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  1. #1
    Newbie thecdmall's Avatar
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    Percentage To pay affiliates
    I'm a little curious on how you come to terms on what percentage to pay your affiliates? From what I've seen in my research the norm is 10-25% and the 25% is on the high side.

    Any feedback would be nice. Being I'm trying to get everything up and running within the next 2 weeks.

  2. #2
    Outsourced Program Manager Affiliate Eagle's Avatar
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    Overall, I generally see merchants offerring between 5-12% on the average. However it all depends on the product and margin. Each business model is different.

    We try to work with our Merchants and encourage them to be as competitive as possible. Hope this helps.

  3. #3
    The "other" left wing davidh's Avatar
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    I'd worry more about how your prices and selection compare to your competition first.

    Commission percentage doesn't mean much if the stuff is hard to sell, and music buyers are notorious cheapskate chiselers (unless you deal in out-of-print titles or obscure imports).
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  4. #4
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    As far as prices, they're good there. As far as selection, that needs help.

    Example:

    http://www.thecdmall.com/50-centgunit-c-33.html

    http://www.mixunit.com/50cent.html

    In that example about $2 cheaper but selection not there.

  5. #5
    Newbie thecdmall's Avatar
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    Quote Originally Posted by NoWires
    I'd worry more about how your prices and selection compare to your competition first.

    Commission percentage doesn't mean much if the stuff is hard to sell, and music buyers are notorious cheapskate chiselers (unless you deal in out-of-print titles or obscure imports).
    I have the best prices on the net from REPUTABLE sites like mine. I think I'll be as competitive with my Affiliates program as I am with my prices. That may bring in Quanity.

    Thanks for the advice. I was under the impression that there was some kind of equation

  6. #6
    Newbie thecdmall's Avatar
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    Quote Originally Posted by TrustNo1
    As far as prices, they're good there. As far as selection, that needs help.

    Example:

    http://www.thecdmall.com/50-centgunit-c-33.html

    http://www.mixunit.com/50cent.html
    Very true, I'm still in the process of uploading all items. I have just as much as they do if not more Just have to upload the product itself.

    I see you have did your research.

  7. #7
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    Well that's good on the selection Checking the top mixtape sites and you definitely have the best prices.

    As far as what to pay, your 10%-25% seems to be the range:

    http://www.google.com/search?hl=en&l...s+&btnG=Search

    I guess as high as you can go

  8. #8
    Newbie thecdmall's Avatar
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    Quote Originally Posted by TrustNo1
    Well that's good on the selection Checking the top mixtape sites and you definitely have the best prices.
    Thanks. I'm working on getting up the rest just trying to get this affiliate program down packed and done. Not only that, I'm thinking about joining an affiliate program once I get my calendars and clothing line up.

    But thanks again.
    Do you ever shop at any of those sites?

  9. #9
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    "Do you ever shop at any of those sites?"

    No, but I know about them and know that some people are really into mixtapes.

  10. #10
    Affiliate Manager Matt McWilliams's Avatar
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    If you are just starting out, I would go high...

    But is just my opinion and others will disagree.

    Figure out what you profit off a purchase and then share X% with them.

    We pay between 50-70% depending on the type.
    Matt McWilliams
    Call Me At: (317) 825-8826 | Follow Me On Twitter: @MattMcWilliams2 | Connect With Me On LinkedIn

  11. #11
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    High is good but leads are a different animal than sales of products. As far as merchants that actually sell products the highest percentage I've seen come from something like ink merchants or art/poster type merchants, seen some over 30%.

  12. #12
    Affiliate Manager Alan Hamilton's Avatar
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    CD - the formula is something that you come up with yourself. If I can offer advice, I would suggest that you reach your final percentages by considering:

    1) your gross & net margin
    2) how aggressively you want to recruit good affiliates
    3) your ongoing promotion and support costs
    4) bonus incentives you want to offer to increase performance

    If you consider all of these things first, you can then do a "head check" to identify where you are coming from with respect to how you will share revenues.

    If you resent that an affiliate may get more than you do on individual sales, you'll want to re-look what you are trying to accomplish and what it is worth to you.

    Keep in mind that although an affiliate may make more than you do on the sale of a single CD, you are getting a percentage of sales from hundreds or thousands of affiliates - so be generous. Show your affiliates that you value their partnership & they will treat you well.

    Cheers & Best Of Luck
    Last edited by ALH - AmeritrustRx; September 27th, 2006 at 12:34 AM. Reason: typo
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  13. #13
    Affiliate Manager Matt McWilliams's Avatar
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    Quote Originally Posted by TrustNo1
    High is good but leads are a different animal than sales of products. As far as merchants that actually sell products the highest percentage I've seen come from something like ink merchants or art/poster type merchants, seen some over 30%.
    Leads are definitely different, but ultimately you need to decide how much you want to make off of each transaction.

    Don't be afraid to not make much starting off. As time goes on, your profits will go up too!
    Matt McWilliams
    Call Me At: (317) 825-8826 | Follow Me On Twitter: @MattMcWilliams2 | Connect With Me On LinkedIn

  14. #14
    Newbie thecdmall's Avatar
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    Quote Originally Posted by MattMcWilliams
    Leads are definitely different, but ultimately you need to decide how much you want to make off of each transaction.

    Don't be afraid to not make much starting off. As time goes on, your profits will go up too!
    Thanks,
    Very good advice. All I've been doing the last 2 weeks is research on alot of different things for my site. I do think the affiliate side of my site will really help out the success or doom of the site.

    And I love how you used the term the affiliates might make more then I do on transactions, but I will have more affiliates making me more money. Never looked at it like that.

    Thanks again.

  15. #15
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    Quote Originally Posted by thecdmall
    I'm a little curious on how you come to terms on what percentage to pay your affiliates? From what I've seen in my research the norm is 10-25% and the 25% is on the high side.

    Any feedback would be nice. Being I'm trying to get everything up and running within the next 2 weeks.
    As others have noted, typical rates run from 5% to 15%, with higher rates offered in certain niches. For price-competitive computer products, rates are below 5%, and some ebooks pay as much as 75%.

    My formula for setting the commission rate is simple: identify your gross profit margin (retail price minus cost of goods), and share generously with your affiliates, while also remaining competitive (both for consumers and affiliates). Sometimes you must balance your desire to offer the "lowest consumer prices" against your desire to offer the "highest affiliate rates."

    Certainly, the "minimum threshhold" for commissions is probably the rate that Amazon pays its affiliates for products in your category. I'm not sure what their tier structure is these days (it changes based on sales levels), but my report today shows that they are paying me 7% on books, music, and movies, and 4% on electronics. Since Amazon seems to have a higher conversion rate than most smaller competitors (many would disagree), I think 10% is a realistic "minimum" affiliate rate, and somewhere from 12% to 15% may represent the "sweet spot" for a new CD merchant.

  16. #16
    Newbie thecdmall's Avatar
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    Quote Originally Posted by markwelch
    As others have noted, typical rates run from 5% to 15%, with higher rates offered in certain niches. For price-competitive computer products, rates are below 5%, and some ebooks pay as much as 75%.

    My formula for setting the commission rate is simple: identify your gross profit margin (retail price minus cost of goods), and share generously with your affiliates, while also remaining competitive (both for consumers and affiliates). Sometimes you must balance your desire to offer the "lowest consumer prices" against your desire to offer the "highest affiliate rates."

    Certainly, the "minimum threshhold" for commissions is probably the rate that Amazon pays its affiliates for products in your category. I'm not sure what their tier structure is these days (it changes based on sales levels), but my report today shows that they are paying me 7% on books, music, and movies, and 4% on electronics. Since Amazon seems to have a higher conversion rate than most smaller competitors (many would disagree), I think 10% is a realistic "minimum" affiliate rate, and somewhere from 12% to 15% may represent the "sweet spot" for a new CD merchant.
    Thanks for the information. Are you an affiliate manager? If so can you point me in the directioin to check some of them out on the forum. I can't find anything. Thinking about joining SAS here soon.

  17. #17
    Outsourced Program Manager Rick - Bitcom's Avatar
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    As everyone suggested you should be generous. 50% of net profit is probably fair for your top affiliates. Less for the one's not trying as hard.

    But!!!

    Don't forget to leave some for incentives. You're gonna want to run contests, give bonuses, and reward extra good affiliates for short term successes, so leave some money for that.

    You'd be amazed at how much more motivated an affiliate gets when you give them a little something to compete for.

  18. #18
    Newbie Online's Avatar
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    I assume, it really depends on the niche... You just compare the Affiliate programs of your competatives and then perform a better deal.

    It is very important that you do not offer worse conditions than they and also feature something outstanding...

  19. #19
    Newbie thecdmall's Avatar
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    Most of my competition doesn't offer an affiliates program. That is why it's kinda hard for me to figure out what to do about it. I have been to a couple of different websites some what like mine and got some information from the site but as for direct competition NONE.

  20. #20
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    Quote Originally Posted by thecdmall
    Thanks for the information. Are you an affiliate manager? If so can you point me in the direction to check some of them out on the forum. I can't find anything. Thinking about joining SAS here soon.
    Yes, I am an affiliate manager, and like many other affiliate managers I am somewhat active all across ABW. Over the past 10 years, as a consultant, I have "designed" or "defined" affiliate programs for a number of merchants. I have also been a very active affiliate for some merchants, and I've done some experimenting; I also do a lot of PPC work, both for clients and for myself.

    I'm not quite sure what you're asking. If you're looking for terms of other affiliate programs, then check out some of the "affiliate directory" sites and look for other merchants in your market segment, or in complementary businesses.

    Quote Originally Posted by thecdmall
    "Most of my competition doesn't offer an affiliates program. That is why it's kinda hard for me to figure out what to do about it. I have been to a couple of different websites some what like mine and got some information from the site but as for direct competition NONE.
    That's not really true: you absolutely have "direct competition" for affiliates (and for the products you sell), because you are seeking to capture the affiliate's attention and ad-space inventory, and you want to capture the consumer's attention and money. It doesn't matter how you define your online store: maybe you've chosen a novel "niche", and maybe your products are unique, but there are products "like them" offered by many other online merchants.

    My current company sells "posters with famous quotations," and we offer hundreds of designs that are not available in any other store, plus a selection that's larger than the "quote posters" offered by any other online store. However, there are online "poster merchants" with hundreds of thousands of product SKUs, including many dozens of "quote posters" that consumers might buy instead of ours. There are several sites that offer consumers some ability to create custom posters. There are retail stores (including local poster shops, Wal-Mart, and teacher-supply stores) that offer some posters with famous quotations. And there are also hundreds of "quotation web sites" that compete for consumer attention. While I could argue that we don't have any "direct competition," such a claim is irrelevant, because I must still compete for the attention of both affiliates and consumers.

    It's not a "zero-sum game," of course: an affiliate can add product information and advertising to promote multiple merchants, and consumers may be inspired to buy more products if there is a greater variety of quality products offered at competitive prices. Indeed, when I talk with prospective affiliates, they sometimes ask why they should promote "my" products instead of "someone else's" and my answer is that they shouldn't -- they should experiment with promoting "both" or "all," to offer a broader mix of products to their customers, and thus increase the overall sales.

    Finally, be careful not to focus your "competitve analysis" too narrowly by looking at only "niche" or "segment" retailers. Never forget the "big players" (local or dot-com) out there, folks like Amazon and Buy.com and eBay and Wal-Mart who are competing with you for sales and consumer attention, with many similar or related products, even if they carry millions of unrelated products.

  21. #21
    Affiliate Manager MINDsprinter's Avatar
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    Another idea is offering a flat rate commission (like we do). That can add up to being over 50% of the sale price sometimes. But, if you have a good idea of how much money an average customer will spend with your company over, say, one year, then you have a good idea of how much you can offer.

    Remember, attracting new customers is much harder (and more expensive) than keeping existing ones. Keep in mind that affiliates are not only bringing you sales, they are bringing you new customers.

    --Jason
    Jason Rosenbaum
    Affiliate Manager
    MINDsprinting

  22. #22
    Full Member Zdig's Avatar
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    i agree with the idea of going high in the beginning. pay your affiliates so much that you're losing money...eventually you can move the commissions back down to earth and everyone is happy. just make sure your affiliates are away the sky-high commissions are only an "introductory rate". think of it like the credit card companies do...give a really good rate to hook people in, then switch over to what makes you money.

  23. #23
    Newbie thecdmall's Avatar
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    Quote Originally Posted by Zdig
    i agree with the idea of going high in the beginning. pay your affiliates so much that you're losing money...eventually you can move the commissions back down to earth and everyone is happy. just make sure your affiliates are away the sky-high commissions are only an "introductory rate". think of it like the credit card companies do...give a really good rate to hook people in, then switch over to what makes you money.
    Thanks everyone for the great response. I already love this forum.
    Here is what I'ved decided to do. Tell me what you think.

    I am going to do 50% commissions for a while to see how everything goes. Not only will I still make a piece of the action but I will also get brand awareness being I think with such high commissions, the affiliates will get out there and try to make some money.

    Now what should be the min. payout and when?
    I have a general Idea but I like to get feedback. Especially from this forum.

  24. #24
    Newbie thecdmall's Avatar
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    Anyone have any tips on my last post?

  25. #25
    Affiliate Manager DreamPrints's Avatar
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    I'd like to hear the questions, too.

    I have my own observations but they are theoretical rather than practical, so please, affiliates, share!

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