Are you struggling to attract affiliates to your program? Looking for the secret sauce to make your affiliate program irresistible? You’re in luck! In today’s episode, we dive into the art of attracting affiliates with the right commission structure. I share the strategies and techniques that will make your program stand out from the crowd and have affiliates flocking to join you. I’ll even share some creative ways to incentivize top affiliates without breaking the bank. Let’s dive in!
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Podcast Episode – How to Negotiate Affiliate Deals That Benefit Everyone
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Previous Episodes of The Affiliate Guy
BREAKING NEWS: What the 2023 FTC Updates Mean for Affiliate Marketing
Why Your Affiliate Program is Failing (And What to Do About It)
How to Build Strong Relationships with Your Affiliates
10 Lessons I Learned Launching a Bestselling Book
How to Attract Affiliates with the Right Commission
Are you struggling to attract affiliates to your program? Looking for the secret sauce to make your affiliate program absolutely irresistible? We are in luck.
In today’s episode, we dive into the art of attracting affiliates with the right commission structure. I share the strategies and techniques that will make your program stand out from the crowd and have affiliates flocking to join you. I’ll even share some creative ways to incentivize top affiliates without breaking the bank. Let’s dive right in.
So today’s episode is all about attracting affiliates with the right commission structure. And we’re going to start with looking at a basic commission structure. And then I want to talk about some creative ways to get affiliates going, to get them excited, to motivate them, to incentivize them that maybe don’t involve money, at least on the front end for those of you out there who maybe are just starting out.
So some of the stuff I’m going to share, you go, well, that’s really easy when you have a ton of money. Yeah, some of these are things you should do when you have more money, and some of them are things that you’ll do when you’re starting out. So I want there to be kind of a broad array of possibilities today.
So what I encourage you to do is when you hear something, you go, well, I can’t do that. I don’t have the budget for that or whatever. Don’t just shut down and stop listening.
I’m going to talk about some things that are for every budget, literally from the person who has $200 in the bank and you’re starting your business and you’ve got your first couple of affiliates to people who’ve got millions and everything in between. All right, so let’s start with that basic commission structure. I get asked this all the time, Matt.
How much should my commissions be? What should my commission structure be? And the answer is, it depends.
There are so many factors. What type of market are you in? What’s the actual product is it a physical product with low margins.
I’ve worked with companies like Shutterfly and Adidas where the margins are only 20% to 25%. So if we pay, like with Shutterfly, we had a very competitive commission by industry standards. It was 10%, 13% for I’ve talked about this before, but like storefronts nonprofits and stuff, 13%.
If I did that in digital course world, I would get laughed at in the coaching world, where maybe the offers are $50,000, but the commission is 2500 to 5000, that’s different. And that’s a lot of money because you’re spending a lot of time with them. So it really depends on the type of product and the market.
Generally speaking, the higher cost of goods, the lower the commission. Obviously, the more time and the more handholding you personally spend with somebody, the lower the commission. But I’m going to walk you through that basic structure.
This is a starting point. This is not the end all, be all. So the first thing we do is we start with the price.
You are not going to pay a $200 commission on a $100 product. There might be reasons to do that. Well, we can talk about those later.
But then from there, you’re going to subtract your incremental cost. What do I mean by an incremental cost? Well, I get a lot of people who say, well, if I’m going to produce this course, I’ve got to go to the studio and I’ve got to hire somebody to do this, we got to edit it, and I’ve got to do all this.
Well, you’re going to pay that whether you sell one or 1000 courses, the studio time. I’ll give you an example. The last course that I produced cost roughly 13,000 – $14,000 from everything included was about probably more towards $14,000.
I was going to spend that $14,000 if I sold zero courses. And I was also going to spend that. I did. Whether we sold 500 on the initial offering didn’t matter. I spent the 14 grand.
So that’s not an incremental cost. An incremental cost is, okay, every unit we sell, we have to pay $40 for access. That’d be ridiculous with stuff like Teachable and Whatnot Today and Social Glow and other companies. But let’s just say you had to pay that for some reason. There was something going on.
Okay, for every 100 members, for every 100 people that sign up, you need to hire a community manager at $50,000 a year. So for every 100 people that sign up, you’ve got to spend $50,000. That’s a reasonable cost.
If I’m doing my math right, that’s $500 per customer. Okay? So that’s not outrageous, especially on some higher end courses to have like, a community manager and something like that.
Another incremental cost would just be if you provide access to software that maybe you license and okay, everybody who joins you’re licensing this $100 software, that’s an incremental cost. So just for some perspective, like our most recent couple of courses, we have virtually no incremental cost. I mean, it’s maybe in the neighborhood of $20-$25 per course.
So it’s very low. But we do subtract that when we’re calculating this. Then we subtract the time. This is not a cost. This is your specific time. If you have a business partner, it would be their time. If you’re hiring somebody, you just subtract the cost for that. That’s just a cost.
What I mean by this is when I say subtract my time is if I’m giving a 30 minutes coaching call to every single person who signs up for the course, I want to factor that in.
I cannot sell a course for $300 and then give a 30 minutes coaching call to everybody who signs up. There’s no way to be able to pay a fair commission and do everything else and make it worth my while. Now, I’m not going to factor in my time at, like, my one on one coaching rate.
I’m going to downplay it and just say, okay, what’s my time worth to me to be able to do this? I’m going to subtract that. Again, incremental time only, not the time it takes to produce the course.
I’m not even going to do it if it’s like, okay, we do group coaching. So if I have 500 students and they can all come to the group coaching call, that time is not factored in. This is incremental time only.
The fourth thing you want to do is decide what you want to make. I don’t want to make less than $200 per unit. It’s just not worth my time.
Or I don’t want to make less than $10 per shoe or whatever, $500 per widget, whatever the case is, I don’t want to make less than that. So you have to factor that in. And then the last one, and this is the most important one, you got to look at the competition.
You have to look at the competition. If the competition is paying 30%, you need to be in the ballpark. You need to be at 20. At the minimum, 25, preferably. Do you have to compete with them directly? Oh, they’re at 40%.
That means I have to be at 40%. No, but generally speaking, you want to be within 25. I would say 25% to 40% of them.
And what I mean by that is 25% of 40% is 10%, right? So you want to be no lower than 30% on a 40% commission. If your competition is paying 40.
If your competition is paying 15%, you can be no lower than 10. I mean, technically you could be 9, but why would you be at 9%? That’s just weird.
Go to ten, make it it’s much more attractive at ten than nine. If your competition is at ten, you better be at six, probably at eight, to be competitive.
All right, so an example of this calculation, let’s just say you got a price point of $500, and you got a cost of $200.
That is a fixed cost per unit. That is literally, if we’re talking a widget, it cost you $200 to manufacture it and ship it to get it in your and then ship it to you and then ship it to them per unit. Right?
Not sure how much to pay your affiliates? Watch my free video tutorial on YouTube that walks you through step-by-step.
If it’s a community, then it costs you $200 incrementally per student for community manager and coaching. For this example, let’s just say time is zero, you’re selling a digital course, or it’s just basically something where you’re not offering any coaching from you. So time is zero.
Usually that’s the case, and you say, you know, I don’t want to do this for less than $100 a pop. So right there, 200, 100. We’re left with $200.
We could offer a 40% commission. Now, we look at the market, we see that the market’s average is 30% on a $600 product. So they’re making about $180 a pop.
We have a $500 product. Now, I’m going to then look, and I just said the average is 30% on a $600 product. Now I’m going to go kind of and look at the high end and say, okay, the high end people, they’re at 40%, and their product is about $500.
So they’re paying $200. In that case, I’m going to compete with them. I’m going to go to 40%. I said I only want to make 100. So if it costs me 200 and I spend 200, I’m going to make my $100.
I might go a little bit lower. Depending upon various circumstances, I might go as low as 30% and then offer some incentives to get them higher. I might even be willing, on big affiliates, say 100 sales per month or more. I would be willing to eat into those margins a little bit and maybe pay like 35% plus some incentives where they make upwards of 42%, 43% in incentives and things like that.
Now, ultimately, what really matters is EPC earnings per click. If I’m an affiliate, I don’t care what your commission is. Now I do look at your commission, because if your commission is 10% and everybody else is at 30 or 40, I’m like, that’s insulting.
Your conversions are not going to be so much better.
That I can afford you to pay me such a lower commission. But if you’re at 30 and they’re at 30 and maybe this other guy’s at 35 and this other guy’s at 25, ultimately what matters is how much am I going to make per click. So we’re talking about conversions and that factors in, and we’ll talk about that a little bit later.
But how much if I send 1000 clicks and your offer we’ll just do the math on this. I might screw up the math, but let’s just say we both convert at 50% and both products are $100, well, then the higher commission wins. But if I convert at 60% and you convert at 50% and our price points are the same and we offer the same commission, well, then you’re going to make more money with me because of the higher conversion.
But let’s just say I offer 5% less, but my conversions are what’s the math on it? Well, you’re still going to make more money with me if we have the same price point. And then of course, you got to factor in like, okay, if the price point is higher but the conversion rate is lower and the commission rates the same and all these things, well, all that factors into that EPC, what am I going to earn for sending 1000 clicks or 100 clicks?
Doesn’t matter. If I’m going to send a lot of clicks, what am I going to earn? That’s what matters to me as an affiliate.
So that’s what you’ve got to focus on as an affiliate manager. Now, let’s say you can’t offer a higher commission than the competition. You just can’t.
What are some creative ways that you can still attract affiliates? Well, I discussed a few of these, I think it was about three or four episodes ago. I talked about negotiating affiliate deals that benefit everyone.
And I shared kind of touched on some of these, one or two of them at least in that context. Like, how do we negotiate a deal? How, as an affiliate, do I get a little something, some extra when maybe they can’t afford to pay me more?
And as an affiliate manager, how do I get them to actually come on board when I can’t afford them, pay them more? So the first one is just again, this one means you’re going to spend more money and maybe you can’t do this one. But could you offer some tiered commissions?
I mentioned this a moment ago. Okay, I can’t offer 30% across the board. The competition is at 30%.
I can’t do that across the board. My margins are going to be too low. So what do I do?
Well, maybe you advertise a 25% commission or a 20% commission even. But anybody who does 100 sales or more gets that 30%. You go, man, that really eats into my margins.
Yeah, but it’s on a lot more sales and it gives people something to shoot for. One of the things you have to remember that I share so often with regards to affiliate bonuses is if somebody’s going to make 60 sales and you incentivize them heavily to get to 100, keep in mind that next month they’re only going to get to 70. The next month they’re only going to get to 82.
And then the next month 94, and then 97. And so for four months, you got increased sales for that incentive without paying the bonus. And that’s why I love flat like bonuses, where it equals that percentage.
So let’s say instead of offering a 30% commission, you offer a 25%, but you pay them a bonus of the 5%. So on 100 sales, you just give them a $500 bonus. If they land on exactly 100 sales, yes, you’d outpaid 30%.
But what if they hit 111? That’s really now you’re paying only effectively a 29. 3%
commission or whatever the math might be, 28 and a half, something like that. You got all those extra sales for only really a three and a half percent 4% bump. So look for those ways you can do tiered commissions or bonuses that get people that drive people to create more sales, but don’t necessarily, especially early on, result in paying a higher commission.
The second thing you can offer, and these are in no particular order, by the way, is offer free trials. I mean this both as an offer, but also as an incentive to affiliates paying for free trials. So the first thing you do is you offer them, especially if you have a software or some sort of a monthly access type thing, offering your affiliates the ability to promote free trials.
That gives them an unbelievable marketing edge. So if I’ve got $100 a month software, and you’ve got $100 a month software, and we convert similarly and all those things, but I can let the affiliate promote via free trial. It’s a much easier promotion for them and something they can run on a continual basis versus feeling like they have to sell, sell, right.
So it creates this marketing edge for you, even if all other things are equal. And the second thing is to pay for those free trials. If you can, maybe you can’t offer more on the sales, but you can offer on the free trial.
And this becomes a very attractive thing to an affiliate. So the math on this, let’s say you have $100 a month software, and you convert 20% from free trial into paid customers, and they stay an average of two years, so they stay for 24 months. So you’re going to make $2,400, right?
You’re going to pay a 25% commission. So that’s 2400. That’s $600 you’re going to pay.
You’re going to make one $800 over those two years. But what if you also paid a bounty per trial? And just for example, let’s say you paid a $50 per trial bounty, if you know your numbers and you convert 20%, that means you’re paying $250 for that $2,400, you’re basically paying an extra $10 a month.
That’s really what it works out to, an extra 10%, roughly. You could go lower though. Maybe you offer a $10 per free trial, but if you send 50, it bumps up.
And if you send 500 in a month, I mean, think about that. If somebody can move 500 free trials or 1000 free trials, you might be willing to pay substantially more per free trial in addition to the commission. So this becomes a really attractive offer to the affiliate because they know the thing they control is the free trials.
And man, if I can get 500 people, I mean, I’m instantly going to make, let’s say you go $20 per, I’m going to make another $1,000 plus. So this gives them that immediate hit, gives them some revenue right now, and they know they’re going to make revenue long term. Now, if you’re worried about a bunch of bogus trials, like where somebody is going to send hundreds of to make thousands of dollars in bonuses and their trials don’t convert, put it in the language that your trials have to convert at a reasonable or comparable level to the average or higher.
And so what we’ll then do, we do this with leads, contests as well. So it’s like, oh, if you send 1000 leads for the webinar but none of them convert into sales, well, we don’t pay you on those. Those are bogus leads.
The same is true with trials. So if your normal conversion rate is 20%, like this example, and somebody converts 19%, you pay them. You pay them on all the trials because 19% is comparable to 20%, I would say, like in that case, 15% or lower.
And no, you don’t pay them. Now you’ve got to make that choice. If somebody just maybe had a funky month, if the three months before they were converting in an average of 20% roughly, and then suddenly in one month they convert only 13%, I would still pay them on their bonuses that month because you don’t want to lose them.
Okay? The other thing here is make sure that you’re checking those conversion rates. The bonuses we will pay them typically after we would have some sort of a way to know how they’re going to convert.
So we would pay the bonuses, say, a month later than we would pay their normal commissions just to be able to verify things. So that’s how you avoid those bogus trials. Paying on the trials is a great way to just incentivize.
And it’s kind of like we’re willing to do something a little bit extra. And it’s kind of a very creative way of getting affiliates motivated to promote you when maybe you can’t pay a higher commission rate. Next, you can offer exclusive coupons.
Don’t make the same mistakes I’ve made with my affiliate programs. Learn my top 20 affiliate program mistakes…and how to avoid them!
This is a way of, again, motivating and incentivizing affiliates without paying more money necessarily. Obviously we hope to pay them more money because you hope they’re making more sales. But this is a way of giving them something that not everybody has.
So whether it be an exclusive coupon code that effectively gets the same thing as everybody else, or just could be a special deal, maybe you have a specific product that this affiliate really wants to promote because this particular product is perfect for their audience. And you offer them an exclusive deal on this specific product with a coupon code. So like coupon code matt, 25 gets you 25% off coupon code, whatever.
And then usually that’s how you do it. Like their first name and then a number or something like that, or their brand name and a number gets you 20% off, 25% off this one thing. That’s something you can offer them and nobody else can necessarily offer them that.
And if you get creative and think, how can we really motivate an affiliate with something you don’t necessarily have to pay more money. The next thing is access to training. And I specifically mean not only to help them with affiliate marketing, to help them promote them better, because if I’m going to get training that helps me make more sales and somebody else is not going to train me, I’m going to pick the company with training.
But also how can they train me to help me with my own stuff? And I’ve got a couple of examples of that that I’ve employed over the years. There have been opportunities where I basically in a given month, had to choose between two different promotions.
They were both around the same time and we could not promote both. I chose the one where I knew their affiliate program was going to help me so much along the way. They were going to make sure by gosh, that we had a great promotion and so I went with that one.
There have been times where I wanted access to that product because I knew it would help my business or they were going to offer some things. Like one of the bonuses was that they were going to coach me. I did this years ago where there was one particular affiliate program and I was particularly attracted to.
They didn’t have a ton of money. Like the bonuses they had were not like first prize is like $25,000 whereas some of the other was like $100,000. And I was in the running.
I ended up finishing third place and I think we got like a $7,500 bonus whereas third place and other promotions that were just as big might have been 2020, 5000. And we chose to go with this one because their bonuses, they had a mastermind for their top affiliates, which I really wanted to be a part of. And then the person who ran the launch would coach me.
So I got like a 4 hours of coaching and there was particular thing I wanted coaching on and then I got access to their software, which was this particular software was really expensive and I got access to a bunch of other stuff that didn’t necessarily cost them money that they didn’t have. So it’s one of those things like the value to them, what they were going to spend on these prizes was a few thousand dollars. The value to me was $25,000 plus.
So think about ways where you can increase the value to them without increasing the cost to you. And training is one of those things. Obviously better conversions.
Having better conversions is a great way, all things being equal, if you have similar commissions and your thing converts 10% better, I’m going to choose you. Like I said earlier, if you pay 30% and somebody else pays 25% but yours converts at say from click to sale converts at 2% and theirs converts at 3%. Oh my goodness.
That’s a 50% increase in conversions for only a 5% decrease in commissions. So if you can’t afford to pay more hone in on conversions, what can you do to get those conversions up? One 10th of 1% and then another one 10th of 1% and then another one 10th of 1%?
Can it be on the front end? Can you get your click to lead conversion to be 2% better from a 48% to a 50% conversion from click to lead? Can you then get maybe your initial sales to go from 2.
1% to 2. 2%?
That’s not that much better. That’s almost 5% better if you actually think about it. And then can you get your follow up sales to just go up by, say, 1%, a half percent, a quarter of a percent.
Typically in these types of worlds where we’re dealing with 2. 2% conversion rates to go from 2.
2 to 2. 4,
oh my goodness. You can pay a little bit less if you’re converting that much better. So what can you do to make them more money without costing you more money?
And conversions is going to be one of those things. Another thing you can do is just make it easy for them. Again, I have chosen programs where I’ve like, I thought about maybe promoting something else the following year, but I went, oh my gosh.
It’s just easy to promote them. They make it easy to get graphics. They make it easy to get swipe copy.
It’s just easy to navigate. That’s why we just rolled out our brand new affiliate dashboard for our affiliates. If you want to see it, sign up as an affiliate.
Just hit up our affiliate manager partners@mammicwames. com, and Jennifer will help you to get everything, including access to the affiliate dashboard.
Well, one of the reasons why we did that was we’re making it easy for our affiliates. Where is everything? It’s right there.
And it’s so easy to find. Just make it stupid easy for them. Don’t make it hard for them to find something.
They should be able to find everything they want. Promotion dates, swipe copy, graphics stats, the rules, the terms, like everything should be right there, ridiculously easy for them. The next creative way you can help your affiliates to make more money is just a long term collaboration.
These are things like having them come on and teach your audience. If there’s a topic that they’re an expert at, have them come on and teach your audience. Have them come on and teach your affiliates.
You go, well, how does that help them? Well, it puts them in front of your affiliates and obviously helps you make more money long term because they’re going to help your affiliates make more money for you. But just find ways that you can collaborate long term.
This ties in with the next one, which is to promote them. But collaborating long term, what are some things that you can do? Ties in with the one after that, which is co branding.
There’s all these things like that really just are tied up in this long term collaboration. Promoting them is a way if I’m going to make $8,000 rather than $10,000 in a promotion, if I’m choosing between affiliate programs and I’m going to make $8,000 promoting you versus $10,000 in another one, maybe they have a slightly higher commission or a little bit better conversion, something like that. But you are going to promote me and make another $8,000.
That’s $16,000. I make more than that, $10,000. So promoting me becomes an incentive for me to promote you.
And that’s something that you tie those together, that’s a big deal, especially long term. I mean, long term, it could be six figures because yeah, let’s say we do a webinar. Let’s say I promote your webinar and you promote my webinar and I could have made a little bit more promoting another webinar, but you promote mine.
And not only do I make $8,000, sometimes these numbers could be astronomically higher. I make $8,000 and I get 400 leads. It’s probably bad math.
I would make a lot more than $8,000 in 400 leads. But you get the idea. Maybe we’ll go 300 leads, I get 300 leads, whatever, 16 buyers.
But I got another 284 people that didn’t buy 170 of which will stick on my list for the next three years and will buy other things. So I make $20,000 off them and I make another $10,000 off whatever the numbers are. It doesn’t matter.
The reality is that becomes an incentive. Just like collaborating. Long-term co-branding is a way of collaborating.
Is there a way for us to work together on a product? I’ve done this with a couple of partners over the years and we’ll collaborate and we’ll come up with some cool ways to work together. We’ll co brand pages, as simple as that.
Like when I’m going to do a webinar with somebody, if they’ll put my name on it and put my name in the follow up stuff, then that increases conversions, which goes back to what we talked about. If you’re willing to do those things and do a little bit of extra work to make my webinar go from, say, maybe initially I was going to send, I’m going to send 1000 clicks and convert 450 of them. But you do a few things to the landing page that increase the conversions to 500.
Now we got 50 more people on. And then you do things in the follow up that increase the show up rate from 100 to 175, we’re going to make more sales. And you do things in the follow up, they’re going to mean instead of those 325 just falling off the earth, 100 of them are going to watch the replay.
Now you have 275 instead of 160 engaged, we’re going to make more sales. And then the follow up is better. From there we’re going to close a higher percentage and those things start stacking.
The higher conversion rate on the front end, the higher from click to lead, from lead to show up or to engagement, from engagement to sale. If you increase each of those by 10%, that’s not 30%. I don’t know what the number is, but I think it’s something like 35%.
It compounds. You start compounding multiple things and it gets ridiculous. And then the last one could you offer equity in the company early on?
I’ve seen this done and it absolutely can work. You got to make sure you cover your legal dot in your I’s and crossing your T’s here. Could you offer equity especially early on?
Somebody is going to help you build your company and build your brand by introducing you to their audience. You can’t afford to pay a higher commission. Could you offer equity?
And what that might look like is if your company is currently valued at half a million dollars. Just using round numbers here, and you really, truly feel like you’re going to get this to a $10 million company in say five years instead of paying a little bit higher commission. And they make an extra $10,000 right now, which might really hurt you.
Could you offer a half percent of equity? And initially that’s only worth 1%, would be worth 5000. So it’s worth $2,500 instead of 10,000 in commissions.
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But if you more than four X over the next five years, that’s worth it to them. And it shows that you’re willing to get creative, that you’re willing to break the mold. Would you be willing to do that?
Again, I’m not suggesting it’s for everyone. That’s not one of the ideas. I would suggest if you’ve currently got a million plus dollars in the bank, that’s not something I would suggest, somebody who’s already making it and you’re winning on other levels.
I would not suggest lowering your commissions and then offering equity. It’s too complicated. But initially, if you can get a big affiliate who’s willing to, maybe your list right now is 6000 people and this person single handedly, overnight is going to put your list at 25,000.
Would you be willing to offer them half percent to 1% of your company? No voting rights, none of that. It’s just equity.
Something to consider might be a terrible idea, but it might just work.
So you have some creative ways here to motivate and incentivize your affiliates without breaking the bank. That’s what we want to be able to do here. I would love to hear from you.
What was your biggest takeaway? Like, what’s one of the like, oh, my gosh, you’re going to put this into use tomorrow. This is awesome for you, right?
Shoot me a text at 260-217-4619. I would love to hear from you, just what your biggest takeaway and what you’re going to do at this episode. Also, make sure check out the links in the show notes.
I’ll have that email address to join our affiliate program. I got a couple of other links, some things that I didn’t really dive into today, but I want to make sure you check those out because I do go deeper into some of the stuff we talked about today. So check out the links in the show notes.
There’s some good ones in there for you. And if you got questions about this or anything else, you can text me and mention that number is 260-217-4619. Last thing, make sure you hit subscribe.
The next episode coming up is going to be a good one. We’re going to talk about how to avoid the most common affiliate marketing mistakes. I’ve got so much to share in that episode.
I don’t want you to miss that. So make sure you hit subscribe so you don’t miss it. I’ll see you then.
Questions?
Text me anytime at (260) 217-4619.
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