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  1. #1
    Join Date
    March 7th, 2005
    Portland, OR
    New merchant pricing
    Hey everyone, I'm firing up an online store and I'm brand new to the web retailing business. I'm planing to start and affiliate program but I have a question about pricing as it relates to affiliate conversion rates and commissions. Here's the deal...

    For my products, there are some large online retailers already established in the market. For certain products, they are pricing their merchandise just barely above what I can get it at wholesale.

    This presents me with a pricing issue if I intend to give a percentage to an affiliate and a percentage to myself. Even at a low percentage, say 5% for affiliates and 5% for me, certain products would have to be priced above what my competitors are charging.

    So, my first question is this: If a merchant has slightly higher prices than some of it's competitors, how does that effect your conversion rate as an affiliate? And does that factor into whether you will pick up their program or not?

    Second, as you can see in my 5% example, if I want to be more competitive as a merchant in the affiliate arena by having good commission rates, the price I'll have to charge for products will be directly related to the percentage I give affiliates. Do any of you have any experience with merchants who have been in this same thin margin situation? And what percentage did you and the merchant agree upon as the best mix of affiliate/merchant/markup combination?

    Any input is appreciated. Thanks!

  2. #2
    Internet Cowboy
    Join Date
    January 18th, 2005
    Welcome to ABW. The big guys buying containers and retailing at your wholesale cost is something you can't control.
    Price your products as low as you can and still make a profit to stay in business and pay an affiliate commssion.
    Provide the customer with outstanding service.
    Provide your affiliates with reasons to promote you like:

    • An extended cookie duration
    • Sales tracking of phone sales
    • No parasites in the program
    • Free data feeds
    • There are more things you can provide affiliates at little or no cost to you that make a huge difference in how well your affiliate program is represented.
    Set your program up with ShareaSale, unless you plan on administering it yourself. ShareASale provides everything an affiliate needs at no additional cost to you.

    If the big guys wish to whore out the market on certain items, consider not carrying those items, unless they are essential to your success. Otherwise, price it as best you can, build a loyal group of affiliates and let the rest take care of itself.

    I sell items as an affiliate every day that can be purchased cheaper elsewhere. Some people will shop for hours to save $2, most will not. Build a large affiliate base and that will in turn help to push your competition lower in the SERPS.

    Again, welcome. And best of luck!

  3. #3
    Join Date
    January 17th, 2005
    Hi Dan,

    I'm certain almost every merchant whose gone online has had that dilemma at one point or another. The key is to keep your overhead as low as possible. Perhaps going with a shopping cart solution that comes with an affiliate software built in would be your best course; at least in the beginning. This may give you more room to play with your price points and affiliate percentages. As hit on above, offering your users and affiliates an experience beyond the product will give them an incentive to go with you over the competition. The proof is in the conversion and retention rates. Become better than your competitor in this arena and even if they are priced lower customers and affiliates will come to you.

    Mandy Haga
    Last edited by Haiko de Poel, Jr.; April 7th, 2005 at 12:04 PM. Reason: Sig removed, earn it.

  4. #4
    Join Date
    March 7th, 2005
    Portland, OR
    Scohaz & Mandy,

    Thanks for the replies, that's very encouraging. I'll definitely be using your suggestions. One followup:

    What data do you typically like to see in the data feeds?


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