I asked this same question in the marketing thread, but no one answered me so I figured I'd ask some affiliate guys. Here's my question: I've been really considering starting an affiliate program for a site that I have. I sell tangible goods. The one thing that really makes me think twice is some of my products don't have a huge profit margin. Most of my products do, but some don't. Have any of you out there started your own affilate program? How did it go? Do you sell some products with small profit margins?
If most of your products have high margin you can either raise the price of lower ones or sell them with loss as long as you can sell much more high margin products. Keep it simple, same commission % for all products.
A possible consideration is to seperate the high profit and low profit items into different categories. Category 1: earn 10% commission Category 2: earn 5% commission Obviously not knowing all the tangible goods that you offer I dont know how practical that would be to simply split the inventory or how appealing to webmasters to promote the lower paid commission items. Another approach is affiliates could gain a higher % for their referrals to your main site and not product specific ... 0 - 99 visitors per month = 1% 100 - 249 visitors = 2% 250 - 499 visitors = 3% 500 - 999 visitors = 4% 1000+ visitors = 5% The visitor referrals rate would be added to a base commission rate of 5% for example so a website sending 50 visitors per month would see a 6% commission on items sold while a site sending 1000+ visitors would receive 10% commission. Obviously I just used simple figures to illustrate the point as I do not have any experience in operating an affiliate marketing system but felt either approach could be considered for your purposes. The first approach of 2 commission rates clearly lets you seperate the high profit from low profit items. The second approach based on traffic levels, will leave it up to your website to convert on higher profit items over the lower profit items.
Regardless of the margins are you likely to make repeat sales? If you can get repeat sales from new customers then a tight margin / loss on the first purchase might be offset against their future purchases
Repeat sales will obviously depend on the item and the service received (in case of any follow up queries). This means it would be up to you to look at repeat sales opportunities... possible free opt-in email listing can help you get interested people subcribed - as long as it is not spammed every day etc, and only "bargains" or new product (related products) info is sent,then you can expect some repeat sales. In the case of repeat sales, the affiliate programme itself would stipulate how long it was valid - lifetime, 60 day etc. So lifetime would mean margins would not change while a 30 or 60 day repeat sale would mean after the time elapsed your margin would increase. It has to be considered from 3 perspectives, yours, your afilliates and your customers. If you achieve a good balance you should increase profit via more overall sales... although margins themselves are susceptible to supplier cost changes so they would vary over time naturally anyway.
iDev seems to be a popular choice, as it integrates easily with a lot of billing systems / shopping carts We're using it at: http://affiliate.blacknight.ie/
Thank you all for your input. I think having 2 catagories is probably the way to go for me. Anyone else using Idev? What are your opinions on it?
Just do it. Then look at how your sales go. Maybe those products with a lesser profit margin will sell the most...