A merchant has emailed me the following text:
I would like to know what is the range of percentage paid out in the affiliate program? Someone told me it is between 3% to 25%. Is that right? What is the lowest rate you have seen so far? the median? and the highest?
Actually, the range is much wider than the “3% to 25%” you’ve been quoted. At one end of the spectrum, there are some of the larger brands (e.g.: Apple and Dell) that paying affiliates as little as 1% on the default level; and on the other end, there are industries in which merchants are happy to pay as much as 100% (or even more) in affiliate commissions (e.g.: Chemistry.com [matchmaking] and Superb Internet [hosting])
So, the range I’ve seen goes from 1% (sometimes even lower) to 100%.
However, I believe that the question we’ve started with has a huge potential to misguide a merchant in their search for the perfect commission figure to offer their affiliates. You want to look at the range within your industry. After all, you want your affiliate commission to be competitive when compared with what your principal rivals are paying.
Industry-specific affiliate payouts always depend on:
- Size & popularity of the merchant — In most cases, the unfortunate reality is: the better the brand recognition (and hence, the click-to-sale conversion too), the lower the commission
- Typical industry profit margins — A clothing merchant, for example, will always beat an electronics merchant in the commission figure (10-15% vs 3-6%), while a flowers and gift baskets merchant will most often beat a clothing merchant (15-20% vs 10-15%)
- Type of sale — Is it a subscription-based service that’s being sold, or a retail product? Naturally, the commission in the former case will always be more generous than in the latter
Consider all three factors, study what your competitors are doing, and come up with both the range, and your own strategy based on a comparison of apples to apples.
Those are some really great points regarding the range of affiliate commissions. I all most wonder though; with brands like Apple, if they even want to be associated with affiliate marketing at all and maybe that’s also why they set their rates so low? They understand that they need a program, but a few rotten eggs have given affiliate marketing a bad rap over the years and it could be possible that large companies are worried that their brand is going to be associated with spammy websites…thoughts?
I can’t speak for Apple, Vee, and I don’t want to make any assumptions on why they’ve chosen to pay affiliates such a low commission; but I do not believe that affiliate marketing has a bad reputation. Some CPA networks, and some affiliates do. But it is not fair to equate the whole industry to a handful of unethical people/organizations.
The key to successful affiliate marketing campaign is in managing it, and not letting it run on an auto-pilot. Then you won’t have to worry about loosing money on it. Merchants have nothing to lose if they are in full control of their affiliate programs.
I’m trying to decide about what happens during sales and a lot of people ask me for discounts for their followers. The problem is that if I have a 40% off sale and I’m giving a 20% commission and I’m giving a 15% discount, this leaves me with only 25% of the revenues which doesn’t really seem fair to me.
I do have digital products and maybe wouldn’t have had those sales if they weren’t referred, but is this a wise set up?
Thank you for your feedback.
Leslie, you’re not the first merchant that faces this problem. There are several possible solutions: (a) pay coupon affiliates lower commission, (b) eliminate discounts altogether or (c) not allow affiliates to marketing the ones that you run (will require policing). I don’t know your particular situation, but one of these may work.
Thank you for your feedback. Appreciate it. Very nice blog you have here. Quality content.