Why The PPC Affiliate Model Is Flawed

Many a budding affiliate marketer has dipped their feet into PPC models in their quest for quick online success. Using PPC to drive affiliate traffic to a merchant’s site is an inherently flawed model.

The Structure of a Flawed Model

In a nutshell, the model is extremely simple. You sign up for an affiliate account, choose a merchant program to promote, and use Google AdWords to send eager customers directly to the merchant’s site. You use your PPC expertise to research profitable keywords, write enticing yet qualified messages, and link to landing pages which are most likely to convert. By adding tracking parameters to your Google AdWords keyword URLs, and sending PPC visitors directly to the merchant’s site, you then get rewarded if the customer makes a purchase.

And because you’re sending PPC visitors directly to the merchant’s site, you don’t even need your own affiliate site. Think about all that time and effort you could save by not having to develop and maintain your own site! Not to mention having one less reason for potential customers to get distracted and go elsewhere.

It is easy, and is probably why so many affiliate marketers have used PPC marketing to send potential customers directly to the merchant’s site from Google. But as we’ll see, such strategies are rarely profitable, largely due to their poor competitive structure and inability to fully reward affiliates for the true value they are creating.

Affiliate Perspective: 6 Reasons the PPC Model Is Flawed

You’ve set up your Google AdWords account. You’ve researched highly-relevant long tail keywords which are proven to be cheaper. And you’ve created highly relevant ads to match each ad group’s keywords to stand out from the competition. Heck, you’ve even compiled a comprehensive list of negative keywords and considered whether deep-linking or category-linking would work best for your particular merchant.

So you turn on your campaigns and wait for the affiliate commissions to come rolling in. But after a few days, the only thing rolling is your bank balance – in the wrong direction. You’re getting clicks, relevant ones, but the commissions just aren’t there. Why?

Because you aren’t being awarded for the true value you are creating. You have a fantastic PPC campaign, one that any decent-sized business would be extremely happy with, but the structure of the affiliate remuneration is failing to account for all the positive externalities you are creating:

1. You are building brand equity, but you aren’t being rewarded for it. By targeting searchers who are at the earlier stages of the buying cycle, you are creating interest and awareness of the merchant’s product and services. Many of these visitors are likely to return to the merchant’s site at a later date via a brand search or a direct link, of which you receive no credit. While most merchants understandably prohibit their affiliates from bidding on brand terms, largely due to little value being added, it still does not hide the fact that affiliates are building brand equity for free.

2. You are providing the merchant with lifetime customers, but you aren’t being rewarded for it. Again, most affiliate models do not take into account the lifetime value (LTV) of a new customer when calculating commission payments. Since new customers will often re-purchase again at a later date, or perhaps refer family and friends, there is an added value from new customers which is not being awarded to the affiliate. Affiliates using PPC are investing in the long term, but are only being rewarded for the short term.

3. You don’t have access to analytics data, so can’t see which keywords and ads are working. You can’t see metrics such as average page views, average time on site, bounce rate and returning visits to determine which areas are generating interest and showing promising signs of purchase. In effect, you’re going in blind. You’re living in the Stone Age. The only feedback mechanism you have at your disposal is your affiliate program’s sales data, possibly segmented by keyword if you had the opportunity to set up custom tracking URLs. But even then, that’s not perfect, due to tracking lags.

What’s more, the competitive nature of affiliate marketing creates heap of inefficiencies for PPC affiliates:

4. You need to work with extensive tracking lags. Most affiliate programs update their sales data after manual approval, which could be anything from several days to several weeks. I once ran hotel affiliate program, and only got to see conversion data when customers checked into the hotel. Not when they booked, but when they checked in to the hotel. Knowing 6 months later that a keyword has or hasn’t worked is hardly the most efficient way to manage a PPC campaign.

5. You are competing against other affiliates who have the same idea. You bid on keywords which are most likely to convert, and so do your competitors. You and other eager affiliates are directing traffic to the same website. And since Google only allows one ad per website to show at any one time, you are in effect competing with other affiliates to show ads for the same merchant. You raise your bids, and so do they. You raise your bids again, and they do the same. As Adam Viener points out in an analysis on affiliate PPC last year, you both end up paying over the odds for each click.

6. Your click volume is negligible. All that competition from other affiliates means your ads are only shown for a handful of searches. Your total PPC spend is relatively low – much lower than you’d like it to be. And since Google’s Quality Score is in part based on PPC spending history (of which yours is minimal), you get penalized with poor Quality Scores and higher CPCs. How annoying.

Merchant Perspective: 3 Reasons the PPC Model Is Flawed

Affiliate PPC programs don’t make much sense for the merchant either:

1. Ads for the merchant only appear for keywords at the purchase stage of the buying cycle. Although this makes complete sense for affiliates (as conversion rates for purchase intention keywords such as ‘book Strand hotel New York’ will likely be much higher than ‘New York hotels’), it means the merchant is failing to connect with potential customers at the research and interest stages. The merchant is neglecting researchers and information seekers, and failing to add value at these crucial interest and awareness stages.

2. PPC sales volume for the merchant is low. Since affiliates only bid on keywords that deliver a profit (at least in the long-run), keywords which break even or run at a loss are avoided. While these could still be extremely profitable for the merchant in terms of brand equity and lifetime value, these customers are being missed under the poorly structured affiliate remuneration model.

3. The merchant’s messages are diluted. One PPC affiliate might use prices and offers in their ads, and take visitors to the merchant’s most relevant landing page, while another affiliate might use cheesy emotional messages in their ads, and take visitors to the merchant’s homepage. Another PPC affiliate may use capitalization and call to actions in ads, while yet another may use lower case or misappropriate promotional codes. There is no consistent message in the merchant’s PPC ads, resulting in confusion and a lack of brand synergy. Conversion rates suffer as a result.

Is there a Solution for Affiliates?

The competitive nature of affiliate marketing means it will always be difficult to use PPC marketing to send visitors directly to a merchant’s website. As keywords become more competitive, it will only become harder to achieve profitable margins from affiliate PPC. While long-tail keyword opportunities still exist, these opportunities are becoming more niche and of a lower search volume.

That said, even if affiliates can uncover these uncompetitive long-tail keyword niches, it still does not account for the poor commission structure of the affiliate model. The better your PPC campaign, the more added value you are creating for the merchant for free, and the more time and effort you are investing without reward. Somehow that doesn’t make sense.

So ultimately, the PPC affiliate model is flawed. It fails to take into account value creation, and fails to provide a means to prevent inefficient PPC competitiveness. And since affiliate PPC advertisers do not have any analytics data to work with, optimization becomes extremely difficult, making it impossible to deliver an efficient PPC campaign.

Is there a Solution for Merchants?

Merchants cannot simply change their affiliate program terms to allow affiliates bid on their brand terms, as this would disproportionally reward affiliates for the negligible value they are creating. However, if the PPC affiliate model wants to be a sustainable long-term model for both affiliates and merchant, the model needs to be tweaked to reward brand equity creation and awareness generation. A model which places value on returning visits over an extended period of time, especially visits from brand searches, would help to close the gap between the brand value created and the brand value rewarded.

But then again, the highly-competitive nature of affiliate programs means there will always be multiple affiliates looking to send PPC traffic directly to the merchant’s site. Inefficient competition against other affiliates will ultimately drive up click costs, lower Quality Scores, and reduce conversion rates.

To overcome this problem of inefficient competition, one option for the merchant is to hire a dedicated third party PPC management agency. However, this can often be expensive, especially if highly-tailored PPC campaigns are built to cater for thousands of specific products.

Hybrid Model Option

Another solution which merchants could look to adopt is to designate only a few select affiliates to manage their PPC campaign, with each select affiliate perhaps looking after only certain parts of the website. The merchant could choose partner PPC affiliates based on a resume or application process, ensuring only dedicated, experienced PPC managers apply.

A camera retailer, for example, could let one affiliate look after the PPC marketing for their SLR cameras category, another affiliate look after their SLR lenses, and a third affiliate look after the PPC marketing for their photo albums. Using only a handful of select affiliates makes this model somewhere in-between hiring a dedicated third party PPC agency, and using hundreds of PPC affiliates in a free-for-all competitive manner. Perhaps this is the balance PPC affiliate marketing desperately needs.

For such a ‘hybrid’ model to work, there also needs to be more sharing of sales and analytics data. As long as the affiliate is trusted (which will be determined during the application process), the affiliate being able to see which keywords and ads are delivering sales in real time, and also which keywords and ads are engaging visitors (metrics such as average time on site, average page views, and returning visits), would allow the affiliate to better optimize their PPC campaigns to deliver long-term value from PPC. Clear guidelines will also need to be written up to prevent any overlap in keywords between affiliates, and guidelines for messages in ads. If there are only a handful of key affiliates running a merchant’s PPC campaigns, such measures would be relatively easy to enforce.

But while the merchant no doubt has a role to play in creating a model which better rewards affiliates for the true value they are creating, perhaps affiliates also have a role to play in putting pressure on merchants for better sharing of real-time information, faster payment models, and taking on landing page and website recommendations. Perhaps something in the way of an ‘Affiliate PPC Best Practice Methodology’ is needed to clearly specify how the PPC affiliate marketing model should be structured to provide incentives which work for both parties.

Happy Medium

Either way, it is clear that having multiple PPC affiliates competing against each other is a recipe for disaster for all involved. Similarly, hiring a dedicated third party PPC agency is not always the best solution for merchants, as this can often be very expensive.

Something in the middle, therefore, is needed. A delicate balance, which realizes the benefits of healthy competition while at the same time limiting inefficient over-competition, is arguably a happy medium. Four or five carefully chosen, dedicated, and hard-working PPC affiliates, each with real-time reporting and analytics data at hand, would no doubt provide a recipe for long-term success. Allowing competition, but only the right kind of competition, is surely the key to a long-term sustainable PPC affiliate model for both affiliates and merchants.

About Alan Mitchell

Alan Mitchell is a pay per click marketing specialist based in Melbourne, Australia. He has over 4 years experience running successful PPC marketing campaigns for brands such as Skype, Alfa Romeo and UK Post Office. You can find Alan on Twitter @alanmitchell.

Twitter: @alanmitchell

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Alan Mitchell is a pay per click marketing specialist based in Melbourne, Australia. He has over 4 years experience running successful PPC marketing campaigns for brands such as Skype, Alfa Romeo and UK Post Office. You can find Alan on Twitter @alanmitchell. Twitter: @alanmitchell

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16 Responses to Why The PPC Affiliate Model Is Flawed

  1. rollerbladerdc says:

    Congrats on your first post! I hope that you don't mind if I jump in as I disagree with you on a few things and there is probably not a right answer to some things in search. I think the first thing to think about is that your model of a PPC Affiliate is somewhat outdated or flawed itself as it doesn't take into account how many of the successful (Non trademark bidding) PPC Affiliates work.

    1. Now a days it is financially irresponsible to do Direct to Merchant (DTM) PPC Marketing (Non trademark) as an Affiliate. Like you said, you lose the lifetime value of the customer and don't build a brand for yourself. With newsletters and RSS feeds being extremely affordable and urls and hosting even cheaper, build your own site and landing pages then drive the traffic there. Once there you can collect their info when they opt into your newsletters and you can also remarket to them and send them to multiple merchants. Not only can you get the regular sales, but you can offer other products and other Merchants. You also build a brand and a site that they may remember, bookmark or refer other friends to. Sending them to the Merchant directly is not always a smart idea now a days. 5 years ago everyone was doing it, especially because in many engines you could drive 5 ads to the same site and it was dirt cheap.

    2. No tracking. This is not true. In Share a Sale for example you can see the URLs and which keywords you passed through to generate a conversion in the tracking or sales reports. If you are serious about PPC you can also ask the Merchant to place your Adwords or other PPC pixels on their site and sometimes they will. If you are driving them to your landing page on your own site, set up unique or dynamic pages for your campaigns and track through the referring urls to the site. If you can find a way to dynamically insert (via the url or click or added parameters) the keyword into the page and pass it onto your link via custom links or other links you can also then track sales by keyword.

    3. Limiting Affiliates to only a section of the site. Not only can this be a turn off because as the Affiliates generate more ideas for keywords and want to promote you more, you may have restricted them which stops your own growth. Why limit them and your income potential? If the other Affiliate in a different section isn't as good or doesn't think of those keywords you have now limited yourself. You may also lose that Affiliate to a competitor who allows them to bid across the site.

    4. The costs increase as more PPC Affiliates jump in. This is true, but it also means the Merchant's costs increase on a click basis. At the same time, by having 5 PPC Affiliates bidding on Blue Widgets and driving them to their own domains which may only feature your product, you are moving away competitors ads from the sponsored listings and getting more exposure for the product and search query. You are also getting numerous other sites promoting you as a legit seller which helps to increase your brand and trustworthiness in a positive way. The increased costs per click can be a good thing and can increase sales when handled correctly.

    5. The emotional or weird ad copy isn't always a bad thing. You never said that it was, but the comment wasn't necessarily towards the good points or why certain PPC Marketers, not just Affiliates, use them. Having something that is off can stand out and grab someone's eye. It can also cause them to want to read the ad instead of just clicking. Don't forget that these weird or emotional ads can generate even more valid clicks and if the landing page carries the message or reaction through it you can increase conversion rates. This is what companies that sell high end collectible rely on. These ads aren't always a bad thing.

    This is a great first post, but many profitable PPC Affiliates don't usually drive to the Merchant anymore. That model is very outdated and doesn't build long term value for the Affiliate. Affiliates can be some of the smartest business people.

    They not only know that they should build their own brands, especially because they can lose that Merchant at any time and if they don't have their own site with their own newsletters, they won't have anything to show for the thousands they spent on their PPC except a few commissions. They drive to their own site and instead of a keyword heavy url, they use a brandable one that is memorable. From there they can optimize conversions as well as for the SEs by letting their end users and visitors build backlinks, etc… PPC is not in any way a flawed model for Affiliates. The model has just advanced and updated itself. I just wanted to throw a few thoughts out there. Congrats again on your first post.

  2. Stewie says:

    Terrible article. I have been a ppc affiliate markerter for many years and the majority of this article is innaccurate. You either don’t know the industry or you’re new at it.

    • Kyla Simms says:

      I totally agree with you.

      This entire article is wrong and obviously meant to scare new affiliates away from the most effective way to promote an affiliate link.

      Not to mention there are numerous  PPC networks other than Google Adwords which provide great traffic and conversions at 1/4 of the click price of Adwords.

      It is a fact that when you target your keywords precisely for buyers they convert much better if they are sent directly to the merchants professional landing pages.

      Buyers want instant gratification when they look for solutions, not page after page of useless blog fluff.

      ATTENTION NEW AFFILIATES: direct-to-merchant ppc marketing works and it is a long-term method. This is a business, and a business must advertise to stay alive.
      Research this method on your own then create your own strategy.

  3. Thanks for your comments.

    @ rollerbladerdc

    You make some valid points about how the majority of these problems (unmeasured lifetime value, high risk of merchant leaving, inefficient over-competition) can be overcome by directing PPC traffic to your own intermediary site. And as many affiliates would agree, building your own intermediary website, and investing in your own brand, often seems like the sensible choice when compared to direct-to-merchant (DTM) PPC.

    But this does not necessarily mean direct-to-merchant PPC has to be financially irresponsible. Direct-to-merchant PPC can still be a viable option for both merchants and affiliates should the model be tweaked to account for these problems.

    If you consider that the majority of merchants will always want to do some sort of PPC activity themselves, why not create a model which adequately incentivises a select group of hard-working affiliates, rather than simply hiring a dedicated PPC agency?

    Although I agree that nowadays direct-to-merchant PPC does not make financial sense for affiliates, perhaps this is simply due to the inertia of the model. Perhaps it is time for merchants to adapt, and develop a direct-to-merchant PPC model which can work in this highly-competitive environment.

    Surely hiring a dedicated PPC agency shouldn’t be a merchant’s only option? With the growing number of highly-skilled freelance and affiliate PPC managers, why can’t merchants crowdsource their PPC to a select group of dedicated affiliates instead?

    Cheers,
    Alan

  4. [...] Why The PPC Affiliate Model Is Flawed (revenews.com) [...]

  5. @djambazov says:

    Adam, Alan,

    Thanks for laying out the foundations for a good discussion with excellent counterpoints.

    I want to address the question of whether the DTM model still exists. I believe it does but that the players have changed.

    Market and industry forces have made it financially unfeasible for affiliates who were just dabbling in DTM search to remain in the model. Those that have thrived are specialists and agencies with extremely high efficiencies. They started as affiliates who carved out a highly efficient niche in search; or as traditional search agencies who moved to a performance model in order to remain competitive in winning new clients.

    These specialists/agencies act in tandem with or in lieu of the merchant's internal search team. Tight knit collaboration such as the sharing of analytics is required in order for the DTM model to be deemed successful for either the merchant or the specialist/agency acting in the role of the affiliate.

  6. rollerbladerdc says:

    Angel,

    I agree the model still does exist, but the Affiliate that has learned that they can do it to their own site, build a customer list and database by driving to their own site also understands that they have created sustainable income and traffic. They can continue to remarket to this group and make money as long as they keep their site and list alive. If they drive to the Merchant DTM then they don't get anything but the commission and have not maximized their ROI on their spend.

    Agencies definitely exist but then it isn't really an Affiliate model which is why I wanted to point out that the Agency DTM model should not be confused or crossed with the Affiliate model. There are performance based PPC Agency models but they are different than Affiliates as they get custom commissions (so do some Affiliates) and will drive to the break even on certain keywords so that the Merchant does not go to a traditional firm. The Affiliate PPC model is not flawed in any way and can be extremely profitable. Both you and I know quite a few PPC Affiliates who do not bid on trademarks and do very well. Some do DTM but quickly learn the benefits of building their own customer list and database.

    I just wanted to throw out another point of view.

  7. Tim says:

    Google is slowly closing the door on affiliates who use PPC to send visitors to a 'landing page' (on the affiliates site). What happens is they lower your landing page quality score to 1. If this hasn't yet happened to you, get ready for it (via manual review). I don't do much PPC, but the few direct to merchant ads I've experimented with, have stayed viable.

    And sending adwords clickers to a 'newsletter signup page', is what google calls data collection sites, not a lot of future their either.

  8. Pat Grady says:

    your positions seem to imply that affiliates are getting shorted and so are merchants… both can't be shorted overall. If affs are under comp'd for lifetime value or brand building, then merchants gain. if affs don't chase enough lesser converting keywords (to keep their margins higher), then merchants lose (volume). these things, when properly managed, should balance out – for both parties. if either feels slighted, they have other choices, so they should adjust or leverage their opportunity cost options. nobody's stuck in anything that can't easily be adjusted, though you indicate otherwise. your suggestion about having several ppc folks working at the same time in a divided fashion grossly simplifies the product and branding overlap issues that arise. so your post seems to me, to be wordy, meandering through opposite looks at easily solved problems – so the links to your own blog here are more than a little off putting to me as a result. it's obvious that you've got experience and expertise, i suggest you narrow your topic next time, skip the link bait headline, meander less, solve more and skip the embedded self links unless they add clear and present value.

  9. Scott Hazard says:

    "Many a budding affiliate marketer has dipped their feet into PPC models in their quest for quick online success. Using PPC to drive affiliate traffic to a merchant’s site is an inherently flawed model."

    Your article made more sense up to that point than it does after that point, but it loses ground quickly after that. Those who dabble and those who dip their feet usually do find that PPC is flawed. It's sometimes expensive and frustrating even when you know what you're doing. I wouldn't classify a successful PPC campaign as a "quick online success."

    You make far too many assumptions to possibly know the ins and outs of what you are writing about.

    Good advice: "narrow your topic next time" from the reply above.

    Congrats on your first article just the same.

  10. Pat Grady says:

    "You make a point that if merchants don't reward lifetime value, then affiliates will react by only bidding on highly-converting keywords, thereby balancing it out for both parties."

    You're meandering again. :-) I did not say 'if one, then the other'. Reread my input, I said each happens. Each can be fixed, but only if those involved realize it's inefficient and want to change it. That doesn't mean it's broken, it means it's not optimized via proper management.

    There is a real problem that can arise, and that's the opportunity cost for each party. A PPC affiliate who chases longer and deeper, does indeed find smaller returns, but that's not the limiting factor by itself… that affiliate has many other merchants they can "work" for, so it often cannot be made to be "optimum" (not optimized), on a purely affiliate basis. Again, not because the model's broken, but because the marginal gains to the merchant reach a long tail limit where it doesn't make sense to pay an affiliate an increasing amount of money to chase deeper, that is, it doesn't make sense for either party.

    Let's say you hire a helper to keep your car clean… you pay her for results, $2 per square foot that she cleans… and when the interior and exterior are mostly clean, you ask her to continue working for $2 per square foot, but she has to look long and hard to find little nooks and crannies to clean… is she going to give up washing other people's cars to chase down every speck of dust that lands on your car? And what would you offer her to keep cleaning? Nothing is broken, the process just has limits. Diminishing returns happen. In fact, optimization requires exactly that.

    Don't confuse limits with aggregate inefficiency – they are very different. The point at which it becomes inefficient is exactly when both parties should want to stop. Again, that's not broken, but very "fixed".

    The merchant has opportunity costs as well – chasing one more PPC sale with every resource you have (or anything disproportionate that your usual costs), means other channels and processes are then inefficient.

    If the model is "flawed", it's that each party doesn't have unlimited non-diminishing potential gains… but that means every process is "flawed".

  11. Pat,

    You make an excellent argument, which is elegantly presented with your example. I agree that diminishing marginal returns (and therefore opportunity costs) will arise in almost all business models. However, I want to argue that perhaps a different structure of model will reduce the extent of these diminishing returns, and deliver better overall value for both parties.

    Of course, with your car wash example, if it is going to take the car was helper 4 hours to find 1 extra square foot of car to clean, she would no doubt look elsewhere for a better deal when she reaches this point of diminishing returns. Working at $0.50/hour is probably not worth her time, no matter how excited she is about getting her first job.

    So it makes sense that the car washer (affiliate) will stop working as soon as diminishing marginal returns sets in. This is also illustrated in my example diagram, and is the point where the two red lines cross at 2,000 sales at MC (affiliate) = MR (affiliate).

    http://www.revenews.com/wp-content/uploads/2010/1

    But what if, instead of paying the helper $2 for every square foot of car she cleans, you pay her $0.50 per square foot for the outside of car (which is relatively easy to clean), and $3.00 for every square foot of interior she cleans (which is more tedious and time consuming, but still of high value to you).

    With more of a performance model in place, you are better aligning her efforts with the value she is creating. She will work for longer, and receive more revenue, and you’ll get better overall value for the amount you spent.
    If you compare the 8th diagram with the 10th diagram in the post below, it shows how adjusting the levels of compensation (depending on the marginal value created), leads to 1) higher profits for the affiliate, 2) higher profits for the merchant, and 3) a reduction in overall marginal utility loss:

    http://www.calculatemarketing.com/blog/techniques

    I imagine a staggered performance model could potentially overcome the problem of brand bidding (i.e. letting affiliates bid on brand keywords, but only paying them a fraction of the commission for sales), as well as providing an incentive for affiliates to chase a greater number of difficult longer-tailed keywords (which were previously highly-valuable to the merchant but not worth the affiliate’s time).

    Such a performance model would no doubt be hard to construct and maintain, especially with multiple DTM PPC affiliates, and may face multiple practical constraints. But if such problems can be overcome, it could be a potential alternative to a fixed priced model and better align the financial motivations of affiliate and merchant.

    Of course, it is possible to shy away from direct-to-merchant PPC and instead develop your own intermediary website and brand, as many affiliates would advise, but this does not necessarily mean that DTM PPC can’t still exist.

    I guess the fact that many businesses are currently using PPC to drive sales suggests that there is at least some profit to be made from PPC. So the fact that DTM PPC has become ‘financially irresponsible’ in recent years, as some of the above comments have suggested, surely means that the current model has failed to adapt.

  12. Pat Grady says:

    "But what if, instead of paying the helper $2 for every square foot of car she cleans, you pay her $0.50 per square foot for the outside of car (which is relatively easy to clean), and $3.00 for every square foot of interior she cleans (which is more tedious and time consuming, but still of high value to you)."

    the guy parked in the next spot will pay her $2 / sq ft to clean the outside of his car…

  13. …and he'll be left with a grubby interior, because the first guy (and everyone else) is offering $3 / sq ft for interior cleaning.

    So the only way for the second guy to get his interior cleaned is to raise his interior cleaning prices to at least $3 / sq ft (which let's assume is the market average if such an outside / interior car split pricing model became the norm).

    The second guy then realises he is substantially overpaying for the outside cleaning of his car ($2 / sq ft), so then reduces his outside cleaning to $0.50 / sq ft in line with market averages.

    In the short run, there will of course be some people paying higher and lower than everyone else, largely due to imperfect information. And there will naturally be profit to be made for people who can spot these discrepancies and exploit them. Just as there will always be some affiliate programs paying higher than others.

    But in the long run, prices would naturally migrate to a equilibrium level which fairly rewards car washers for the time and effort they invest. Since exterior car washing is relatively easy, there will be people willing to take on the $0.50 / sq ft exterior rates. And since interior cleaning is more tedious, there will be people willing to take on the $3 / sq interior rates. More cars get cleaned, more interiors get polished, and car owners enjoy the better value they are paying. Everyone is better off under a split pricing model.

    • Pat Grady says:

      nice try, :-) but the reality is, she has many thousands of cars adjacent to car #2… all paying good money for the easier work.

      • I agree that is the current reality, but that doesn't necessarily mean it's the best model. I'm not arguing whether the split pricing model I suggest currently exists, rather whether it can be a viable alternative to create better overall value for both affiliates and merchants.

        Of course a split pricing model will have multiple problems to overcome, such as developing a critical mass of merchant adoption to drive prices to their new equilibrium levels (from a $2 flat fee to a $0.50 / $3.00 split). But since the economics says that a split model is more efficient, I'm arguing that if these problems can be overcome, there is potentially a lot more profit to be made for both affiliates and merchants.

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