Referral Commission for Converting Traffic

Sahil Sajan

7 years ago

Im sure it largely depends on how much traffic that person promises to bring to your website!

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SARubin

7 years ago

What you're looking at is "Customer Acquisition Cost."

So, what's a good commission rate for this affiliate? It depends. What's the average lifetime value of your customers?

If you're average client only buys from you once, then you can't just give away your entire profit, to your affiliates.

So I'd only offer him maybe 50% commission (at most), on your net take of the sales he sends you. If he sends you 1000 actual sales a month, then your take is still $15,000 a month in sales that you wouldn't have gotten otherwise (As long as your take still covers your operating cost, and leaves you with a decent profit)

You also need to consider your refund rate. I don't know if there's even such a thing as a refund policy for your type of business? But if there is, then start with a smaller commission, and after a month or so, you should have some indication of the quality of clients he's sending you.

If he's sending you quality clients, then you could talk about incentives that will raise his commission a little.

Couple examples could be: For every 1000 sales he sends you, he gets a bonus. Or, for every 1000 sales, his commission ticks up 1 percent, until it reaches a maximum plateau.

This type of incentive could get him to send you more good clients. And for affiliates that send you crappy clients, their commission stays small... or you simply drop them altogether.

On the other hand... If your business has recurring income (like a membership site, or just a lot of repeat business) then it's easier to give him the lions share of the first time sale.

You could even give him 75% (or more) of your $30, as a commission. Because then you get a bunch of new clients that can generate many thousands of dollars per month, for many months to come.

So, cost per acquisition is what you're looking at. Now you need to decide how much each new client is worth to you and your business (lifetime value) minus the risk, and adjust your commission rates accordingly.

This is just a basic rundown for you. But hopefully it gives you a starting point?

All the best,
SAR

Originally Posted by Reignman003

I run an adult service site (similar to webcam, but not webcam). A fellow site owner in the same niche as me reached out via my site's contact form offering to work with me and send traffic (referrals). I just sent him my Skype info to discuss further.

Should I offer him a flat commission (% of sales that convert on my site via aff link)? I have never advertised or had an affiliate help with the site. Mostly SEO over 2 years and getting roughly 30k/month in traffic. I could provide an aff link and provide custom dashboard login with report of sales acquired via their link.

The way revenue is currently split up on my site is:
70% to adult model
30% to site owner (me)

So if a sale for $100 is sold, I get $30.
If you were me, what % would you offer an affiliate for the sale?

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PPG19

7 years ago

Originally Posted by SARubin

What you're looking at is "Customer Acquisition Cost."

Customer Acquisition Cost is the cost associated in convincing a customer to buy a product or service. Basically how much marketing and advertising money you spend to acquire a customer. Customer Acquisition Cost has nothing to do with this because in this case his customer acquisition cost is 0 (affiliate/referral links).

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SARubin

7 years ago

Originally Posted by PPG19

Customer Acquisition Cost is the cost associated in convincing a customer to buy a product or service. Basically how much marketing and advertising money you spend to acquire a customer. Customer Acquisition Cost has nothing to do with this because in this case his customer acquisition cost is 0 (affiliate/referral links).

I don't know where you get your definition from?

But in my world, customer acquisition cost is exactly what it sounds like (the cost of acquiring a customer)

The original question was about how much commission to pay for each sale. So in your mind, is the cost of paying a sales commission, for the acquisition of a customer, not a customer acquisition cost?

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PPG19

7 years ago

Originally Posted by SARubin

I don't know where you get your definition from?

But the customer acquisition cost is exactly what it sounds like (the cost of acquiring a customer)

So in your mind, is the cost of paying a sales commission not a business cost of acquiring a customer?

The easiest and simplest method to calculate CAC is to divide the total MARKETING campaign costs (MCC) with the total number of customers acquired in a specific time.

A sales commission is not a marketing cost.

What is your definition of Customer acquisition cost? Curious...

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SARubin

7 years ago

Originally Posted by PPG19

The easiest and simplest method to calculate CAC is to divide the total MARKETING campaign costs (MCC) with the total number of customers acquired in a specific time.

A sales commission is not a marketing cost.

What is your definition of Customer acquisition cost? Curious... .

Any costs directly associated with acquiring a customer.

Marketing is one cost...

But unless your marketing closes the customer, all by itself, then in many cases a sales person has to finalize the deal. Which makes sales commissions another cost of acquiring the customer.

And especially if your sales people (with commissions) are your marketing medium, that cost really does need to be included.

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PPG19

7 years ago

Originally Posted by SARubin

Any costs directly associated with acquiring a customer.

Marketing is one cost...

But unless your marketing closes the customer, all by itself, then a sales person has to finalize the deal. Which makes sales commissions another cost of acquiring the customer.

And especially if your sales people (with commissions) are your marketing medium, that cost really does need to be included.

No, not all the costs, it's here where we disagree i think. CAC is calculated on MCC only.
If what you are saying was true you would include all type of costs and expenses like renting an office space for example because that would be required to have an in house sales team...

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SARubin

7 years ago

Originally Posted by PPG19

No, it's here where we disagree i think. CAC is calculated on MCC only.

Well, an exchange of different ideas is one thing a forum is good for. We may not always agree, but at least we can see things from different points of view.

Originally Posted by PPG19

If what you are saying was true you would include all type of costs and expenses like renting an office space for example because that would be required to have an in house sales team...

I personally wouldn't take it to that deep of a level (but some other people might?)

For my taste, CAC is anything directly related to customer acquisition (and I might go 1 or 2 levels deep, before segregating the costs to a different category)

Anyway, nice exchanging ideas and methodologies with you. I just hope we didn't completely confuse the original poster, by diverting too far from his original question.

All the best,
SAR