Public Commission Statements, Ongoing Payment to Affiliates, and the Customer's Knowledge of Pricing
Are We Telling Them Too Much?

Visit discussion lists and affiliate sites online and you will find the question of repeat payments to affiliates coming up again and again. Some claim that affiliate networks are rip offs because they only pay you once for customers. Others say that the affiliate must do more than just generate a lead and wait for the cash to keep rolling in; after all, their effort ends with the first contact. If they do nothing to continue to market the program, why should they get paid?

The question of paying affiliates on an ongoing basis is an interesting challenge. Some markets bear this burden better, like cars. CarPrices.com pays its affiliates for up to a year by tracking a cookie. Yet cars offer more frequent sales than most commodities; if you buy a car, you need insurance. You need warranty help. You need repairs, information, and advice. It is an industry with a tremendous back end.

This kind of natural back end ties into the long term value of a customer. Automobile affiliate networks can naturally determine the long term value of a customer and can reward the affiliate on an ongoing basis. The first payment may be small, but overall the reward can be quite lucrative.

Compare that to a video being sold; the profit margin is absolutely small and paying an affiliate for repeat purchases would simply not fly. It would be too costly for the company to do that with a low profit margin item.

The question of whether or not to pay affiliates on an ongoing basis ties into a basic principle of sales; without motivation, you have a bunch of affiliates looking to do little work and get paid forever. It's like a job where you send one customer over, do nothing, and hope to keep getting paid. If the affiliate makes an effort to generate repeat business and promote your network, they should be rewarded.

But if you have set up a basic lead generating system and/or have a low profit margin item, it just doesn't make sense.

Which brings up the final challenge affiliate networks are really bringing to all of us; the customer is starting to know what they should really pay for a product. This has implications outside the Internet as well. Public commission systems inform the consumer of what they are really paying. Look at Amazon.com's inability to make money; it loses money on each transaction.

Only time will tell if the Internet's ability to educate consumers about pricing will really impact pricing significantly. Affiliate networks are providing a significant challenge to both online and offline retailers, certainly in the book market.

Are we all telling the consumer too much?