Affiliates want the highest commissions possible. Affiliate programs want to make as much profit as possible, which means paying the least amount they can. So, how do both parties win? Today, I’ll share how to negotiate affiliate deals that benefit everyone.
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VIDEO: What is the Right Commission to Pay Affiliates?
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Table of Contents
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Previous Episodes of The Affiliate Guy
How to Build Your Personal Brand and Become a Celebrity in Your Niche with Rory Vaden
Why Your Affiliate Program is Failing (And What to Do About It)
How to Build Strong Relationships with Your Affiliates
How to Use a Challenge for Affiliate Marketing: How Entrepreneurs on Fire Made More than $250,000 in One Affiliate Launch
10 Lessons I Learned Launching a Bestselling Book
How to Negotiate Affiliate Deals That Benefit Everyone
Affiliates want the highest commissions possible, and affiliate programs want to make as much profit as possible, which means paying the least amount that they can. So how do both parties win? Well, today I’ll share how to negotiate affiliate deals that benefit everyone.
So naturally, as I said at the beginning, affiliate programs want to make as much money as possible.
And if they can do a million dollars in sales and only pay a 10% commission versus doing a million dollars in sales paying a 20% commission, well, they want to do the first. Now, there’s an argument, of course, and we’ll talk about this in this episode where paying a little bit more might actually make you more money.
In other words, I would much rather make $2 million and pay $200,000, pay a 10% commission than make a million and only pay 50,000 making a 5% commission.
Assuming that my cost of goods works and they’re like if I have no cost of goods or whatever, obviously a higher commission is going to be more attractive to affiliates. But here’s the thing, affiliate managers don’t advertise their highest rates. That’s the little secret.
I’ve talked about this from an affiliate manager’s perspective. Why don’t we advertise our highest rates? Well, number one, we want to save money for incentives.
If I pay a 20% commission, but I really could afford a 30% commission, then I have 10% to give in incentives. I can go to an affiliate. Let’s say it’s just for an argument’s sake.
It’s a $100 product. I can go to that affiliate and say, I will give you a $2,000 bonus if you make 25 sales this month. It gives me that ability.
In fact, often what I’ll do, I was just talking with a client today about this, is we’ll offer an incentive on a crazy number of sales. Perhaps it’s a number that maybe only one or two affiliates even have ever hit before, but it’s an insane number and it’ll be above that 30%. So remember I said if I can afford 30, this crazy incentive might be at like twelve or 13%, I’m paying 20%.
And then I’ll do this as I might say on the $100 product, I might say, okay, if you do 1000 sales. So 1000 sales times, that would be $100,000, right? 500 sales, which would typically be extra if I’m doing my math right, would be 500 times 100 is 50,000. Yeah, I had to make sure I was doing my math right there.
But we might offer a $70,000 bonus or a $65,000 bonus, something like that, something that makes it really attractive. So number one, we’re saving money for incentives. Number two, we’re making more money if I advertise a slightly lower rate, I make more money.
There are tons of other reasons why an affiliate manager doesn’t advertise their best rate, but we’re not going to get into those. We want to talk about how to negotiate a better deal. So from both perspectives, we’re going to look at this from both perspectives, the affiliate, and the affiliate manager.
Now, this is assuming that you’ve agreed to work together, or at least you hope to work together. If that’s not true, this is all irrelevant, right? As an affiliate, you’ve agreed, you know what, this is a good fit for my audience, and you want to promote it as a merchant, as an affiliate program you’ve agreed that you want this affiliate, they’re a good fit for your program, and you want them to promote you. If both of those aren’t true, this is irrelevant.
So we’re going to start with a little bit of pre-work here. There’s a little bit a few questions you have to ask yourself before you get started. And we’re going to go kind of back and forth between the affiliate and the affiliate manager and some things that apply to both here.
So as an affiliate, the first thing you have to ask yourself is, what is your value proposition? Why should you make a higher commission? Well, because then they make more money. Okay?
That doesn’t convince me as an affiliate manager, why you should make a higher commission. What do you bring to the table? What is your site all about?
How good of a fit is it? Right? What are the data? What are the metrics? How many followers do you have? What’s your list size?
I want to know these things. As an affiliate manager, I want to know what your value proposition is. If you have a smaller list, meaning it’s not like, massive, and I don’t mean smaller, like, it’s 800 people.
But if you come to me with a list of 300,000 people, it’s pretty obvious what the value proposition is. You bring a massive audience. What if it’s only 20,000 people, but it’s super-targeted?
Then talk about that. Talk about how your audience is highly targeted, and how you tend to sell a lot. Like, I know people that I work with that have lists of only 20 to 30,000, but they have like 800 buyers on their list.
They have a really high rate of buyers. And we’ll do a webinar, and they might only drive 600 people to the webinar versus other people who might drive 4 or 5000. They’ll drive 600 people to the webinar, and 80 to 100 of them will buy.
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I’ve done webinars like that where I did $100,000 and only 600 people registered. That’s insane. So if you’ve got that, bring that to the table.
Tell me, what is your value proposition? Now, as an affiliate manager, the first thing you have to ask is, what is the market saying? You must know your competition.
What are the other affiliate programs in your niche paying, and do you have to be in the ballpark of your competition? I’ve got a video where I talk about this. I actually walk you through step by step how to determine the right commission to pay affiliates.
I’m going to put a link to that in the show notes. This video, it’s like, I don’t know, five to ten-minute video, but it’ll walk you through, step by step how to get to the right commission. And the final question is always, okay, what’s the market saying?
Like, if you can only afford 20%, but the market is paying 30 to 40, you better figure out a way to get to 30. You don’t have to be on the high end, but you’ve got to be in the ballpark. You can’t be at 20%, and the same is true.
Like, you’re like, I can afford to pay 50, but the market is like, everybody’s at 30. Then maybe you could only pay 40 and still destroy them and keep an extra 10%. That’s kind of cool.
I believe in paying affiliates well, but if you can make an extra 10% and destroy the competition, then do it now. Both of you, the affiliate and the affiliate manager, of you need to know your goals and your priorities, right? You need to be crystal clear on these.
As an affiliate, what’s your goal? What’s your priority? Maybe you’ve had a merchant cancel on you, and you need to replace that income.
So you’re actually going to somebody and saying, I’m interested in promoting you. You were making $10,000 a month, and you need to replace 8000 of that at a minimum if you need to make $8,000, okay? That’s your priority. That’s your goal here.
As an affiliate manager, maybe you’re looking to make a splash in the market, so you’re looking to really grow this affiliate program. You’re kind of the new kid, and you’re looking to really make a splash in your niche.
So you need to be okay with making less money to get some of these bigger affiliates in early on. You need to be okay with making a little bit less money to get these affiliates jazzed up. So I’ll do that.
It’s the same as with pricing, right? When we’re looking to make a splash in the market with a new product, we use what we call BIS pricing. Butts In Seat Pricing. I just want to get butts and seats. I want to get 50 people into this course so that I can test this course out.
Is this course any good? Are people getting results from it? Can I get ten or 20 or 30 testimonials from these 50 people?
Because that makes the marketing easier later. So I might sell a course early on at 497, and as we get the testimonials and we get the proof and we figure out the marketing, then we increase the price to 997. But that gets those butts in those seats early on.
The same is true with affiliates. I might pay a 40 or 50% commission, a higher commission maybe, than what I normally would pay later on, just to get ten or 20 affiliates promoting and start getting some results and get the proof, okay, this is working. This is converting.
Get some testimonials from those affiliates and start getting other people who follow those affiliates to see them promoting. That’s my goal and my priority early on. So I’m willing to negotiate more.
So you need to be clear on these, both as an affiliate and an affiliate manager. As an affiliate. The second thing your pre-work here is, don’t forget there are other factors than just commission rate.
If I pay a 20% commission rate and my competition pays a 25% commission rate, but they have a bad reputation, they make you look bad. They have a high return rate. They don’t convert as well.
I mean, just look at the math. If you send 100 clicks and I pay both $100 products 100 clicks, $100, right? If I convert 15 at a 20% commission, you’re going to make $20 times 15.
So that’s $300. If they pay a 25% commission but convert ten, you’re going to make 250. You will make less money with a 5% lower conversion rate if it affects your brand or just from a math standpoint, if they have a 10% return rate and I have a 2% return rate, you will make more money.
Not to mention you’ll have a better reputation. Think about how it makes you look. So don’t necessarily it’s not all commission rate, so don’t get caught up in that.
Be willing to work with a company, maybe take a little bit less money for a higher conversion rate, a little bit less money for a better brand reputation, a little bit less money for it making you look better, and how it’s going to affect your audience.
As an affiliate manager. The second thing you need to do in this pre-work is you need to know the highest you can go. You can’t break the bank, all right? You cannot lose money if you’ve got a $50 cost of goods and $100 product. The highest you can go, to be quite frank, is probably 45 and make no money because you still got credit card processing and other things.
So it’s probably 40. You probably got at least $10 in there baked in, in addition to your cost of goods.
Now, again, I mentioned that video on calculating commissions. It’s important that you watch that video if you haven’t already done the exercise basically, on your own, you need to know the highest you can go and still make money.
In other words, you need to know the lifetime value of a customer. So if you’ve got a $ 100-a-month membership and the average member stays for 21 months, you know the lifetime value of an average customer is $2,100. I can afford to pay 25% recurring monthly, and I can easily pay a $1,000 bonus, that’s basically $200 per sale for every five sign-ups.
I know if they buy if it’s a $100 product, but I know that the average customer spends another $100 within six months on the back end. Lifetime value. I mean, I’m not looking at ten-year value, but if I know they spend another $100 on the back end within six months or a year, and let’s say on that 1st $100 purchase, the cost of goods is let’s go $50 and the $100 on the back end, it’s 100% profit margin, zero cost of goods. It’s a digital product.
Then I can pay a 30% commission, maybe even a 40% commission on that 1st $100, and only make like ten or $20 because I know I’m going to make 100 on the back end. So I need to know the highest that I can go. Now, something that both of you need to be willing to do, you got to be willing to walk away. You got to be willing. Like affiliate managers.
Sometimes an affiliate will simply ask for too much, and if they’re asking for such a high commission rate that the margins just aren’t there, just bail out like there are other affiliates out there and affiliates. Sometimes the offer just isn’t worth the space on your promo calendar if the numbers don’t work if you need to replace $10,000 a month in income and there’s just no path to making $10,000 with this affiliate promo, it is what it is.
Sometimes it just makes sense to walk away. So if the numbers don’t make sense either way, you got to be willing to walk away. But we’re going to get into our do’s and don’ts here.
So I have a few do’s and a few don’ts I want to share with you here. Do be willing to consider alternatives if higher commissions just aren’t possible. So this is both of you, affiliate managers and affiliates.
Maybe you can offer a free trial for their audience. That makes them the hero. And you, as the affiliate, you go, okay, again, if you need to make $10,000, if you got to replace $10,000 and the math doesn’t work, okay, it is what it is.
But if it’s not like that. Again, this is why we go back to you to get to know your goals. What’s your objective here?
That’s the most important thing. If you say, man, being the hero to my audience, that’s kind of cool. They’re going to love me.
That’s going to help me keep people for longer. I’m going to make more sales of my own products over time. All right, I’ll be the hero.
Make a less so what about a free trial? If it’s like a SaaS product, if you already offer a trial, maybe offer them a longer trial. So you normally offer a two-week free trial.
Offer your affiliates 30 days. Offer this affiliate for 60 days. Offer things like the friend of Matt discount.
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This is something I’ve negotiated with some different companies that, quite frankly, couldn’t afford to pay me anywhere near what they needed to pay me to make it worth my time. But if I can tell my clients, they get a friend of Matt discount. I’ve actually, in some cases, I’ve waived the affiliate fee because the affiliate fee is going to be like $100.
I’m like, tell you what. Instead of paying me $100, how about you give my clients a $200 discount? Would you be willing to do that?
Absolutely. Cool. They offer a discount to my audience. Again, makes me the hero. I get to offer my clients a $200 discount on a $600 product. That’s pretty flipping cool.
You could do things like exclusive payment terms. This is where when I refer somebody, instead of a $2,000 one-time offer, maybe they can pay like, you don’t offer this to everybody, but they get to pay $500 a month for four months or something like that. Again, makes me the hero.
Exclusive bonuses – Hey, we can’t offer a bigger commission, but we can sweeten the pot. So for this $1,000 course, I cannot afford to pay more than $400. I cannot afford to pay you a higher commission. But I’m going to add this bonus and make this worth $1,500, and it becomes a special offer for my audience.
You could do special marketing, a custom webinar, or a co-branded workshop where, hey, it’s not just going to be our generic workshop. We’re going to like, can we do an interview with you and talk about it?
That’ll increase the conversions as well as the kind of features you and maybe we can even sell one of your things on the back end. Just all these things.
Custom webinar, custom phone number for customer service. They could do a custom sales page, all these things.
And then lastly, you promote them – Hey, I can’t afford to pay you higher than this commission, but we can promote you. We can drive $100,000 in sales a year to your product. Well, that’s worth a lot more than an extra $50,000 in commissions.
So the key here is just to get creative. Like, sometimes you combine these. I had a client once who could not go above a 15% commission rate.
They just could not they had a low-margin physical product. So we ended up doing this massive campaign with one affiliate. I mean, I’m talking they were driving over $350,000 a month.
This was like a $3. 54 million a year affiliate deal, and they wanted 20%.
That was their minimum. And I was like, I can’t my client is not going to pay 20%. But what I was able to do was get them an exclusive 20% off coupon.
The average was 15%. You say, well, you couldn’t afford to pay 5% more, but you could do 5%. You’re paying them 15% off the now discounted price.
So we paid them 15%, but they got a 20% off coupon. So they were the heroes of their audience. They were the only ones who had this 20% off coupon, and they were the biggest affiliate by far, and it was amazing for their audience.
So their audience loved them for this coupon. And with that 15%, they actually brought in people. They were able to do some other stuff, and they made a lot of money.
We also sent them, I mean, something like $5,000-10,000 in the product so they could do some they could do videos around it. We co-branded, like, 30 or 40 different landing pages, and the higher conversions were worth it. And this was not the intent.
We were just looking for a way but they actually ended up making more money than if we just paid them the 20% they were asking for. They were one of our highest-converting affiliates. So get creative with this, all right?
So like I said, do be willing to consider alternatives if higher commissions are not possible, okay? Another do here, do be willing to negotiate. All right?
That’s what this whole episode is about, right? But a lot of people are like, I don’t like negotiating. I don’t want to do this.
It’s too hard, tough. It’s part of your job as an affiliate, it’s your job to negotiate. We get it on the affiliate management side, right?
But as an affiliate, it’s your job to negotiate because it’s your job to make as much money as possible and to serve your audience as best as you can. So that’s another do. There a don’t is don’t insult with your first offer.
Don’t insult the affiliate. They ask you for 30%. Your normal is 20%, and you come back at 22%. Don’t be insulting. Don’t insult with 20%. Plus, we’ll give you this 10% code that we offer to everybody.
That’s a little bit insulting. Be willing to negotiate. Like I said, don’t insult with that first offer. And the same is true with the affiliate. The average rate is 20. Don’t come in and be like, I need 50% in a coupon code in this. Like, really, don’t be insulting.
Also, don’t offer everything on the first offer. This is mainly for affiliate managers.
Don’t say, well, we can go to 30 and they’re asking for 30. Or they say like, what’s the highest you pay, you go, we can pay 30 and we can do this, and we can do this. It doesn’t leave any room for negotiating.
That’s not negotiating, that’s just saying everything you can do. And then lastly, a big do for affiliate managers. Make the affiliate feel like they won.
Make it feel like the affiliate is the winner. Make them feel like they’re getting a special deal, even if it’s not that special. Starting this relationship off right it’s great for morale. It’s great to be able to build these long-term relationships.
The little things you can do, like when they sign the deal and like you negotiate it like throw in just a little something and be like, hey, they start promoting.
And first sale, let’s say you have a $1,000 product and you negotiated a 40% commission. Give them $600 on the very first sale. Just an extra, hey, it’s a 100% commission.
It’s the only time I can do it, but I just want to say thanks. Or send them a gift card, send them some merchandise, send them some product or something just to welcome them on board. Make them feel super special and like they won.
So now you know how to negotiate these affiliate deals where everybody wins. That’s the whole point. Everybody ends up a winner when you do it this way.
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So remember what we talked about today:
Number one, know your value proposition both ways.
Number two, know what the market saying.
I said this for the affiliate manager earlier, but I didn’t really say like, hey, affiliate, if you know that nobody out there in this space is paying more than 20%, don’t ask for 30. Duh.
Know your goals and your priorities.
Don’t forget there are other factors than just the commission rate, like conversions and reputation.
Know the highest you can go as an affiliate manager.
Know that LTV, is the lifetime value. Both of you, be willing to walk away. Be willing to just step away.
Consider those alternatives, all the things we talked about, the bonuses and trials, and whatnot.
Be willing to negotiate. Don’t insult with that first offer.
Don’t offer everything on the first offer either. And make it feel like the affiliate has won. The affiliate managers are out there.
So hope you got value out of this episode. If you have any questions about this or you’d love to let me know your biggest takeaway because I’d love to hear from you. Text me anytime at 260-217-4619.
And make sure you hit subscribe because, in the next episode, I’m gonna be talking about why affiliate marketing is easier than you think. It’s gonna be a great episode, and you don’t want to miss it, so hit subscribe so you don’t. I’ll see you then.
Thank you so much for listening today.