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March 15th, 2011, 07:46 AM #1
Commissions To Pay
- Join Date
- March 3rd, 2010
I just read the other thread about this and did do some due diligence on my competition, but just want to make sure I am fair in my commission payout for a newly launching affiliate program.
There seems to be a big range in my market which is toys - I have seen payouts from 3% - 10%....but the twist is there is no site directly competing with me....so I just wanted to get ideas from some affiliates...
My retail prices are high...average sale is about $250....most of my products are over $150....some as high as $2500.
I was thinking of offering 5% as the base with a cap at 8% for top producers....I have analyzed my costs and find 5% to be a comfortable place where we can still reach a decent margin overall - my profits range from 13% and up.....
Is 5% acceptable in the toy market with an average sale of $250?
Any thoughts would be appreciated, I just want to make sure we kick off on the best and most attractive foot possible!
March 15th, 2011, 11:29 AM #2
- Join Date
- January 18th, 2005
The percentage rate is NOT the only factor, but it certainly is very significant. You might succeed with a 5% advertising fee if you have a strong conversion rate and a high average transaction size, but at that rate you'll have trouble attracting affiliates (they'll look first to others promising higher rates), especially those focused on a narrow niche, unless your product is truly a "perfect fit."
Without knowing more about the products you sell, nobody is going to be able to offer meaningful advice. Your suggestion that your profit margin on some products is only 13% raises some very serious concerns for me (even if I assume that this is "after" paying affiliates); knowing that, I'd worry that the slightest misfortune could drive you out of business.
Also, be aware that lots of folks have come and gone over the past 15 years, promising high conversion rates and high average transaction sizes, and claiming to have a unique high-demand product, but usually the data proves most of their claims to be wrong (not that they lied, but usually because they didn't really understand the marketplace and the profile of an internet business).
Last edited by markwelch; March 15th, 2011 at 11:32 AM.
March 15th, 2011, 11:57 AM #3
- Join Date
- March 3rd, 2010
Thanks for your feedback! First, there are only a couple of items with that small of a margin.....most fall much higher - or we would not even consider an affiliate program! :-)
My background is in e-commerce and I have been buying, building and selling sites for years so I am well versed in the industry - and I have dappled in affiliate programs as well - but never seriously got into it from either side, which is why I just want to be diligent and make sure I create an enticing program that affiliates will WANT to be a part of.
The niche is outdoor toys, so the margins are strong and the products are high priced. There are not a lot of outdoor specific sites so I have nothing to really gauge an average commission on.
Traditional toy stores seem to offer 8-10% but their products are much lower in price, although I understand because they are older more established stores their conversions may be higher.
We are a newer store - but with my background in e-commerce I am confident of the growth and we have well exceeded our sales to date.
I would NEVER go into this giving false promises, I understand the affiliate relationship and will do everything I can to be as open and forthcoming as possible.
I am looking for long term growth for this particular website as I have researched this niche and know the potential is there. I have never created a site that hasn't flourished.....
Thanks again for your help! :-)
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