Starting an Affiliate Program

A question for you affiliates out there :)

[digitalv]

I've recently acquired an established company that I think could benefit by having an affiliate program. The "product" is a monthly subscription-based service, which can range anywhere from $10 to $50 a month in $10 increments, depending on usage. Most customers will be at $10, second largest group at $20, etc. I'm not exactly sure how I should price the affiliate commissions. There are a few options I've thought of, and of course I'm open to suggestions:

1. One-Time commission equal to whatever their first month's subscription is (I make $0 on new customers the first month).

2. XX% of the customer's usage per month for one year.

3. 50% of the first month's gross, then XX% for every month afterward for one year.

For those of you who are in one or more affiliate programs, what type of deal made you want to sign up? Or was it more about how well you thought you could sell the product? I've never joined any affiliate program before, nor have I ever owned a business until now that I thought could benefit from one, so I'm looking forward to hearing feedback from those of you who are on both sides.

[chrisnrae]

For most affiliates, it's all about the ROI. As for commission structure - it would depend. A lot of people may like the idea of residual commissions. But, myself, as an affiliate, I wouldn't touch residuals without knowing your retention rate.

Not saying you have to post it on the site - but pro affiliates are going to want to know the demand for the product, your conversion rates, your retention rate (if you go with residual commissions), your reversal rates (if you have them), etc.

[mil2k]

For normal affiliates go with :-

[quote1. One-Time commission equal to whatever their first month's subscription is (I make $0 on new customers the first month).[/quote]

For premier affiliates (the ones which send you maximum traffic and conversions) you can think of giving monthly residual as performance bonus.

[ergophobe]

There is an ongoing thread on What do affiliates want? [webmasterworld.com] but it doesn't necessarily answer the specific questions you have.

Tom

[digitalv]

Anyone else care to comment?

[skibum]

You could always offer options, 100% of initial signup, some kind of tiered residual payout, pay per lead.

If you hit XXX then you ear 30% residuals, if you hit XXXX they you earn 50% residuals.

It could also pay per verified lead regardless of whether they sign up to be a paying customer.

If ya have all the history of the consumer base they can all be setup to pay about the same in the end and the affiliate can pick the one most appealing.

[digitalv]

If you hit XXX then you ear 30% residuals, if you hit XXXX they you earn 50% residuals.

It could also pay per verified lead regardless of whether they sign up to be a paying customer.

Are companies actually doing this, or is it just wishful thinking on your part? :) Those numbers seem outrageously high for commissions. This is an established company and product and there is no way I could offer that type of commission without raising the price. Perhaps some companies start with an affiliate program and have a deliberately high price to account for affiliates but that's not the case here.

Paying per "verified lead" isn't going to happen either - while I've never run an affiliate program before, I do currently run a company with commission based sales people so I know what that's all about ... no freakin way :)

[tsar]

For me it's % of the sale, the more the better.

[chrisnrae]

Actually some programs do pay per verified lead. Not a ton, but there are some ;). Can't see it happening for the program you mentioned wanting to start though.

[skibum]

The most profitable programs that get more attention than any others offer 35% to 100% recurring. 100% is for the products they want to really grow, the lower percentages are for the more mature ones.

The affiliate makes a mint, and the merchant gets ALL the traffic in a particular market. They probaby pay out a million+ a month in commissions so its a very viable program.

They will also pay per verified lead but that is watered down to account for "soft" leads. If you know you can deliver sales, the pay per lead scheme is a total sucker bet for the affiliate.

Raising the price to account for aff payouts may be something to consider. If a program pays enough it can be seen everywhere.