Tuesday, June 20, 2006

Setting Affiliate Commission Levels

So, you finished your product, got your Clickbank membership and are ready to put your new item into the listings. One box in the submission form, however, remains empty as you think about what number to type in.

Before you choose one, take a moment to turn away from that screen and think about what number will work best for you. That empty form is going to be where you insert the commission rate you are willing to pay affiliates.

Let's consider how that number should be determined.

First, consider both the size of the potential market and the asking price for your product. If you are selling a product to a fairly small population segment, you may have to offer a particularly attractive commission to attract affiliates. Of course, this will decrease your earnings cap, but it can improve your real earnings relative to what you may have been able to get at a lower commission rate.

The asking price is also relevant. Not only does it have a potential impact on the possible number of customers, it will also play a role in what represents an acceptable rate to affiliates. For instance, if one is selling a $3000 item, most affiliates will be amenable to accepting a lower percentage because the potential payment per sale is still higher overall than it would with a less expensive item.

Second, try to objectively assess the quality of your product relative to others in the same niche. Better products are more likely to gain market share, making it possible to get by paying a slightly lower commission. If your product is clearly a third-place project, you will have to consider high commissions to inspire participation in the product's marketing.

Third, price the competition. Learn how much others are offering for similarly priced items. You don't want to pay your affiliates more than what's fair, but some research may demonstrate that the only way to compete for affiliates is by offering more than you may have thought. This research will give you a good idea of what would constitute an appropriate range of possible commission points.

Finally, don't forget about yourself. Make sure the commission you offer is not going to cut into your profit too much. You didn't acquire a product and recruit affiliates just to watch them get rich! Make sure the number you choose still allows you a fair opportunity for profit.

These four considerations provide a good idea of some of the factors one must consider when setting an affiliate price. By carefully assessing the market, your asking price, the quality of your product, the commissions offered by the competition and your own needed profit margin, you can arrive at a fair commission price that will keep everyone happy.

David Cooper is the editor of the Affiliate Marketing Articles Newsletter. David specializes in helping entrepreneurs determine how to set their affiliate commission levels. Subscribe to his FREE newsletter at:
http://www.affiliatemarketingarticles.com