THE BLOG
03/31/2011 02:25 pm ET | Updated May 25, 2011

How Much Should an Affiliate Get Paid?

If you are like many of my coaching clients who create product launches that involve affiliates you want to make sure you are offering fair compensation in return for their support.

Before you can determine a percentage or a flat-rate fee, you need to weigh a number of considerations when you structure your product offering.

What is it worth to them?
Think like an affiliate. There is always a cost (hard costs and time) when you are sending out to your list; paying a list service, paying an assistant to get email copy and scheduling set up, and the loss of people who drop off your list whenever you promote something (it doesn't generally grow your list to promote products).

It's more important to look at the actual dollars an affiliate will earn as opposed to being hung up on a percentage. For instance, 50% is the average but is it worth an affiliates' time to promote your $6.95 product? On the other hand, the prospect of earning 50% of a $2,700 product is promising, but if you are not well known and don't' have a strong platform you won't convert and the affiliate won't earn any money. Is it worth it to jeopardize their list and their time and money to promote it?


Consider your hard costs

Obviously you have to determine your own hard costs. If you have a product that you are selling at $59 and your hard cost is $25, you have $34 left in profit margin. If you give your affiliate partner 50% of the $59 ($29.50) does it make sense for you do that? It might. Here's why.

Determine the Value of the Upsell
It is not necessarily the first transaction that is attractive to an affiliate, but the conversion rate which results in long-term, higher commissions.

If someone approaches me to be an affiliate for a great offer for $59.99, I can see it is a good fit for my audience and they are paying out 50% commission and there is an upsell, I am interested. If they typically convert 15% of the people who buy their $59.99 product up to their $795 product and I am getting paid on those sales as well, I am on board.

If you have a strong conversion upsell rate and the higher product has a low hard cost to you, that's when it is worth it for you to give a higher percentage upfront. Some people are paying their affiliates 75% because it is so valuable for them to have that potential new client because they will buy something else of value beyond the initial sale. It's that valuable.

If your conversion rate is high, set up a tiered commission where you pay a bigger percentage on the lower end product and a smaller percentage on the higher end. You will make more money overall. You can also pay the affiliates on the next level product the customer buys from you but not on every product.

At the end of the day, always respect your affiliate relationship. Any offer you present must have value based on the potential costs I mentioned earlier. Lastly, never market to your affiliates. My personal belief and practice is to never add my affiliates to my subscriber list. I would not market to them without their permission. They can add themselves if they want but I would never presume to send a blast message to them.

If you are earning commissions on products you promote, the Federal Trade Commission guidelines state that you must have a disclaimer that you are a paid affiliate. For more details, go to http://www.ftc.gov/