Playbook / Lessons / Partners and paid growth
Cash-flow businessPay for affiliates only out of real margin
Kmet, writing from the merchant side, says a store should set its base affiliate commission before launch and keep the structure flexible by product category and customer type. She advises building the rates so that some margin is left over to fund sales promotions for affiliates. The aim is a program whose cost per sale stays under control.
“Structure your commission rates so that you have additional margin to offer sales incentives.”— Carolyn Kmet, How to Set Affiliate Marketing Commissions, Oct 2012
Do this
Work out today the gross margin on your best-selling product, set one default commission below it, and hold back a slice of the margin as a capped pot for a time-limited affiliate promotion.