Impacts and Pitfalls of Affiliate Marketing

May 14, 2024

Whether you love it or hate it, there’s no denying the results—affiliate marketing can make Merchants a lot of money.

Affiliate marketing is a form of performance marketing. Affiliates (think of influencers, bloggers, call centers, etc.) drive a specific action for Merchants. Actions can be anything from simple traffic to a more involved conversion, but more times than not, affiliates drive call volume and website visits.

Though simple in nature, complex problems can arise with Merchants using affiliate marketing strategies. Problems that can make maintaining a healthy Merchant portfolio and underwriting Merchant risk difficult.

Let’s make sense of the impacts and pitfalls that make affiliate marketing tick. And look into ways that you can make it work in your advantage.

Impacts of Affiliate Marketing for ISOs and Payfacs

Merchants Can Increase Sales
And when Merchants increase the number of transactions, you increase revenue. There’s nothing new there. And affiliates increase the potential for increasing quality traffic that converts.

Merchants Leverage Trust and Reach
Affiliates bring their own audience and credibility to the table, enabling Merchants to leverage their trust and reach new customers. This is especially beneficial for medium to high-risk Merchants who struggle to safely grow their business.

Merchants Can Scale Quickly for Less
Affiliate marketing enables merchants to scale their marketing efforts quickly and efficiently, without incurring marketing costs. This is because merchants only pay for results (e.g., sales, leads), making it a cost-effective way to drive growth.

New Revenue Opportunities for ISOs and Processors
As an ISO or Processor, offering affiliate marketing solutions can generate additional revenue streams through commission fees, setup fees, and other related services. This can help diversify your revenue and increase your earnings.

Merchants Stay Healthier for Longer
Affiliate marketing can help merchants stay healthy and profitable by driving consistent sales and revenue. This can lead to longer lifetimes and reduced churn, making it easier to maintain a healthy merchant portfolio.

Pitfalls of Affiliate Marketing for ISOs and Payfacs

Fraud and Chargebacks
The biggest pitfall for affiliate marketing is the increased risk of fraud and chargebacks. An enormous thing to be aware of is that rogue affiliates can act as though they’re funneling conversions to your Merchants via the provided marketing material and promotions; but those affiliates might also be funneling traffic from a fraudulent or misinterpreted offerings.

Poor Quality Traffic
Affiliates may drive low-quality traffic that doesn’t convert, leading to wasted marketing spend and reduced revenue. Merchants must ensure affiliates are driving high-quality traffic that aligns with their target audience. Hard to prove that your Merchants are Healthy.

Underwriting Merchants that use Affiliates is Risky
Listen, if you can’t prove that a Merchant is healthy. If that Merchant can’t prove that their affiliates are driving quality transactions, then potentially meaningful revenue for you is left at the door.

Ways to Avoid the Pitfalls of Affiliate Marketing

Many of the problems plaguing Merchants and their affiliate relationships can be linked to: poor promotional materials and Merchants not understanding where their traffic sources come from.

Firstly, if your Merchants don’t provide an effective promotion, a good landing page, proper scripts and offerings, then the affiliate won’t be able to make the conversion. This can lead to the affiliate dropping the Merchant, or the affiliate going rogue—funneling traffic the Merchant’s way using their own promotions and marketing material. The later can be particularly painful because customers won’t always get what they pay for, and that can lead to chargebacks.

Next, leaving Merchants to their own devices is a huge problem for both your Merchants’ and your own bottom line and compliance requirements. Following what affiliates are driving what actions, using Payments and CRM data to cull out the bad actors, and optimizing the affiliate pipeline is really the only way to stay healthy and excel.

What’s the easiest way to avoid the pitfalls of managing a portfolio of Merchants using affiliate marketing? Easy—Slyce360.