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February 12th, 2014, 07:05 PM #1CJ and their x% or $y policy
Hi all - I've got another question:
In CJ's pricing structure, they pitched it to us as follows "CJ will be paid x% commission or $y, whichever is higher" on all affiliate-referred sales (we do have real numbers for x and y).
We sell products on our website which are below a certain price point that would render $y to be more than x% of the sale. This situation would also mean we would be losing money on the sale if we were to be paying CJ the $y.
We thought that by limiting the items in our data feed to exclude items below the threshold price point we would be able to avoid straight up losing money to CJ in this way.
But what does making things "unavailable" in our feed really mean? Does it mean we won't pay a commission when a customer is referred by an affiliate and then buys something that is not technically available to affiliates on our feed?
I've emailed our CJ rep about this (I'm trying to be as transparent as possible with the network) and I'm awaiting her response. I was just wondering if anyone has encountered this issue in the past and what can be done to remedy it?
February 12th, 2014, 08:26 PM #2
Having certain items in the feed just means that those are the only items available in the feed, nothing more and nothing less; an affiliate commission should still be tracked and credited when an affiliate refers a customer to your site. Just as a customer may be referred through a text or banner link, they could very well be referred through a product link for a higher priced product and then navigate through your site to eventually purchase a low-cost item.
February 12th, 2014, 09:18 PM #3
With CJ you can do item based commissions and create a sku list with zero commissions. Affiliates hate that but if its clearly defined in your program terms, program description and terms then its on them to decide if they want to promote you. If average commission is 10% and CJ charges 30% of that then the total cost per sale is 13%. Why would you run an affiliate program where you have less than 13% gross margin. You should be looking at 25% gross margin for an affiliate program versus 35% for a dropship program or 50% for wholesale dealers/distribution partners.
February 13th, 2014, 10:25 AM #4
Why run an affiliate program with less than 13% gross margin... that is a good question. Being tasked with affiliate manager after working with my company for less than 4 months, and still being new to the business world in general (less than 2 years experience with no master's degree, not do downplay myself, but it's just a fact!) I was unaware of the perils of small margins in the affiliate space.
Is this "no-commission SKU list" something that CJ might not tell me about unless I specifically ask about it? I am assuming it is separate from my data feed...? I would definitely be interested in setting that up, and will talk to my rep about it.
Thanks so much for both your feedback. Very illuminating.
February 13th, 2014, 11:56 AM #5(less than 2 years experience with no master's degree, not do downplay myself, but it's just a fact!)
Is this "no-commission SKU list" something that CJ might not tell me about unless I specifically ask about it? I am assuming it is separate from my data feed...?
February 15th, 2014, 06:20 PM #6
- Join Date
- January 18th, 2005
- Small Town in Tennessee
As Chuck has stated, affiliates resent no-commission skus, but they've adjusted to it. Merchants like WalMart or Amazon pay one low commission on electronics (because there's no margin) and a better commission on bath towels.
The resentment comes from if I just picked bath towels to promote, and the merchant has ads on every page promoting a new hot electronics item, which they should do - consumers WANT the new hi-tech toys.
As long as you're upfront in your merchant description and TOS, the only hate mail you'll get is from affiliates who join every new program - without ever reading the TOS
All My Best,
February 17th, 2014, 11:02 AM #7
You should know what percentage of your web sales (no sales rep participation) are in each profit tier, ie: 5%, 6%, 13%, 20%, etc. and determine what your average margin is. Are you including factory/manufacturer and all rebates in your profit calculations?
How many of your first time high-ticket customers become regular/repeat customers?
What is your threshold for customer acquisition? You don't micromanage every click with PPC, right?
If you do decide to exclude certain products, make sure those products are not in your datafeed and it's very clear to your affiliates you aren't interested in them selling big-ticket/low margin items...
Last edited by Convergence; February 17th, 2014 at 11:29 AM.Salty kisses, Sandy toes, and a Pirate's heart...
February 17th, 2014, 11:51 AM #8
we are making a set of SKUs defined at 0% commission in our data feed to prevent an ultimate loss of money due to tight margin.
we are not including factory/manufacturer and all rebates in the profit calculations, at least i don't think so. i met with pricing a few months ago to determine the margin we could give up for this program and set different payouts for smallwares and equipment.
we are not going to do any distinguishing between new/returning customers for now. that's how we chose to set up tracking; i think it's because it would be easier that way to set up.
I'm not sure what you're talking about with the threshold for customer acquisition. I am actually the current PPC specialist here, under the PPC lead, and i would say i don't micromanage every click, but mainly because that sounds like a bad thing, not because i'm sure i don't do it (i guess i don't really know what you're asking...)
any further explanation on those bits that i didn't understand would be greatly appreciated! thanks for your input.
February 17th, 2014, 12:09 PM #9
2) New/Returning Customers: was referring to your current customer base. You should get that data from current sales/marketing reports. This will give you your customer trend determining what revenue potential each customer has. That helps determining what your customer acquisition threshold is. If over 12 months an average customer returns six times and buys enough high-margin items to offset the cost of the low-margin items then you have a winner (when you compare the same customer dataset as if they purchased through an affiliate program). So, with PPC you don't try to "micromanage", meaning you don't try to match every click with every sale. You understand that one campaign needs to be profitable overall or it has to be adjusted or stopped. In other words, what are you willing to spend to get a lifetime customer - that's your threshold.
3) The rebates are HUGE, trust me. - Besides, many manufacturers are going to have MAP so the margins are there.
Clear as mud?Salty kisses, Sandy toes, and a Pirate's heart...
February 17th, 2014, 12:13 PM #10
Amelia, don't know if you realize that THIS thread is public versus your other thread which is private. Don't know how much you want to divulge in public, yet...Salty kisses, Sandy toes, and a Pirate's heart...
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