Running an Affiliate Program: How to Choose Your Commission Levels

If you use the internet to sell products or services, you may be interested in starting an affiliate program. With these programs, you rely on the use of website affiliates. They are also known as online agents. These individuals will use links and banners to advertise your products or services. Each has a special tracking code. That enables you to tell which affiliates helped you generate sales. Those affiliates are paid a commission for doing so.

In terms of affiliate programs, payments are made to affiliates a number of different ways. The most common is a preset set commission percentage. For example, if an affiliate has a 5% commission rate and they sell a $600 television set, they earn $30. On the other hand, flat commission rates mean the affiliate earns the same amount of money, regardless of a purchase. For example, an affiliate can earn $5 on the sale of a DVD, magazine subscription, or television set.

When determining how you should pay your affiliates and how much, there are a number of factors you should consider. What are they?

The number of products you have available for sale. If you are only selling one product, like a how-to eBook, it is best to opt for a flat commission rate. Your eBook sells for the same price, like $19.99. In this aspect, flat commission rates are ideal, as your affiliates know, upfront, how much they will make from each sale. If they sell a copy of your eBook, they automatically know they made $3 or whatever your commission rate is.

If you are selling a large number of products, like if you run an online store and provide generalized links to that store, use your best judgment. An affiliate can make good money by selling a flat screen television with a 5% commission, but may barely get pennies if they help sell a DVD. In this case, many affiliate program managers have specific commission percentages for each product category, like movies and books, toys, electronics, and so forth. With this approach, you ensure your affiliates get paid a fair percentage, but that you make money too.

If you are selling a service, it depends on the type of packages available. For example, if you are selling your writing services, you will get varying requests. One client may ask you to write an 800-word article and another client may ask for one hundred 300-word articles. In this aspect, commission based on percentage is best. You will not lose money if a referred client only wants a $15 project.

Finally, it is important to consider the average selling price of your products. If you run a specialty store, such as handmade children’s clothes, most of your products are similar in price. You can easily charge a flat rate commission and not lose money yourself. It is with a mixture of cheaper and expensive products be careful. Always think about the bottom line. Consider the cost of materials or purchasing wholesale, shipping, and other expenses. Make sure that when you add in the money paid to affiliates, you are still making a profit. Remember, affiliate programs should help you generate sales and income, not lose it.

When determining commission, you want to make money. You also want to provide affiliates with enough income to justify their hard work. For that reason, provide a solid commission. What you need to remember, as a product or service seller, is repeat customers. The purchase is made through your website; your affiliate just links them. Your customer orders and pays for their purchases on your website. They will remember this website and head directly there next time. Rarely are second purchases made through affiliate websites. Consider this onetime payoff worth it in the end. Affiliates help to generate interest and sales, but it is up to you to have a good product, good customer service, and affordable prices to generate repeat sales.