Insights about reseller and affiliate programs

Most service providers and product sellers online will sooner or later create an affiliate or reseller program (if they don’t have one yet) and sometimes those programs appear to be to good to be true, so I’ll provide some insights based on my 9+ years of experience running reseller and affiliate programs.

Basic differences between reseller and affiliate programs.

Affiliate program. All visitors will be directed to the provider’s website, which will track the affiliate code to know who sent each visitor. The provider will add up all sales and pay a comission to the affiliate. In order to do so, most providers will provide banners, text links and some marketing tools to the affiliate. Pricing is set and payments are processed by the provider. Support, customer service and issues are dealt directly between the customer and the provider.

Reseller program. Most of them are “brandable” or “white label”, meaning that the visitor will actually think that he’s dealing with a provider instead of a reseller. Reseller usually sets his/her own prices and processes payments, even though some reseller programs (like Enom and WildWestDomains for domain names) process those payments on behalf of their resellers. Most reseller programs require the reseller to provide first level customer service to the end user.

Common questions that aren’t always answered when signing up for a reseller/affiliate program.

Affiliate programs:

Q1. How can I be 100% sure that I’m being paid for all sales I refer?

A1. There’s no way to know, some affiliates place a small “test order” which they pay as if they were regular customers just to see if the comission for that sale shows in their affiliate panel, however there have been cases of providers that use rules and ratios like pay for 9 sales, skip the comission on 1 sale.

Q2. The provider is offering a higher comission than what they’re charging the end user, how’s that possible?

A2. Sometimes it’s because of recurring payments. Maybe a customer will sign up for a monthly service that will cost him $10/month. The provider is paying a $50 comission on that sale… looks like they’re risking too much as the customer may cancel the service after 1 month, however the provider knows -based on research and experience- that most customers will remain active for 2+ years, so in the end, they’ll charge each customer $240+ so paying a $50 comission isn’t really that much. Also, read the fine print, some providers offer juicy comissions but those comissions are paid only after the customer has been with the provider over XX days/months/weeks/years.

Q3. So providers are really paying a lot of money to affiliates each month?

A3. Sometimes they do, however most affiliate programs have a “minimum limit” that has to be met before comissions are paid. Let’s say that a specific affiliate program offers $5 per sale, but you need to have $50 or more in your affiliate account before it’s actually “paid” (funds sent to you). A lot of affiliates will sign up, generate a couple leads that will eventually turn into sales and will remove the affiliate code because it wasn’t as good as they were expecting, so those $10 will never be paid. Also, sometimes the affiliate is also a customer, so comissions can be exchanged for services, adding up to the provider’s profit.

Q4. How do provides track sales to know exactly which affiliate referred a customer?

A4. They use cookies, when the visitor clicks on the affiliate link or banner, a cookie is set in the browser, so when the visitor returns to the provider’s site, even if the sale wasn’t completed on the first visit, the affiliate system will read the cookie and know which affiliate created the lead in the first place. However cookies aren’t always reliable, there are a lot of tools that wipe the entire cookie repository from browsers (system optimizers, history removers, and such programs). The visitor could be using another computer when signing up, other than the one he used when he clicked on the affiliate link, so the sale can’t be tracked. Or the cookie’s expiration time could be reached and therefore removed by the browser itself.

Q5. So that means that all providers can cheat on their affiliates?

A5. Yes, they can. However if their affiliate programs are working as expected, it would just hurt them bad, as people will start moving away to other affiliate programs and will post their bad experiences online, damaging the public image of the provider. You can expect most affiliate programs to be trustworthy.

Reseller programs.

Q1. Is it possible for my customers or visitors to know that I’m reselling?

A1. Yes. Sometimes it takes more knowledge and time to figure it out, but there’s always a way to know which provider you’re reselling for. Google is your friend.

Q2. If my customers can find out who is the real provider, does that mean that they will go directly to the provider?

A2. Not true if you’re smart enough. In order to be a good and profitable reseller, you need to add that “extra” to the services or products being resold that will make your customers be loyal even if they know that you’re reselling for a profit. Let’s say that you’ll be reselling IP phone services (VoIP), you are adding a small profit to each call, so why would your customers stay with you instead of going to your provider and getting cheaper fees? Maybe you could give them freebies, like a sign up bonus, send your customers nice emails on holidays (non-automated), try to know them by name and provide a presonalized service, etc. Most customers won’t mind paying a small extra to get a good service or product.

Q3. Will the provider contact my customers and offer services directly?

A3. All of them claim they won’t, however their TOS (Terms of service) usually incluse a special clause that says that if needed, they can contact your customers. Sometimes it’s a customer protection measuer, as there are unethical resellers that will disappear overnight leaving their customers hanging in the air, but some other times that clause is used for marketing purposes. So don’t believe blindly what you read, always try to build a loyal customer base that will not just inform you if they’re contacted by your provider, but will also dismiss such offers and stick to you.

So how can I be sure that I’m signing up for the right affiliate/reseller program?

Both cases:

Make sure that the provider of your choice has a good reputation online.

Look for providers with some experience providing the services or products you’ll be reselling, try to avoid starting companies.

Affiliate programs:

Make sure they pay on future purchases/signups from customers you referred.

Look for low payout limits, so that you can collect your earnings sooner.

Try their support, see if they always reply in a timely manner.

Reseller programs:

Make sure you’re getting a good discount or that it’s a wholesale-only provider, do some research to find if they have a retail leg. If they do, your provider will also be your competition.

Make sure that what you’ll be charging is enough to keep your operation profitable but that also doesn’t become so expensive that it will scare your customers away. Add your costs plus payment processing fees plus your profit and then look at other providers to see if your price is still reasonable.

See how you can improve the services or products being resold.

Just my 2c.