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Capped Affiliate Programs often not appropriate
In the OLD days of marketing, it was traditional to have a fixed budget to put on various forms of advertising. In those days it made sense to some extent. For example, you'd have a load of leaflets made and given away, and you'd know how much you'd spent on printing them. Commissioning a television commercial campaign would have a movie budget, and adverts in the newspapers would have a spending budget to buy as many column centimetres as could be afforded. Posters on streets, signs on buses and in the underground train network, all worked quite well with this model of advertising.
Times they have a'changed, and there is something distinct about affiliate marketing which makes the old approach inappropriate. In various traditional forms of advertising, most of the effort was wasted and there was often no way of determining which of it was doing any good. However in affiliate marketing, you know exactly who is doing some good and who isn't. Everything is tracked, and you know where the good is being done, and you only need to pay for actual custom brought to your business. It is this fact which makes affiliate marketing a thing which generally shouldn't be capped!
The question to put to you, if you're an affiliate merchant, is this: How much stuff do you want to sell? Or to rephrase the question, How much money do you want to make? Would you care to put a limit on that? Can your bank account ever be "full" so you need to avoid making more profit lest it might burst?
No? No limit? Well then don't have a capped affiliate program! You want to sell as much stuff as you can, and you only pay for actual results, so let's get on with it.
There are exceptions to this. There aren't many, but let's explain some of them that are valid and some that are not so:
* "Limited edition of collectible pots. Hurry while stocks last! Only 1000 ever made. A future antique!" ... OK, the thing you're selling is rarity, so you don't want to sell too much of it. Fair enough, I suppose. After object number 1000 has sold, the affiliate program is closed. Don't worry; I wasn't on your affiliate program to start with, as I knew it would end.
* "I'm new to this world of affiliate marketing and I want to be cautious to start with so I don't overstretch myself". Yes, well I can understand, and you know, affiliates are funny folk to deal with, some of them especially so. OK, not a problem! Let's be friendly to the learner drivers! Xyroth has said that it's acceptable for merchants to have a capped affiliate program for the first six months while they are learning how to run an affiliate program properly.
* "We're a corporate company and we'll always run our advertising on a fixed budget like we've always done, and we've got a middleman advertising consultant company to buy all the advertising for this year and that's how we're going to do it and that's it". No, I don't agree with you on that. It's like saying "I've had a dog for years and so now I've got a cat instead I'm going to insist on taking it for walks on a lead, feeding it on bones, and keeping it in a kennel". The old ways might have worked in the old days, but change happens, and the correct response is adaption rather than extinction. You don't need to accept my word for it, ask the free market. What are your rivals doing? If their approach is more flexible and more affiliate-friendly, you might consider having an even better approach and outdoing them.
As with many things, communication is important. So, even if a merchant has a capped affiliate program, it's better to communicate the fact rather than to go into "paused" or "suspended" mode unexpectedly. Those affiliates who are in business for the long term can at least then see where the problems are.
Did you know? Some affiliates can't "pause". Although spam senders can pack up for a while and then resume later, it's more difficult for affiliates who create dedicated pages. Once created, the page is there to stay, and any pausing of the affiliate program represents working for nothing for a few days, or a month, however long the affiliate program is paused. Can you tell the gas company "pause your gas supply for a few days as we won't be needing any gas until next week", or how about telling your insurance company "please pause the home insurance for a week". It might sound as if it's easy to get away with, but the upshot of the pausing/capping of affiliates programs is that some affiliates won't join. Believe me, I know affiliates who won't join some networks because they've heard about the proliferation of capped program behaviour described as "pandering to the merchant!".
Well Done to those affiliate merchant companies who have reformed their policies on capped programs! Vodafone, who used to say around the 27th of the month "please stop promoting us for a few days as we're on the cap of the budget", have now got a sensible policy of having mobile phones and mobile phone paraphernalia on sale all of the time and crediting us properly. I'd like to say well done to Toyota as it would be nice to be paid a commission for each car sold, but last time I looked it was still a limited run-off of glossy brochures which soon run out. TD Waterhouse, the company who opened up dealing in stocks and shares to ordinary folks, went on pause for a whole month in January 2008, so it would be nice if we could be assured this was a one-off and was not going to be happening again. The booby prize goes to Ariel Automatic, who, despite making a quality automatic washing machine powder, and being a famous name, had an affiliate program being a washout as it was capped and sold out in a week leaving us all in the lurch. It's been years now, during which time the dedicated page (if remaining active) would have helped to sell crate loads of washing powder. Were they led astray by their advertising agency? Shucks!
Well Done to R.O.EYE and other affiliate marketing companies who are trying to educate merchants into doing the right thing regarding long term unlimited affiliate programs!
To sum it up:
* If your product production is limited, then you can have a capped affiliate program, but please don't make your affiliate program capped just for accounting purposes. It puts affiliates off.
* If you're a merchant who's new to affiliate marketing, how many of those things do you want to sell? If the answer is "as many as possible", let's get on with an unlimited uncapped system and actually sell as many as possible.