A Short Quiz. How Well Do You Analyze the Affiliate Profit Potential of Your Products?
Time for a little break from the figures. Just in case you’re a little unclear about what I just said above, I want to hit you with a few examples to demonstrate my point, and to prove that you do actually know how to analyze the situation effectively and make changes to your advantage. So here are some examples, and some questions for you. You just learned how to do something new. Here’s the proof.
Example one: A year or two back (This is a true story by the way), someone I met through one of my sites tried to strike a joint venture deal with me. It was a JV of the simplest kind. He gives me higher commissions, and I promote his product. Ignoring the quality of the product right now and just concentrating on it’s earning potential, he had a $57 product, and offered me two dollars per sale, one off commission. It’s probably quite obvious at this point that I said no at the time, and for good reason.
Would you promote anything for $2 per sale on a one off single level commission? There are far better deals out there.
So what do you reckon he could have done to entice me further, improving his offer at the same time? Try and come up with a couple of ideas based on what we’ve just talked about before reading on.
How about bringing the commissions up to an even 60% for a start? It was a JV after all, so I’d expect higher than average commissions. Even at 50%, I may have been tempted to accept. Hey, it’s a quick burst of cash, it was possible I may have said yes. So how else could he have enticed me? Remember back to the four points we discussed a few minutes ago..
How about some commissions over two level? That would have meant my one off promotion, while not reoccurring isn’t quite so one off anymore. If he wanted to entice me further, he could have dropped the commissions to maybe 45-50% and offer a monthly recurring commission if the product allowed this.
Taking things a step further, what if the product he had been selling for $57 was a low ticket item that fed through to a high priced one off sale for $200-$2000 per sale at 50% commission? I definitely would have gone ahead then if the product was quality.
Do you see how bad design of a pay plan or product in general can doom it failure from the start, unable to be revived without some major overhauls to how the whole sales system works? You may wonder why you’d change the way your whole business works just to get me promoting, but that’s not what it’s about. In general, affiliates are after the same thing in a program they’re going to promote, whether it’s me, or any of the other thousands upon thousands of them out there.
Can you also see how through this last snippet of information about bringing a low priced product through to a high priced product, you can attract people who wouldn’t normally promote a $20-$50 product for someone else? There’s plenty of people out there who only promote for others if it’s a high ticket item. This is a great way to carve your way through the competition and start pulling in the joint venture prospects that do just that. Joint ventures are a whole new ball game however, so we’ll continue on now through affiliate management.
All About Adding Value
So you see, it’s all about adding value, something that many demote to just a product sales relevant technique, however it is one of the biggest improvements you can make to any of the resource building parts of your business, be it affiliates, list building, JV’s, returning customers, any of them.
Your product doesn’t have to be the most expensive, or offer the highest first level commissions in the world. It doesn’t even have to off reoccurring commissions either, but it does have to be worthwhile for anyone to consider promoting for you. And remember, it’s about building affiliates for the future rather than to make a shed load of money in a few hours. If you have to give a little bit more away short term to gain long term affiliates and contacts, that’s definitely one heck of a good deal. Don’t think of it as having to wait. Think of it as having the choice to earn $100 extra a week for the rest of your life, or having to be patient but earn $1000 and more extra per week for the rest of your life for example. I know which one I’d choose.
The General Rule
Here’s a general rule to go by. It doesn’t apply in all cases, but in most. The better your product is, and the more the affiliate earns over time, or the higher the commission for the single sale product, the more affiliates you will attract, the more money you’ll make. This should give you a good insight into what to do with your levels, reoccurring level, and overall percentage.
If in doubt, pull out that calculator and start working out how much you and your affiliates will earn with a select number of sales over a period of time in a theoretical situation. There’s nothing wrong with doing this to get an idea of the kind of figures you’re likely to be seeing, but I’ll be honest with you, nothing beats testing, not to mention playing with numbers is a heck of a good motivator.
A Brief Glance at Innovations
One more thing we need to look at when we are dealing with what kind of percentages to give your affiliates and what levels to set these at. There are some innovative ideas floating around out there about getting the most out your affiliates with regards to commissions. Look at quick start bonuses for example. How about offering 100% commissions for the first month, and then a smaller percentage ongoing afterwards? Quick start bonuses seem to be growing ever popular in the race to have affiliates promoting your product. It’s worth thinking about what other types of ways, bonuses, and loyalty schemes for long term affiliates you can bring to life, too. You just might come up with the next big thing. If you’re unsure though, it’s best just to go with tried and tested methods we’re talking about here.
Ok now we’re done with setting up the affiliate program itself, and you know how to go about levels, reoccurring systems and percentages depending on your situation, it’s time to look at those all important methods of actually getting these affiliates that have signed up to promote for you effectively. Not just once, but over and over again, because lets face it; An army of loyal affiliates means you can keep churning out quality products, and you’ve got people there ready to promote for you, and that’s before you’ve sent ads to your list, anyone else’s or gone in search of joint ventures for the project. Powerful stuff.
We’ll do this after a quick summary of what we’ve just talked about so it’s easier to commit to memory. Skip the summary if you don’t need a refresher or believe all the information has sufficiently sunk in up to this point.
Affiliate Program Management Summary
● What you won’t find here is technical information. What you will find is solid marketing information that’s going to make sure that you get the best out of your affiliates, and to demonstrate why this should be one of your highest priorities.
● Let’s talk first about affiliate programs and how important they are, and what they’ll do for your business. Also how they have a correlation, or even a direct connection to another marketing methods that we’ll talk about in a moment.
● So, why do affiliate programs make success much easier to come by? Well, to put it as bluntly as I can, can you imagine trying to sell a thousand units of your product on your own? That’d be pretty harsh on your pocket, and your time in most cases.
● Now, imagine you had a hundred people standing beside you with the same or greater promotion power than you. Can you imagine selling a thousand units of your product now you have a hundred helpers? You’ve immediately multiplied your promotion power by one hundred times.
● Let me put a scene to you using real monetary terms. You’ve just launched a brand new product, which happens to be pretty similar to someone you know, Mr. X. You both launch at the same time, but the difference is you’ve taken affiliate marketing seriously and have 150 affiliates in your system already, where he has none.
● Both of your products are priced at $500, and you both each manage to sell ten products, totally on your own, for a profit of $5000 each. You’re about even so far, until your affiliates come in. Of course not all your affiliates are going to be heavy hitters or even promote anything, but lets say for this example, just a measly 10% of them make three sales each in that same month at 60% commissions.
● Pulling out my handy calculator, I can tell you that those small number of sales have just made you an additional $9000 and $13500 for your affiliates, bringing your total profit for the month to $14000.
● While you and your affiliates are laughing all the way to the bank, Mr. X is devastated because he didn’t put an affiliate system into action and pull in the type of money and success that you have.
● Now, you can see the importance of such systems. Don’t let anyone ever tell you that you’re wasting your time setting this up, or attracting affiliates. You’ll likely hear things like ‘I tried it but hardly any affiliates promoted for me’. You can see how few it takes to really make your earnings something special.
● It’s true that the rates of promotion can vary, depending on your business, and the quality and experience of the affiliates. Some will forget they signed up. Some will sign up and then get distracted, and some just haven’t built up the resources to point that they can readily make many sales. We’ll address this in a moment.
● Looking at this type of sales figure always gets me excited. Have you ever seen people making 40, 50, 60 even a hundred thousand dollars plus per month, and wondered how they pull in this amount? Well, let me tell you, affiliates are a big part of it in most cases. Don’t miss out, or you might find yourself just getting by instead of extremely comfortable where income is concerned.
● The second reason that you may be told affiliate promotion isn’t worth it is the notion that affiliates are hard to find. This goes in the same box as list building. It’s not hard to do if you know how.
● We’re going to jump ahead now, and start to build up a picture of the ideal affiliate program, with a view to getting your affiliates promoting. The rest of this report contains some fundamentals, so keep reading even if you don’t have a system set up yet because it will provide a solid knowledge base and assist you in understanding what your software needs to be capable of.
● First and foremost, a big aspect in getting affiliates in the first place and getting them to promote for you is the front line, the commission per sale that you’re offering them. Think high.
● I want you to put it out of your mind that giving affiliates more per sale than you make yourself is a bad thing and you’re losing money, because you’re definitely not.
● Lets look at some examples to show you that high commissions on paper looks like less profit for you, but in practice actually means more profit for you. A short term single sale and a long term recurring membership commission example.
● Lets start with the membership site. Let’s imagine that you’re running a membership site with a price tag of $15 per month. Within a single month, if you managed to refer 200 members on your own, that’s $3000 per month. Not bad, a handy little earner. The problem comes when you start talking 60% commissions for affiliates. That leaves you with $6 per month profit per sale. Doesn’t sound a lot does it?
● That looks like a massive cut in profits, but lets say again that you have 150 affiliates, and this time, due to the lower price, and it being slightly easier to get people to part with their cash compared to a $500 product, 15 of your affiliates refer 15 members each that just happen to stay with you for a year. That’s a miniscule $300 extra per week. Now some might see that as not worth it, but let’s add that up, $16,200 per year. It looks a better now. I could buy myself a juicy 64″ plasma screen or 6 brand new top of the range computers. What would you spend an extra $16k on? Not a bad little earner for something that originally took your profit per sale down to a measly $6, especially when you take these very modest figures and spread them over several products.
● I think this is where the whole affiliate program is a bad thing and cut profits state of mind comes in, but that’s not the case. A sale by an affiliate earning 60% doesn’t cut your profits by 60%, instead it’s a gain of 40% on a sale you may not have made in the first place. This is my personal reasoning for not being worried about setting higher than average commissions (60% and upwards). The potential for this is huge.
● The one thing that I do want to show you right away, before we start talking about response rates and the like, is that building affiliates is not an overnight thing. It’s like list building, the more products you launch, and promote, the more Jv’s will come your way, and in turn the more people will join your list and your affiliate program. Don’t fret though, just because it won’t happen overnight, you’ll see later, that it can take just a few weeks.
● Let’s look at some of the nuances an specifics of actually running your affiliate program now, beginning with the forefront of your affiliate system, your commissions.
● Your first option when setting up your system, will likely be how much do I grant in commissions and on how many levels? The answer in itself really isn’t all as complex as it might seem.
● The first thing you need to do is look at things from an affiliate’s point of view. We’ve been spoiled lately with commissions as high as 80/90 even a hundred percent for single month in quick start bonuses.
● Taking this into account, your commissions on the first level should be at the absolute bare minimum 40%. Anything less and you won’t attract the numbers or the quality in your affiliates. You should think of 50-55%% as an average nowadays with anything above that, above average.
● Next up, level two. The all important second level, an important aspect from your affiliates point of view, due to this providing them with a reoccurring passive income, where the people they refer, refer others, and they earn on this.
● I know people who won’t even promote affiliate programs unless they have a second level up there (very important to keep this in mind), so a second level commissions is a must. Use your discretion, and remember whilst you’re selecting your levels and commissions to look at things as if you were promoting your stuff as an affiliate. If it doesn’t look like an attractive deal to you, it probably won’t to anyone else either, and you need to improve that before launching.
● There can, however, be times when 40% commissions and a second level commission may not be viable for tangible products for example, or if you have high per product production costs.
● Still, in this case, go ahead and create yourself an affiliate program, whether it’s five, ten or even twenty percent. It may not get you as much interest and your affiliates might not come in as thick and as fast, but you’re still making additional sales, albeit at a slower pace.
● The next thing we need to look at when setting affiliate commissions is your product price and your product structure. There are four situations and product types that really pull in the performing affiliates. These four conditions are: one, where you have a high ticket item, two when you’ve set higher than average commissions and three, when the commissions are reoccurring over time, whether it’s a direct reoccurrence of a monthly membership site, or an indirect reoccurrence of a second level, four providing a passive income for the affiliates promoting.
● I’ve had people ask me why they’re having trouble attracting affiliates that actually promote something for them, and more often than not, their product is a $10 one off sale with no follow-up product. $5 one off commissions isn’t going to attract anyone. Would you promote this product when you have a choice of using your hard earned resources and promoting for 60, 70 even eighty percent commissions, either reoccurring or on products from $60 up to $1500?
● So before you actually decide to shell out on some sort of affiliate system, make sure that you don’t price yourself too high, offer commissions that are too low, non re-occurring or don’t have a second level. Put yourself in the affiliates’ shoes.
● Just to give you an example of the kind of offers you’re going to start to receive when word gets out, the very first offer I received was from someone promoting a $57 product that offered me $2 per sale. When I told him I don’t even consider promoting for anything less than 40% he was shocked that he’d have to give so much away as he put it.
● So, what do you reckon he could have done to entice me further? How about bringing the commissions up to an even 60% for a start? It was a JV after all, so I’d expect higher than average commissions. I may have even been tempted to accept 50%. Hey, it’s a quick burst of cash. It was possible I may have said yes. So how else could he have enticed me? How about some commissions over two levels? That would have meant my one off promotion, while not reoccurring isn’t quite so one off anymore. If he wanted to entice me further, he could have dropped the commissions to maybe 45-50% and offered a monthly recurring commission. Taking things a step further, what if the product he had been selling for $57 was a low ticket item that fed through to a high priced one off sale for $500-$2000 per sale at 50% commissions? I definitely would have gone ahead then if the product was quality.
● So, you see, your product doesn’t have to be the most expensive or have the highest commissions. It doesn’t even have to be reoccurring, but you must make it worth while from the affiliate’s point of view.
● Here’s a general rule to go by. It doesn’t apply in all cases, but in most. The better your product is, and the more the affiliate earns over time, or the higher the commission for the single sale product, the more affiliates you will attract, the more money you’ll make.
● This should give you a good insight into what to do with your levels, reoccurring level, and overall percentage. If in doubt, pull out that calculator and start working out how much you and your affiliates will earn with a select number of sales, over a period of time in a theoretical situation. There’s nothing wrong with doing this to get an idea of the kind of figures you’re likely to be seeing, but I’ll be honest with you, nothing beats testing.
● Now, one more thing to look at when we’re dealing with what kind of percentage to give your affiliates and what levels to set these at. There are some innovative ideas floating around out there about getting the most out your affiliates with regards to commissions. Look at quick start bonuses for example. How about offering 100% commissions for the first month, and then a smaller percentage ongoing afterwards? Quick start bonuses seem to be growing ever popular in the race to have affiliates promoting your product. It’s worth thinking about what other ways, bonuses, and loyalty schemes for long term affiliates, too. You just might come up with the next big thing. If you’re unsure though, it’s best just to go with tried and tested methods being discussed here.
● Ok now we’re done with setting up the affiliate program itself, and you know how to go about levels, reoccurring systems and percentages depending on your situation. It’s time to look at those all important methods of actually getting these affiliates that have signed up to promote for you effectively. Not just once, but over and over again. An army of loyal affiliates making both them and you a lot of money.