View Poll Results: The amount of shared profit - for merchants

Voters
15. You may not vote on this poll
  • affiliates get only a tiny portion of profit

    3 20.00%
  • affiliates get less than half of the profit

    7 46.67%
  • affiliates get as much as we do (split half and half)

    2 13.33%
  • affiliates get the larger part of the profit

    3 20.00%
  • affiliates get most of our profit

    0 0%
Results 1 to 16 of 16
  1. #1
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    Who gets a bigger cut of the profit on an average order?
    I'm talking after all expenses.

    Konstantin,
    www.GenericGifts.com

  2. #2
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    Im not an expert, but Im not understanding your poll. I am under the impression that the affiliate is an expense for the merchant, thus the affiliate recieves no portion of the profit. An affiliate can be deemed easily as an independent sales representative under the pay for performance model.

    So if I can lend an example, i.e. AVON deploys several independent sales representatives, and pay them a commission, but the sales representative does not share in the profit as the sale rep is considered an expense.

    Perhaps Im off here...but I dont think so.

    Bradley Professional Business Services
    P.O. Box 8413
    New Haven, Connecticut 06530

  3. #3
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    Well, what I meant is how much of your profit goes to affiliates.
    Basically, if your average order is $100 and your profit margin is 20% and your affiliates get 10% commission. That would mean you pay affiliates as much as you make yourself.

    Like your total profit for the $100 order is
    $100x0.2=$20
    And you pay your affiliate
    $100x0.1=$10

    So you are left with $10 of net profit while paying $10 to the affiliate who helped to make the sale.

    Konstantin,
    www.GenericGifts.com

  4. #4
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    Again, perhaps there is a termonology issue going on in this post- but using your example-

    If I am a merchant and selling an item for $100.00 and paying the affiliate a commission of 10% this is how it would go.

    100 sale
    050 cost of good sold
    010 affiliate commission
    ___
    040 Profit going to merchant

    Now this is a basic model, assuming within the cost of goods sold, ie, the actual wholesale price, shipping and handling, sales tax, blah blah is included in the 50 bucks.

    an affiliate is an expense and will not be getting any of the profit. This is assuming a tangible good such a giftware.

    Bradley Professional Business Services
    P.O. Box 8413
    New Haven, Connecticut 06530

  5. #5
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    Nevermind.

    Konstantin,
    www.GenericGifts.com

  6. #6
    Resident Genius and Staunch Capitalist Leader's Avatar
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    I can see what BCC is getting at with his poll--but Bradley is right. Technically, affiliates are an expense like a sales rep is.

    The proper wording should most likely be, "how does your affiliates' commission percentage *compare with* your profits as a merchant?"

    It is a beautiful thing, to do nothing, and then rest afterwards.~Spanish Proverb

  7. #7
    ABW Veteran Student Heyder's Avatar
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    Bcc posted a perfectly legit and sensible question. I don't see why the hoops had to be thrown in. The answer (numbers) of course would vary from merchant to merchant. Some would be able to do a good affiliate program with a very small profit with the affiliate getting a larger share and others a larger profit. One thing is for sure and that is for most retail goods the mark-up is 100% or more. IE if the item costs 100 dollars retail there is a 50 dollar expense for the item wholesale and the rest is profit minus the cost/expense of handling, storage and paying affiliates.

  8. #8
    ABW Ambassador buy_online's Avatar
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    I agree with Heyder, and voted with the current majority.

    Fred
    _______________

    You might just be a redneck if..."Your talent in the local beauty pageant was making noises with your armpit"

  9. #9
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    I'm not arguing the wording, just wanted the vote to be as clear as possible. I wanted to know how much affiliates get compared to the net profit of the merchants.

    Konstantin,
    www.GenericGifts.com

  10. #10
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    If you were to go net profit on the 100 bucks, lets say that after you deduct everything that you could possibly expense out on an given item, the affiliate commission will be far less than the profit the merchant makes on that given item.

    Ive seen the vote, and there is no way that an affiliate would come out even with the merchant. If that was the case, they should get out of the retail or etail business.

    An etail business compared to a retail (brick and motar) has far less expenses- and merchants have still gotten suggested retail pricing, including shipping and handling! -something they couldnt even get near in the brick and motar world.

    These arent hoops, just some basic retail business and accounting practices that come into play in a poll such as this.

    To arbitrarly vote with the majority, in my own opinion will not give you the accurate picture you are seeking here.

    Now true that there are places such as clickbank who pay 50 to 75% commission- but the cost associated with these products are very minimal and in most cases a one time setup fee, hosting etc. perhaps even a monthly fee or commission, but that is it. what other expense is there? You sit back, your ebook is broadcasted by a bizzillion affiliates, and sales come rolling in.

    The tightest profit in the retail industry is the grocery supermarket- the average profit per sale is believe it or not 1 cent per bag of groceries (brown bag) ref super stop and shop, largest supermarkets in the Northeast of USA.

    Hence when a lot of stores tried the on-line version of ordering groceries, it did not produce a substantial profit to maintain this venue. A lot of them have dropped this concept within 2 years or so after implementation.

    Im not knocking the poll, but to say that an affilaite is making just as much as the merchant is just not beliveable.

    Bradley Professional Business Services
    P.O. Box 8413
    New Haven, Connecticut 06530

  11. #11
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    Actually, my average net profit is about 40% of the total, and I pay 20% to affiliates. That pretty much means my affiliates make as much as I do on an average order.

    As a matter of fact, I use the same affiliate software to track my ads on PPC engines (just to have a clear way of calculating ROI). And I use the same formula there as well - if I spend on that particular ad half of the amount I make then I leave it run, otherwise I keep tweaking it.

    Honestly, I don't really see a reason why paying affiliates half of the profit is not believable.

    Konstantin,
    www.GenericGifts.com

  12. #12
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    The regular accounting business practice:

    100.00 Price of item
    -40.00 Cost of Goods Sold
    -20.00 Affiliate Commission
    ______
    040.00 Merchant Profit

    Your concept

    100.00 Price of item
    -40.00 cost of good sold
    ______

    60.00 Net Profit

    Affiliate commission of "half of profit" would be 30 dollars not 20.00

    I absolutely see how you can derive the concept of an affiliate making half the profit- and you obviously are very smart to track your return on investment- and frankly it makes sense to me, but I would suggest strongly that you consider your affiliate as an expense along with the rest of the accounting entities out there or you may get yourself all screwed up trying to explain it to that to a loan officer, or the tax man.

    Just friendly advice-

    Bradley Professional Business Services
    P.O. Box 8413
    New Haven, Connecticut 06530

  13. #13
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    BCC,

    BTW, I think it is great that you pay your affiliates 20% of a given sale, you should do quite well.



    Bradley Professional Business Services
    P.O. Box 8413
    New Haven, Connecticut 06530

  14. #14
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    Bradley, I understand that affiliates are an advertising expense.
    If this was a shipping carrier forum, then I would logically separate my expenses as shipping and all expenses. If this was a hosting forum, then I would state my expenses as hosting and everything else.

    But, since this is an affiliate form and the context of this thread is about affiliates - then to simplify things, I separate affiliate commission from all other expenses because they are irrelevant for this particular poll.

    So, in a given context,
    my profit on a $100 order is $40 of which I pay my affiliates $20.

    The $60 is "all expenses", while $20 is "affiliate commission - advertising expenses", and the other $20 is the net profit.

    If I were talking with my competitor and we were comparing our price models (yeah right) - then I would say than on a $100 order, my expenses are $80. That's all.

    And that's pretty much the reason I said "Nevermind" a few messages back. I had a strong feeling this would turn into a discussion about terminology of retail.

    Here is another example that should show some perspective:
    Two small business owners get together in a bar and talk about how they run their businesses.
    One says, "You know, I just hired a new employee, and I'm paying him more than I pay myself, but he is worth it."
    The other one says, "Nah, I would never pay any of my employees more than I make."

    That's the kind of poll I was expecting to start.
    How do merchants go about paying their affiliates.

    Konstantin,
    www.GenericGifts.com

  15. #15
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    C'mon, a bricks and mortar store wouldn't survive a year at 8-15%. High street Dept stores work on around 280% markup. We get peanuts but our costs are low.

    <font face=verdana size=1 color=43639C>Know Google as you know yourself and you will live to fight many battles - Sun Tzu</font>

  16. #16
    2005 Linkshare Golden Link Award Winner  ecomcity's Avatar
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    Considering you have reasonable return day cookies and track affiliate sales as if it was vital to your business they continue to prosper then a 40/60 percent split is reasonable. If you have the normal merchant leakage and employ diversion tactics or only credit for first time buyers then reverse that figure.

    In all my years of sales I never objected to splitting profit with a 1099 type outside salesman. Cost me nothing if I had final approval on booking the sale. The customer now belongs to me to milk for additional sales if I'm worthy.

    Basically give the affiliate so much it actually pains you to cough up the commission check....then throw in a bonus to hook em for life. Unlike a consumer the affiliate will not have to be re-sold after a few paychecks. Play games with the reporting on/off switch and you'll loose all your PR.

    Mike & Charlie ...

    If they won't adopt and feed a bird ..flip them one! BBQ some Gator and remember to flush WhenU..

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