From January 2nd, Clickbank will be introducing a new marketplace ratings feature to their affiliate program listings.
This statement comes from Clickbank: Effective January 2, 2013, star-based marketplace ratings will be published for each account on the ClickBank Marketplace. This rating applies only to products associated with this account. It does not vary at the product level. Your vendor refund and chargeback history establishes the rating using a 1 - 5 star scale. Products with 3 stars or higher reflect greater customer satisfaction.
So essentially, what they are trying to provide to you as an affiliate, is a 1 to 5 star rating on the quality of each product in their marketplace.
This is calculated based on the refund and chargeback rates of the various products, and new products automatically start with a 3 star rating.
I was first informed about this when I met with Clickbank in person in their Boise offices back in July, and I immediately raised concerns about how this is calculated, however it seems those concerns were not heard so I've decided to make this blog posts so that affiliates and vendors at Clickbank can be aware of the potential problems with this system.
Why a product's quality can't be assessed based on the refund and/or chargeback rate:
1. Some vendors have very poor sales pages, so only the absolute 'wallet out / ready to buy everything on the subject' visitors will buy. Hence these products, no matter what the quality, will probably have low refund rates, as these are a different type of customer to those who are right on the fence that never bought in the first place.
Other vendors may have a much better product, but equally may have better marketing in place, which pushes those prospects who are 'on the fence' into becoming buyers. However they may also have higher refund rates due to the fact that some of those who are on the fence may also quickly refund.
Product A is an average product, with so-so marketing behind it. It has a conversion rate of 0.5% (which means 1 in 200 people who visit the sales page buy the product), and a refund rate of 2% and 0% chargebacks.
So Clickbank's marketplace rating may result in 5 stars.
Product B is a great product, with great marketing behind it. It has a conversion rate of 3% (which means 1 in 33 people who visit the sales page buy the product), however the refund rate is 8%, and chargebacks are at 0.5%.
So Clickbank's marketplace rating may result in 3 stars.
From the above, as an affiliate, you'd assume product A was a better product, but it isn't. It just has a higher marketplace rating because they have poor marketing which has resulted in far lower conversion rates, and as a result a lower refund rate.
2. Some vendors really 'sell' their money back guarantee
If you are a vendor and you have a great product and it has a conversion rate of 1%, yet you do a test and you see that by really 'selling' your money back guarantee strongly, you can achieve a 2% conversion rate, you'd probably decide to keep that strong guarantee right?
There's a big difference between just subtly saying:
"There is a 60 day money back guarantee"
Vs saying overtly:
"Heck, all you need to do is shoot us an email at [email address] any time within 60 days, and you don't even have to give a reason and we'll refund your money. We want to put the entire risk on US, not on you. Yes we realise some people may rip us off with this refund policy, however we believe that most people are honest and we'd rather put our trust in you rather than having you feel like you need to put your faith in us. So there you have it, you have nothing to lose, if our product does not live up to every claim you see on this webpage, or if you simply regret buying for any reason at all, you can simply send us an email within 60 days for a full 100% prompt refund"
Yet with the new marketplace rating scheme, it discourages vendors from boosting their conversion rates through 'selling' their money back guarantees. If you really hype up your guarantee, you'll boost your conversion rates, which is great for you, great for your customers (as they have more faith in their protection in what they are buying), and better for your affiliates who promote your products as there are higher conversions.
However refund rates will be higher, there are always going to people who will take advantage of such overt 'selling' of the money back guarantee. And furthermore, those people who were on the fence anyway and decided to buy, might be more likely to refund.
So, you'd get a case where the product quality is no different to a product that has 5 stars, however due to better marketing (really making the customer feel safe with the guarantee), the product has 3 stars (or less) due to the higher refund rate from those taking advantage of the ease of refunds.
3. Some vendors don't give prompt refunds
Some vendors who receive an email asking for a refund, will either not reply, or will make the prospect go through several hoops in order to receive their refund. Or worse yet, won't get round to refunding at all.
Yes the customer can go to Clickbank directly, but not all customers understand this, so a product can be perceived to be higher quality due to low refund rate (and hence get a good marketplace rating), yet it's really just rewarding their questionable refund reduction tactics.
4. Some affiliates send different quality traffic to others
I've experienced having an offer with a 3% refund rate, suddenly climb to 15%, only for it to drop back to below 10%, all with no change to the salescopy nor my product. The only thing that changed was the traffic sources employed by my affiliates who promoted me.
If you have a great product, that converts well to sales, you'll get a lot of affiliates trying different methods of promoting you.
Some will do SEO marketing, others may buy up facebook ads, or media buy positions, others may do solo email drops, others may try mailing your offer to their already established mailing list.
The more affiliates promoting your product (due to your good marketing) the more likely you'll get some affiliates marketing you to less-than-relevant sources, who may be more likely to be full of refunders.
In addition, if you are running a promotion, such as a launch, some customers may get caught up in the launch hoop-la plus bonuses etc, that they might buy, then regret quickly and refund.
Yet those refunds have nothing to do with the product quality, it's all a case of once again, penalizing the marketing.
If Clickbank proceeds to determine product quality based solely on refund rates, they'll be likely to lose vendors, and/or have vendors who are unsure of whether to aim for a high marketplace quality rating through refund reduction strategies that reduce the conversion rates (as opposed to being motivated to increase the quality of their products).
The only real way to assess product quality is for Clickbank to review the products themselves, I realize this is too costly, however it could be well worth their while to do this for the top 200 or so products in the marketplace, while charging a fee for any other product to get 'reviewed' if it falls outside the top 200.
Even then, even with a review, it's hard for Clickbank to determine the quality without being an expert in each niche itself. Products can 'look' good, and still be a waste of time.
I believe Clickbank should strongly consider changing this upcoming 'Marketplace Rating' feature, to being a 'refund rating' instead, because that is what it really is. It isn't a measure of the product quality at all, they haven't even assessed the product itself, it's merely a measure of the refund and chargeback rates and should be labelled as such.
I understand what Clickbank is trying to do, they want to increase the quality of products in their marketplace, but I believe this 'automated' way of assessing product quality is likely to result in some of the best products in their marketplace receiving 3 star ratings, while some mediocre products will find their way into higher marketplace ratings due to substandard marketing and other reasons other than product quality.
To me this is something that will be bad for affiliates as it discourages vendors from doing good marketing, it discourages affiliates from exploring other traffic sources (and vendors from doing so in case those sources affect their refunds) and it encourages a raft of questionable refund-reduction tactics which are already present online and may become more prominent (I hope not).
Please comment below, I'd like to hear your thoughts.
Update: I was just chatting with some other top Clickbank Vendors about this, and they raised another point, which is the fact that refund rates will be higher on products that offer a $1 trial. This can easily skew the refund rate to be higher, but in reality they were on the fence and wanted to take the product for a 'test drive' and then asked for a refund (some ask for a refund instead of a cancellation).
These new measures by Clickbank may make $1 trials less viable, without sacrificing marketplace rating points (and without it affecting other Clickbank algorithms).