For businesses that have built a strong consumer USP around free-returns this rate could be as high as 50%. And while returns aren’t just an issue for e-commerce, the figure for in-store returns is likely to come in at less than 10%.

Driving e-commerce sales is, and has always been, the main goal of affiliate marketing. Which means incorporating high consumer return rates, while maintaining a viable marketing model for publishers and advertisers, is one of the industry’s biggest challenges.

How do customer returns impact affiliates?

To manage the impact of return rates on advertising costs, advertisers in affiliate marketing have generally adopted a strategy where they leave sales in a ‘pending’ status throughout the consumer’s returns period and then decline or amend tracked affiliate sales when orders are returned.

But as e-commerce return rates have risen this practice has made affiliate marketing increasingly difficult for publishers.

Longer return times for customers have seen the average ‘pending period’ (the time between a transaction tracking and being validated) increase significantly, which adds to the time publishers wait to get paid. And more returns equate to higher decline rates for publishers, making earnings harder to predict. With publishers often investing in traffic or their own marketing this can make cashflow an issue, and causes a reluctance to invest significantly.

There’s an argument to say that more generous return policies have increased consumer confidence in online shopping, and so increased earning potential for publishers. As a CPA-dominated channel affiliate marketing has been well-placed to help advertisers manage budgets as their return rates have increased; something that click or impression based channels just can’t do as effectively.

Equally, it’s hard to see more sales being amended or declined, coupled with a longer wait to be paid, as anything other than a threat to the channel’s overall viability.

The validation process is key to affiliate optimisation

For advertisers, improving the way an affiliate programme validates is one of the best optimisation techniques available, especially in peak season. These are four fundamentals for basic optimisation:

• All programmes should attempt to validate sales every day. Approving sales as soon as it’s possible to do so will mean getting money to affiliate partners quickly
  
• Automate the validation process wherever possible. Pulling a daily file of validations or allowing an affiliate network to connect to a transactional API will remove the need for human intervention and make validations faster
  
• If customers return only part of their order or make changes to their order, ensure this doesn’t result in a sale being completely declined. All affiliate networks should be able to handle this scenario
  
• If an advertiser has a returns period of over 45 days or a return rate that is pushing 50% or higher then this should be a cue to think about a different strategy for managing validations

Affiliate marketing needs a new validation vision, fit for the future

The key to a successful validation process is approve as many sales as possible, as quickly as possible to ensure a regular and consistent flow of money to publishers.

Validation strategies should always be based around getting transactions approved and paid to partners as quickly as possible. This may mean abandoning the rigid thinking that a returned order should equal a declined sale, something that we’ve done to good effect at Adtraction.

Incorporating the advertiser’s average or expected decline rate into the commission percentage is one sure way to speed up validations. Not only does it mean a much lower decline rate, it also means sales can be approved almost instantly and publishers can be more secure that tracked sales will ultimately mean paid sales. This strategy is not only for befitting of affiliate optimisation, but it streamlines and removes the administration burden so traditionally associated with the channel.