Clickbank is preparing a color coded risk management tier system to be released January 2, 2013. It’s to help them decide how much to charge vendors and affiliates for refunds and chargebacks, a regular problem for Clickbank. As a lot of people fall into tiers where they can expect to pay higher fees, naturally they’re upset. After all, a part of the reason they get so many refunds on their accounts is that Clickbank makes refunds so easy to get.

Rankings depend upon how many refunds and chargebacks your products get. For vendors, that’s the products you created and are selling through the marketplace. For affiliates, that’s the products you promote, and the refunds and chargebacks the customers you referred request. Points are added or subtracted daily, to a maximum of 100 points to a minimum of 0 points. Only the sales you make are relevant – if you have a better refund rate as an affiliate than a particular vendor, your tier will not be impacted by them.

At this point, I’m not much impacted, although I’ll have to wait and see what happens with the few products I promote. I know some vendors are looking at leaving Clickbank over this, so it has the potential to be a big deal for me. The preview gives me an Excellent (violet) rating, which is the best you can get. Guess I’m choosing products to promote well.

Impact on Vendors

The impact of this may be huge for vendors. Just how much of a problem it will be depends on how they’re ranked. A vendor can be in the violet, blue or green tier, and not pay anything extra for refunds, but there will be an extra fee for chargebacks. Get a worse rating than that, however, and there are additional fees for refunds and chargeback fees increase. There are also transaction fees for the highest risk accounts.

If your risk becomes too high, you’re booted from Clickbank. This makes sense, as they don’t want to be dealing with all those problems either.

Now, a bad affiliate can have an impact on a vendor, as those are refunds on your product. Hopefully that sort of situation will be handled well by Clickbank.

Impact on Affiliates

Affiliates may have to pay fees as well if they get a lot of refunds or chargebacks on referrals they make. Affiliate fees max out at $5 for chargebacks in the red tier, but are $0 for violet tier. Some people don’t feel that it’s fair to charge affiliates for refunds or chargebacks, as they only referred the sale; they didn’t make the product and can’t control it’s quality, but there is a logic here. Some affiliates use better methods than others to promote products, and send more qualified customers. Affiliates who use misleading methods to promote products are naturally going to have higher refund rates than those who give more honest reviews.

On the plus side, there will also be stars rating vendors, which can be viewed in the marketplace. By default, new vendors will get three stars, but they can climb up to five stars. The stars come solely from the rating as a vendor, and does not take into account anything that vendor may promote as an affiliate. This should help you to find products worth promoting.

Just as with vendors, however, if you become too high risk an affiliate, your account is suspended.

Why Is This Happening?

The big question many people have is why is Clickbank making this change? The answer is pretty simple. They have to, for their own protection.

Credit card companies are looking very hard at certain types of products, as they tend to have high refund and chargeback rates. Make Money Online and Health products are very popular on Clickbank, and happen to be products with those high refund and chargeback rates. They’re also very commonly misrepresented by affiliates and vendors.

Some are, of course, perfectly legitimate, and Clickbank is not choosing to remove those topics entirely. Instead, they’re making it more difficult to continue to sell low quality or fraudulent products through their marketplace.

Pretty much all vendors are taking a good, hard look at these products and deciding whether or not to continue to allow them. It’s not just Clickbank. While some vendors are talking about moving to new payment processors, it may not be that simple a process.

What Will the Overall Impact Be?

It’s hard to predict exactly what will be the result of the risk management tiers. I certainly think there will be a number of vendors and affiliates leaving Clickbank, not all of them bad. I feel certain that some good people will leave for marketplaces that do not yet have such fees in place.

I also suspect that membership sites will be more popular. If you can keep people from buying your product then asking for a refund as soon as they’ve downloaded it, you can keep your refund rate down. Membership sites aren’t perfect protection from refunds, as you can be a member for the entire refund period, then request the entire amount back, but it’s something.

I don’t think anyone is going to be saying anything more than the minimum about Clickbank’s refund policy anymore. Who wants to emphasize how easy it is to get a refund when you’re hurting yourself by doing so? This policy is a part of why Clickbank products have such a high refund rate; it’s not entirely the fault of low quality products (although that’s in there too in certain cases). There are people out there who buy Clickbank products because they know that requesting a refund is very easy.

I don’t think this will be an entirely bad thing. Rough at the start, certainly, as vendors and affiliates decide what they’re going to do. But this is becoming a marketplace reality in general, not just at Clickbank. Give the system a bit of time to work out the lower quality vendors and affiliates, and the Clickbank Marketplace may be a better place. I hope. I much appreciate that they’re giving some warning, rather than just throwing it at us from nowhere.

Now, one can also hope that Clickbank will get strict with serial refunders, but that’s an entirely different challenge.

What Options Do Vendors Have?

There are plenty of other ways vendors can sell their products. Search Google for Clickbank alternatives, although none have the base of Clickbank. Still, it’s an option worth looking into if you don’t feel that Clickbank works for you anymore. Just be aware that this kind of problem is working its way around all payment processors. Take a look at what happened with 2Checkout, which was also once popular with internet marketers. They now have more restrictions on such products, because there was such a problem with refunds and chargebacks.

You can also open up your own merchant account and run your own affiliate program. Infusionsoft is a popular option for sales management. This will probably cause more headaches, as it’s more involved to handle such things on your own, and you do get fees for refunds and chargebacks when you have your own merchant account too. Get too many refunds and chargebacks, and they’ll shut you down too.

What Options Do Affiliates Have?

Affiliates can follow their preferred vendors to wherever they go, of course. It’s pretty easy to have a range of accounts as an affiliate; you just hope that things don’t get so spread out that it’s hard to hit the payment threshold on the different accounts.

Affiliates will need to keep an eye on products that remain on Clickbank to make sure they don’t disappear. There’s no point in continuing to promote something that has been suspended or moved to another marketplace. The sooner you catch these things, the better off you are.

You can certainly take advantage of the star rating system if you want to promote anything new on Clickbank. Take a look and see what’s getting five stars, and you know it’s a relatively safe product to promote, or so you can hope. High star products will at least be worth taking a good look at. Only time will tell how effective a tool they’ll be for affiliates, but I think it will be better than using gravity as a metric.