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I was running some year over year financial reports and was reminded of a big old mess of mistakes that I made last year that might be helpful for some people here.
We run an affiliate program through Commission Junction. Last year we:
1. Didn't screen our affiliated very well - we would only accept from specific countries, but we also accepted sites that weren't directly related to our content and offerings.
2. Paid our affiliates quickly.
3. Didn't have an adequate system to screen and handle chargebacks.
This was an akin to storing steak in your tent when sleeping in bear country. We were unwittingly inviting people to scam us and they did. Here's how:
Three or four affiliates signed up for our program (20% of all sales for 180 days) and used stolen credit cards. Since we paid out quickly and didn't have a good handle on our chargebacks, we paid them their commision before realizing what happened. We got hit with 30k in chargebacks. We didn't have 30k in losses since the money that was charged back wasn't completely lost (we sell services, not goods). However, we did have to pay a chargeback fee with the cc companies and our merchant account. This also counted towards the chargeback threshold (1% of sales for the bigger cc companies).
Our lessons learned:
1. We changed out payout to a 60 day delay on CJ. This took the steak out of our tent and we haven't been scammed since.
2. We implemented a far more detailed system to address chargebacks. We set up online access so that we can check chargebacks daily. We now look at each one to find sales history, ip addresses, affiliate association, etc. If we suspect a stolen card is being used, we issue a refund/void the sale ourselves, which saves us money and keeps us away from the threshold.
3. We screen potential affiliates much more closely.
This was our fault. We didn't have a good system in place and we invited scammers to take advantage of our weakness. They did. Just wanted to share so that someone else could avoid making the same costly mistakes.
We run an affiliate program through Commission Junction. Last year we:
1. Didn't screen our affiliated very well - we would only accept from specific countries, but we also accepted sites that weren't directly related to our content and offerings.
2. Paid our affiliates quickly.
3. Didn't have an adequate system to screen and handle chargebacks.
This was an akin to storing steak in your tent when sleeping in bear country. We were unwittingly inviting people to scam us and they did. Here's how:
Three or four affiliates signed up for our program (20% of all sales for 180 days) and used stolen credit cards. Since we paid out quickly and didn't have a good handle on our chargebacks, we paid them their commision before realizing what happened. We got hit with 30k in chargebacks. We didn't have 30k in losses since the money that was charged back wasn't completely lost (we sell services, not goods). However, we did have to pay a chargeback fee with the cc companies and our merchant account. This also counted towards the chargeback threshold (1% of sales for the bigger cc companies).
Our lessons learned:
1. We changed out payout to a 60 day delay on CJ. This took the steak out of our tent and we haven't been scammed since.
2. We implemented a far more detailed system to address chargebacks. We set up online access so that we can check chargebacks daily. We now look at each one to find sales history, ip addresses, affiliate association, etc. If we suspect a stolen card is being used, we issue a refund/void the sale ourselves, which saves us money and keeps us away from the threshold.
3. We screen potential affiliates much more closely.
This was our fault. We didn't have a good system in place and we invited scammers to take advantage of our weakness. They did. Just wanted to share so that someone else could avoid making the same costly mistakes.
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