Diane,
Some thoughts about affiliate programs:
Lifetime Value of a Customer
The metric to primarily consider is lifetime value of a client in your business, as opposed to sales of individual products or services.
For example, if you know that every new client that comes into your business, on average purchases 4 times from you, then you could afford to pay out an affiliate commission of 100% on a $200 dollar product, because that client is going to make 3 other purchases where you will make your profit.
I operate a lot as an affiliate for web hosting companies. Even though they charge only $6 a month for hosting, some will pay over $100 for each new client...they have based their payouts on the lifetime value of a hosting customer (which is a lot more than $100).
The 80/20 Rule Applies
Like a lot of financial matters, it applies to affiliates as well. In one of my businesses, 2 affiliates accounted for 90% of the affiliate sales.
In most cases this rule will hold true. Therefore it may not be worth the hassles of managing a huge number of affiliates, whether through CJ or a private system. If you know your market really well, and know the players in related businesses, then you can just approach them directly (or hire an affiliate manager to do so).
Turn Your Clients Into Affiliates
At the very least, it is a good idea to enable your current clients to earn commissions on referrals, don't forget them as inside knowledge of a offer or product or service is the most effective selling tool.
What's Your Overall Strategy?
2 Possible strategies that are not mutually exclusive:
1.) Building a huge list of clients or prospects. Take my 100% offer from above and apply it to your most "mass market" product or service. Now add the offer on every affiliate network you can find, and hire an affiliate manager to promote it as well.
The goal here is to use this product as a loss leader. Essentially you are paying affiliates to bring in prospects for you and qualify them. If you see your business as being able to sustain very high volumes, then this method will get you that volume.
2.) Buyout your competition. In a service business or smaller scale operation, if your lifetime customer value (LCV) is high enough then you can take over your competition's business.
If Jon's Tax Shop's LCV = $3500 and Diane's is $10,000 then if you made your affiliate payout $5,000 it would be in my best interest to sell my clients to you rather than to continue to operate my own business.
This is a pretty extreme example, but useful as an example of the power of a well designed affiliate program.
Hope these ramblings help!
Some thoughts about affiliate programs:
Lifetime Value of a Customer
The metric to primarily consider is lifetime value of a client in your business, as opposed to sales of individual products or services.
For example, if you know that every new client that comes into your business, on average purchases 4 times from you, then you could afford to pay out an affiliate commission of 100% on a $200 dollar product, because that client is going to make 3 other purchases where you will make your profit.
I operate a lot as an affiliate for web hosting companies. Even though they charge only $6 a month for hosting, some will pay over $100 for each new client...they have based their payouts on the lifetime value of a hosting customer (which is a lot more than $100).
The 80/20 Rule Applies
Like a lot of financial matters, it applies to affiliates as well. In one of my businesses, 2 affiliates accounted for 90% of the affiliate sales.
In most cases this rule will hold true. Therefore it may not be worth the hassles of managing a huge number of affiliates, whether through CJ or a private system. If you know your market really well, and know the players in related businesses, then you can just approach them directly (or hire an affiliate manager to do so).
Turn Your Clients Into Affiliates
At the very least, it is a good idea to enable your current clients to earn commissions on referrals, don't forget them as inside knowledge of a offer or product or service is the most effective selling tool.
What's Your Overall Strategy?
2 Possible strategies that are not mutually exclusive:
1.) Building a huge list of clients or prospects. Take my 100% offer from above and apply it to your most "mass market" product or service. Now add the offer on every affiliate network you can find, and hire an affiliate manager to promote it as well.
The goal here is to use this product as a loss leader. Essentially you are paying affiliates to bring in prospects for you and qualify them. If you see your business as being able to sustain very high volumes, then this method will get you that volume.
2.) Buyout your competition. In a service business or smaller scale operation, if your lifetime customer value (LCV) is high enough then you can take over your competition's business.
If Jon's Tax Shop's LCV = $3500 and Diane's is $10,000 then if you made your affiliate payout $5,000 it would be in my best interest to sell my clients to you rather than to continue to operate my own business.
This is a pretty extreme example, but useful as an example of the power of a well designed affiliate program.
Hope these ramblings help!
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