What do I need to start an Affiliate Program? Part 3 of 5: Compliance Strategy

Just like everything else in life, finding a place to start is often the hardest part!  In this section, we will outline five key considerations and decisions that need careful planning in order to get your program off to the best possible start.

Part 3: A Compliance Strategy

As with every marketing strategy, there are important legal and compliance issues to consider, and Affiliate Marketing is no different.  The good news is that with proper preparation and utilization of tools available to you, risks can be mitigated and the Affiliate Channel can be very profitable and rewarding.   In this chapter, I’ve outlined three important points to cover when planning your Affiliate Agreement.

The first thing to remember is the popular idiom, “If it looks too good to be true, it probably is”.  The data you review along with your own intuition are the two most important factors in protecting the integrity of your Affiliate Program – use them early, often, and consistently.

If it looks too good to be true, it probably is.

Creation of the Affiliate Agreement

As with any partnership, a concrete legal contract should be put in place between an Affiliate and yourself.  Do not skip this important setup step! Affiliate Networks will have a legal contract, or terms of use, that bind Affiliates to certain terms – but those are typically general and cover a variety of topics.   While helpful, they don’t dictate specific methods which are allowed and disallowed per individual program.   You need your own legal agreement; there is no getting around it!

At a minimum, your legal agreement should cover fully the subsequent points that are laid out in this chapter and then be reviewed by your legal counsel.

PPC Compliance (Pay Per Click)Coupon ComplianceSales Tax & Government Regulation

1. PPC Compliance (Pay Per Click)

The number one converting term, for any business, will nearly always be that businesses name!  For example, if you run an online store selling donuts called “Brian’s Donuts” – you might think that high converting keywords would be “online donut store” or “corporate donut gifts”.  While these could be good niche keywords, they will never compare to the keyword of simply “Brian’s Donuts”, or “BriansDonuts.com”.

The number one converting term, for any business, will nearly always be that businesses name!

 Affiliate Marketers, being so granular with data and so motivated to focus 100% on conversion, were some of the first to discover this in the mid-2000s. They leveraged this knowledge to create high conversions on their PPC campaigns.

To be very clear, it is not illegal or fraudulent for someone else (besides yourself or your company) to bid on these keywords. It is very important to make a distinction between “Ad Text” and “Keyword”. Bidding on a “Keyword” is legal and, in the case of Google, is not something they will even investigate if reported. However, Google may investigate or restrict the use of trademarks within “Ad Text”.

What does that all mean for you!?  Just because it is legal, does not mean that you have to pay an Affiliate to do it.   This is a business relationship with terms dictated in a contract between yourself and the Affiliate. In other words, if you don’t want this activity going on, you need to specifically disallow it in your program agreement. Not having any language on this issue is essentially saying “it is OK”.

In other words, if you don’t want this activity going on, you need to specifically disallow it in your program agreement. Not having any language on this issue is essentially saying “it is OK”

Notwithstanding the above, having a single Affiliate (or a trusted several) bid on your Trademarks is not a bad thing.  After all, if someone doesn’t do it – your competitors will.

The strategy I typically recommend is to disallow any and all brand bidding (your trademarks, your company name, your domain names – and any misspellings) while working to find one or two trusted partners to bid on these words.  ShareASale or your Affiliate Network can almost always point you in a direction if needed.  There are dozens of high-quality, professional firms that specialize in PPC bidding – use your Network to help identify the best one for you.

ShareASale has a basic PPC Keyword Monitoring Tool for Merchants to help manage important brand keywords. This tool will notify you of potential violations by your Affiliates. To learn more, visit www.shareasale.com/m-keywordmonitoring.cfm.

Additional PPC Considerations: Negative Keywords

Remember that your name can be combined with other words, such as “Brian’s Donuts Coupons”, commonly referred to as TM+ (plus) bidding.   If you allow such a bid to be used in your Affiliate Program, make sure to force your Affiliates to utilize what are called “negative keywords” so that the search engine does not broad match your Affiliate’s campaign based solely off of the word “coupon” or similar.

2. Coupon Compliance

Nothing brings in a customer or closes a sale quite like a coupon.   Everyone knows this, which is why marketing through the use of coupons is so prevalent.  However, as a result of heavy coupon marketing by retailers, affiliates, and others – the online consumer has been trained to look for coupons when shopping online.

The online consumer has been trained to look for coupons when shopping online.

There are very good Affiliates who operate in this space, but you need a strong coupon policy, so they know what is expected.

There are very good Affiliates who operate in this space, but you need a strong coupon policy, so they know what is expected.  Here are a few points to consider:

1. Do you allow PPC bids on words such as “Your Brand Coupons” (also known as TM+ bidding)?

2. Do you allow your Affiliates to utilize SEO tactics centered around your brand name.  In other words, when someone searches for “Your Brand Coupons”, what would you ultimately like to see in the search results?

3. What do you want to do if one Affiliate sends you traffic, such as a blog or product review, but the consumer they sent goes off to find a coupon – thus giving a full commission to the coupon Affiliate and none to the blogger?

4. Do you want to allow coupon sites to utilize common tactics such as a “Click to Reveal Coupon Code” strategy, designed to drive up clicks on their ads for your brand.

All of these are important, and should be addressed in your program agreement, but the most important thing to remember is that coupons are out there.  If you create a coupon – it will end up out there.

3. Sales Tax and Government Regulation

New York State, in 2008, enacted a law saying that any online retailer, regardless of location (in the United States) was required to collect sales tax on all purchases to New York consumers if they had Affiliate Marketers operating in New York.  Since that time, anywhere from 10-15 States have enacted similar laws, hoping they have found the “holy grail” in remote sales taxation.   Amazon.com and Overstock.com brought suit in New York, but ultimately lost.

The Performance Marketing Association won its lawsuit in the State of Illinois, to the delight of affiliate marketers located there. That decision was upheld at the highest court in Illinois.   The Federal Government weighed in, with the Senate passing a “Marketplace Fairness Act”, but that measure has stalled in the House of Representatives.  In other words, this situation is far from resolved but one that needs serious consideration.

Anywhere from 10-15 States have enacted similar laws, hoping they have found the “holy grail” in remote sales taxation.

There are three approaches to use:

1. Remove all affiliates from certain states who have passed this law (Such as New York, North Carolina, etc…)

2. Collect sales tax, as requested by those laws.

3. Or, a hybrid-approach whereas you comply with the law but rebut the provisions in each law that presume to cause you nexus.  This is possible only in States that allow for such rebuttal.

ShareASale has tools to help you in compliance efforts, but the basic idea is that you need to collect a document, and a signature, from each of your Affiliates in a “nexus” State declaring that they do not perform any solicitation activities in that State that would cause nexus.

These could include emailing residents of the state your links/deals/offers, utilizing PPC (Pay Per Click) targeting ads toward consumers in that State, and passing out any written material such as flyers in that State.   You then need to re-certify with each Affiliate on an annual basis (in most States).  In a vast majority of these States, the simple action of posting a link or banner on a website is not sufficient for creating nexus, and the rebuttal provision allows you to keep your Affiliates in these States, should you choose to, while rebutting the nexus-causing elements.

Internet Sales Tax Reform Around the United States from ThePMA.org