How do you find the correct % of affiliate payout?

[AffiliatePro]

Hi all,
I am launching a new website soon that will allow web designers to sell their web design templates and flash templates and the site will take a % of sales.
I am going to launch an affiliate program also on the site and was wondering what is the best way to determine a good base affiliate %?
I know that the average template will probably be about $60 dollars. Can someone help me on this?

[Linda Buquet]

Hi AffiliatePro,

Thats easy. Commissions vary greatly by industry.

So you need to research and find out how much programs in your space typically pay and then try to meet or beat their payouts. IF your margins don't allow you to beat other commissions then you can beef up your program benefits by offering longer cookies, innovative marketing materials or proving high conversion rates. Well actually even if you can offer higher commish you should still try to optimize your program by offering affiliates as many of those and other benefits as possible too.

[Linda Buquet]

Oh also after you do your research and find what others pay, come up with a tiered structure.

So lets say top commissions in your space are 30 and you could comfortably pay 25 - but could afford to pay 40 on the high end. Instead of launching with a flat 25 which may sound low compared to competitors. Offer 25 base, 30 for affiliates with over $2,000 sales a month or XX number of units a month and 40 for affiliates that do over 5,000. (just making these numbers up you need to decide what they based on your product and margins and competition.)

That way you can say you offer 25 - 40% commission but you only pay out the higher commissions to affiliates that do volume.

[AffiliatePro]

Great advise Linda,

Now does affiliate payouts typically replace online marketing cost. For example, if my budget is to spend 30% of site sales on online advertising, should that be the max I pay to affiliates, or is that considered different.
John

[Linda Buquet]

Well not certain how most merchants view that. But one thing to keep in mind is that if you spent 30% on Internet advertising you are not guaranteed any sales and dont know in advance what your ROI will be. With affiliate marketing you don't pay unless you make sales.

Not sure if that helps. Hopefully some merchants will weigh in on how they equate affiliate commissions to overall marketing budget.