I’ve noticed quite a lot of emails coming through over the past few weeks from various merchants – mostly UK based to be honest – cutting commission rates by a couple of percent, some with a particular focus on cashback sites, but more often than not the commission cuts are across the board. But why?
I know we’re in the middle of a recession and all that, but shouldn’t the incentive remain – or even be increased – for affiliates to continue to push programs on behalf of merchants, the end product being sustained or increased sales? A percentage is a percentage, and a recession shouldn’t have any effect on the level of compensation an affiliate gets for pushing a program.
Lets take a like for like comparison. Merchant (A) offers a product with a sale value of £100 and pays a commission of 8%. Thats £8 per transaction for the affiliate to earn for pushing through the sale. Merchant (B) offers the same product with a sale value of £95 but a commission rate of 5%. Even though there might be a greater conversion rate with Merchant (B) due to the £5 price difference, earnings to the affiliate will only be £4.75 – almost half of the amount offered by Merchant (A).
No doubt discounting is one of the reasons for merchants wishing to reel in a percentage here or there from affiliate commissions – they believe this helps their case and helps them to control their margins. But what if affiliates simply stop pushing programs that earn them less commissions per sale. Merchants certainly won’t have to worry about the issue of margins anymore, as they won’t even be selling any products!
It’s sad to see some merchants reacting in this way to the current environment. If only they stood back and realised that affiliate marketing is one of the most cost effective sales channels they have available to them, as well as one of the most risk-free in terms of bang for buck, they’d realise cutting commissions will only worsen their situation, not improve it.
What do you think? Have you noticed this too? How are you going to react to it?