Dealing with clients is never easy – especially those who haven’t had any previous experience or knowledge of Affiliate Marketing. A few things I recommend are non-intuitive, and seem to go against accepted wisdom – but are essential to distinguish a mediocre campaign from a great one. What commission to pay is frequently an area which needs explaining.

Commissions aren’t everything. But when presented with a competitor campaign analysis, a client will point to his biggest competitor and insist on matching or bettering the commission he’s offering his affiliates. Obvious? Things aren’t as simple. Is a program that pays 15% comission necessarily more attractive than one that pays 13%? No.

What you really want for your client is a low cost per conversion – to sell as many items as is possible while paying out as little in commissions as is possible [1]. In that case, what you want to look at is the EPC, or earnings per 100 clicks [2]. The EPC for the affiliate is the cost per conversion (CPC) for the merchant.

We begin with an EPC value equal to or lower than, say, the client’s current EPC for his PPC (Adwords/Overture) program. Now we calculate what commission the client should offer:

EPC = (percentage of clicks that result in a sale) X (average value of a sale) X (commission) X 100

Now we know the EPC, the average value of an online sale (the client can tell you that, based on his past sales records). That leaves only the sales-to-click ratio to be estimated. This is where past experience is invaluable. I rely on past campaigns that I’ve run and use those as estimates (which turn out to be fairly accurate).

Now you know better than to rely on simply matching your competitor’s commissions – your client could be paying a lot more than he needs to for the same sales volume!

Notes:
[1] Note the difference – “as little in commissions” is a dollar term, while “percentage commissions” is a numerical term.

[2] Earnings for the affiliate, not the merchant!

- Rahul.

Rahul Gaitonde is an Affiliate Marketing consultant with Convonix Inc.

Tags: Affiliate Marketing

This entry was posted on Monday, June 4th, 2007 at 2:09 pm and is filed under Affiliate Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.