Working with an Affiliate program is the fastest and most efficient way to ensure an increase in revenue for your digital products.
How? A good network often brings significant results, including increased promotion, better customer segmentation, increased traffic to the site, and higher conversion rates. But if you are considering working with Affiliates, you’ve certainly understood all of this already!
The point is that you probably still have questions, more precisely, about setting the commission, right? If your answer to this question is yes, rest assured!
Below, you’ll find important information about three basic steps to take when calculating commissions. Are you ready? So, grab a calculator, a sheet of paper and a pen and let's get started!
The first step when setting an appropriate commission is calculating your costs.
It’s true that selling digital products doesn’t involve common expenses such as physical space, logistics, or employees, but this doesn't mean that the business has no costs whatsoever. So be sure to put on paper what your monthly expenses are.
Consider everything, from the marketing investment to your Internet and electricity bills. So, you’ve summed it up and found a total amount? Great! That amount should be divided by the average number of items sold per month, so that you can find the cost of each unit. Lastly, add to that value the fee you have to pay to use the sales platform (which will store the product, process payments, deliver it to buyers, and also send money owed to you and your Affiliates), which in this case, is Hotmart!
Want to understand how to correctly get to those figures? Let's imagine you are the Producer of an eBook currently sold for US 50. Every month, you spend around US 1,000 to maintain your digital sales, considering advertising costs and general maintenance expenditures. In that same period, 250 units are sold on average. This means that each item has a marketing cost of US 4. In addition, for each digital product sold, you pay a fee of US 4.95 to the storage platform. Therefore, in the end, the individual cost of your product is US 8.95. Simple, right ?! Well, then we can go to the second step: defining the price of your product. Making mistakes when setting a price is very common in pretty much all market sectors, and the Internet is no different. So, stay tuned and don’t make the same mistake!
Let’s assume you are considering selling your eBook for US 50. Is that an appropriate price? Don’t forget the basic principle that digital products need to be more affordable than physical ones. Not many people will buy your product if they are able to find something cheaper and similar in bricks and mortar stores. So, the secret is: carry out a thorough research!
Check out the price of the main publications on the area at bookstores and also take a look at how much your competitors are charging. Prices within the market average will make sure your product is competitive. Therefore, if after your research, you find the price you set is too high, the solution will be to decrease it. That doesn’t mean will suffer losses. Quite the opposite, actually. Sales will increase and you’ll earn more!
Well, now that you know all about marketing cost and you’ve set an adequate price for your product, we have finally reached the last step!
This is the one you’ve been waiting for: Setting commissions. Let’s go back to the hypothetical situation where your eBook is sold for US 50, with a total unit cost of US8.95. Here, you’d have US41.05 left. That amount is nothing other than profit! The commission percentage should be calculated on that! Now, the remaining question is: how much of your profit are you willing to share?
Keep in mind that commissions can vary drastically depending on the product. Working with too small percentages is inadvisable. That will make your product unappealing to Affiliates! They are important partners for your business and they need to get worthy working conditions. Therefore, only choose small commission percentages if your product is already sales champion!
On the other hand, offering commissions that are too high may end up affecting your revenues. There are no questions as to how valuable Affiliates referrals are, but it’s also fair for you to get a good share. For that reason, offering more than 65% in commission requires a thorough study of sales strategies, with all due calculations, so that the Producer doesn’t feel like he is losing money.
The ideal situation, therefore, is having common sense and setting an appropriate commission for you and your Affiliates! Offer at least 30% to get their attention. Consider the possibility of offering a bit over that, reaching up to 50%. Be aware that the bigger the number of Affiliates, the bigger your sales will be. Anyway, there is no magic formula for a pre-defined percentage. Each case is unique! Start out with a secure margin and analyze the conversion number. In no time it’ll be possible to check out precisely what is the ideal commission for your business. So, roll up your sleeves and good sales!
If there are any further questions about this matter, please contact our Support. We are ready to help you!