate marketing proposal and OPM offers one. Both jump into a follow-up call to discuss the proposal and align the (possible) client’s expectations with the agency’s realistic outputs. When the affiliate management company provides the business with a 12-month forecast, they jump to another phone call. The gist of this second conversation looks like this:

Business: Thank you for your estimate. However, based on your current estimates, we can only justify paying one-third of what you charge for your services.

Agency: I heard you say that our prices don’t make any economic sense to you. Could you please tell me the rationale behind this result?

The business then passes the numbers to the agency. They lay out their profit margins by taking into account the cost of goods, compensation paid to affiliates, and the cost of the tracking solution, and show how they will stay in the red for the first few months.

Agency: I hear your concern. But often times it takes a month or two for any affiliate program to ramp up. Rarely, things get interrupted from the very beginning.

Business: However, there are other agencies that will manage my affiliate program for a third of what you want!

There’s something right about it. Indeed, there are cheaper options than working with the best affiliate management agencies in the world. If you’re considering these options, be sure to ask your prospective affiliate manager the following questions:

  • How many other affiliate programs (as well as mine) will the same affiliate admin manage?
  • what’s this? experience What will my affiliate manager have?
  • what’s this? Expertise and previous track record of success in my field?
  • What exactly will my affiliate manager be? transport for me? [Hint: the right answer is in our post on affiliate manager responsibilities and in the one on the optimal time allocation for each]
  • …and, of course, don’t forget to ask for an estimate.

If any of the answers reveal that your affiliate program could fall into the hands of someone with little experience, no verifiable record of success, or no more than a few minutes a day, an explanation of the low cost will help you. be obvious. Of course, the call will always be yours. However, if you’re on a tight budget that can’t afford quality affiliate program management, you’d better handle it yourself rather than delegate it. That’s exactly what I did when I started my first affiliate program twenty years ago. [full story here].

While “fair price” may be a somewhat arbitrary concept when you outsource any business process or marketing activity, “it is not wise to pay too much” but anytime “It’s worse to pay too little.” In fact, “too much” is only the case when your return on investment has no economic meaning. And you definitely don’t want to be judged by the performance of the affiliate program during the first few weeks! It took three months for one of our clients to break even. As of today, they seventh with us every year, insisting on annual renewals and initiating these renewals every year.

Solution

It doesn’t matter whether Benjamin Franklin or Aldo Gucci was the first to say it… The important is the key message, and that message is: “The pain of low quality remains long after the sweetness of low price is forgotten.”

Feel free to contact us for a free quote and estimate.

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