Am I paying my affiliates too much?

15 replies
Hey folks,

I have a question here and I want you guys to answer my question from a product owner's perspective instead of as an affiliate marketer.

Basically, I am having a launch of product soon and currently, the percentage of affiliate commissions that I am paying looks something like this:



As you can see, I am paying 60% of commissions to my affiliates on all level.

However, after paying my affiliates the 60%, I would also have to pay my my business partner 50% of his share. So, in the front end alone, for each sale refer by my affiliates -- I will only get $15.40.

That's not the worst part. In upsell 1, after paying 60% to affiliates, I must also pay 30% commission to the one who created the product for upsell 1. In upsell 2, we will have to pay 50% to the one who created the product for upsell 2. (This part cannot be altered)

Sounds really bad to me.

Do you guys think I should lower the affiliate commissions?
#affiliates #paying
  • Profile picture of the author ppc4profit
    Unless you are dealing in very high volumes this looks like a business model with a low return so you need to challenge it.

    You have not stated the conversion rates and profit outcomes for all the steps in the upsell chain - is it that all the profit is in the last steps? On your figures it seems as though upsell 2 is sold at a loss ??? ( 60% to affiliate and 50% to product owner = 110%)

    I would start with the market - who are the competition and what do they do. What product price, what affiliate commissions, how is it promoted.

    Does this allow you to move your figures and still have a profitable venture.

    Could you tier affiliate commissions?

    Sometimes some ventures will not make a profit and it is good to find this out at the business model / spreadsheet stage rather than after a months costly promotion.
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    • Profile picture of the author Desmond Ong
      Originally Posted by ppc4profit View Post

      Unless you are dealing in very high volumes this looks like a business model with a low return so you need to challenge it.

      You have not stated the conversion rates and profit outcomes for all the steps in the upsell chain - is it that all the profit is in the last steps? On your figures it seems as though upsell 2 is sold at a loss ??? ( 60% to affiliate and 50% to product owner = 110%)

      I would start with the market - who are the competition and what do they do. What product price, what affiliate commissions, how is it promoted.

      Does this allow you to move your figures and still have a profitable venture.

      Could you tier affiliate commissions?

      Sometimes some ventures will not make a profit and it is good to find this out at the business model / spreadsheet stage rather than after a months costly promotion.
      Yes, we are *hoping* that we have a high volume of people coming in to buy our stuff.

      For upsell 2, the 50% will be paid after the 60% is paid to the affiliates.

      Our market has a lot of people selling cheap guides which is a huge challenge for us because what we are offering are good quality videos and guides.

      We do not offer tier commissions.

      Right now what I'm worried is the high amount of affiliate commissions. I was thinking to lower the affiliate commissions for the upsells and downsell but the frontend remain at 60% affiliate commission.
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  • Profile picture of the author Andy Fletcher
    Personally I would start higher and finish lower. The $77 is fairly minimal returns to you and your partner that you may as well offer 75% commissions or more unless you've found that the conversion rate from there to the upsells is tiny.

    After that I'd aim to reduce the affiliate commissions at each step while still keeping them higher in absolute terms.

    Something like 70% 60% 50% 40% and then 50/50 on the downsell.
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  • Profile picture of the author Didier Faucher
    It depends on your goal.

    What do you want to do with this sale?
    Earning money? Branding your name? Recruiting affiliates?
    Getting customers to sell more products to? etc.

    Sometime you have to lose money to make money.

    Good luck with your business.

    Didier
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  • Profile picture of the author ragstworiches
    Hi,

    It really depends on what you are making on the back-end, a lot of people in IM break-even on the front end and make all the money on the back-end. I think 60% is fair since affiliates are really the ones who will do most of the work. I would have thought it was better for you to create your own original product than give away more money?

    By the sounds of it you cannot complain too much about not getting a large percentage if affiliates are doing the marketing, someone else is doing the product and you also having a partner sharing your workload.

    Phil
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    • Profile picture of the author Desmond Ong
      Originally Posted by ragstworiches View Post

      Hi,

      It really depends on what you are making on the back-end, a lot of people in IM break-even on the front end and make all the money on the back-end. I think 60% is fair since affiliates are really the ones who will do most of the work. I would have thought it was better for you to create your own original product than give away more money?

      By the sounds of it you cannot complain too much about not getting a large percentage if affiliates are doing the marketing, someone else is doing the product and you also having a partner sharing your workload.

      Phil
      Yes, I agree but after seeing so many successful online businesses' sales funnels, most of them do not pay as much as we do in the backend -- so I am afraid this is a little too risky for us to give 60% in all levels.

      Originally Posted by Didier Faucher View Post

      It depends on your goal.

      What do you want to do with this sale?
      Earning money? Branding your name? Recruiting affiliates?
      Getting customers to sell more products to? etc.

      Sometime you have to lose money to make money.

      Good luck with your business.

      Didier
      We are basically trying to hit two birds with one stone : to create a brand as well as to make money.

      We've placed a lot of efforts into this launch and we want to make it a successful one as well as making money off it.

      BTW, "Saya Mau Makan Angin" means "I want to go for a vacation" in Malay.

      Originally Posted by Andy Fletcher View Post

      Personally I would start higher and finish lower. The $77 is fairly minimal returns to you and your partner that you may as well offer 75% commissions or more unless you've found that the conversion rate from there to the upsells is tiny.

      After that I'd aim to reduce the affiliate commissions at each step while still keeping them higher in absolute terms.

      Something like 70% 60% 50% 40% and then 50/50 on the downsell.
      That is what I am planning to do.
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      • Profile picture of the author candoit2
        Any sale received from an aff is one that you wouldn't have made anyways. You are not losing, you are gaining.

        Plus you are getting money and your list built by your aff's.

        Your original offer is very attractive to aff's. Their referal generates you a sale and becomes more sales and you are paying them for it.

        Lowering is like saying the value of their referral decreases the more that referal proves to purchase.

        If anything I would lower the front end and increase the back end commissions so if the aff refers someone who has a lot of long term value they get rewarded, not paid less.

        Aaron
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        • Profile picture of the author Tyrus Antas
          Originally Posted by AaronJones View Post

          Any sale received from an aff is one that you wouldn't have made anyways. You are not losing, you are gaining.
          It depends. If affiliates give out bonus, many costumers might end buying through them and not you, even though you've already established a relationship with them.

          In the end I agree that you almost always end up better with affiliates.

          Tyrus
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          • Profile picture of the author Desmond Ong
            Originally Posted by Tyrus Antas View Post

            It depends. If affiliates give out bonus, many costumers might end buying through them and not you, even though you've already established a relationship with them.

            In the end I agree that you almost always end up better with affiliates.

            Tyrus
            Yeah the thing is, we can expect almost 95% of all sales will be from affiliates. Almost 90% of our leads are from our JV partners and we even recommended our affiliates to create as many bonuses possible.

            This is not some small ebook business I am building. We are using the same system that we modeled after big launches on the internet.
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      • Profile picture of the author Didier Faucher
        Originally Posted by Desmond Ong View Post

        We are basically trying to hit two birds with one stone : to create a brand as well as to make money.
        So in this case (making money) maybe your commissions are too high.

        It depends on your costs.

        I don't know in Malaysia, but in France social security contributions are
        a percentage of the turnover (up to 45% depending the type of
        company); i.e. affiliate commissions are not substracted.

        So if someone sells a $100 product and pays 50% to affiliates: $50 to
        affiliate + $45 (maximum) social security contributions + $3 payment
        processor fee.
        => net = $2 (more if SSC are less than 45%).

        (In my case: new status of "auto-entrepreneur", SSC are only 12%.)


        BTW, "Saya Mau Makan Angin" means "I want to go for a vacation" in Malay.
        The literal translation is more romantic.


        Didier
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        • Profile picture of the author Desmond Ong
          Originally Posted by Didier Faucher View Post

          So in this case (making money) maybe your commissions are too high.

          It depends on your costs.

          I don't know in Malaysia, but in France social security contributions are
          a percentage of the turnover (up to 45% depending the type of
          company); i.e. affiliate commissions are not substracted.

          So if someone sells a $100 product and pays 50% to affiliates: $50 to
          affiliate + $45 (maximum) social security contributions + $3 payment
          processor fee.
          => net = $2 (more if SSC are less than 45%).

          (In my case: new status of "auto-entrepreneur", SSC are only 12%.)



          The literal translation is more romantic.


          Didier
          Our social security is only as low as 28%.

          Anyway, how do you know Malay language? Hehe...
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          • Profile picture of the author Didier Faucher
            Originally Posted by Desmond Ong View Post

            Anyway, how do you know Malay language? Hehe...
            I love Indonesia and Malaysia (and Singapore too).

            I learnt some Bahasa Malaysia/Indonesia because I love these countries,
            in order to interact with the locals better (I travelled there several times).
            But I have forgotten almost all now. This is a long time since I haven't
            practiced. Will learn it again later.



            Didier

            P.S: I started to learn the language using books and audios.
            Saya guru saya.
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  • Profile picture of the author Tyrus Antas
    Lore says Eben Pagan from doubleyourdating.com is paying 200% in his front-office while making it up with sales for more expensive products in his back-office. The front-office offer acts mainly as an affiliate-traffic magnet.

    Tyrus
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  • Profile picture of the author jhongren
    Hi Desmond,

    I am reading your original post...60% could be alot...
    maybe 60 for the front end and 50/50 for the backend.

    I am also thinking of you can do a jv contest
    and offer other bonuses like prize money
    and daily update of leaderboard status..
    and also a cross promotion for top 5.

    I am sure this is what excite jv partners...at least
    for myself.... =)

    my 2 cents,
    John
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    • Profile picture of the author Desmond Ong
      Originally Posted by jhongren View Post

      Hi Desmond,

      I am reading your original post...60% could be alot...
      maybe 60 for the front end and 50/50 for the backend.

      I am also thinking of you can do a jv contest
      and offer other bonuses like prize money
      and daily update of leaderboard status..
      and also a cross promotion for top 5.

      I am sure this is what excite jv partners...at least
      for myself.... =)

      my 2 cents,
      John
      Hey John,

      This is not my first product so of course I know about JV contest.
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