Product-based Commissioning in Your Affiliate Program

[00:00:48] Jamie: Hello, Profitable Performance Marketing podcast listeners. My name is Jamie Birch. I am your host and founder of JEBCommerce, your award winning affiliate management agency. Today is another solo podcast. It’s just me here talking to you about all things affiliate marketing. Today, we are going to talk about commissioning based on your product and what that looks like.

[00:01:12] Before we get started on that, I just want to direct you to JEBCommerce.com/elements and you will see the four packages we have for our clients. Now, if you’ve been wondering about, what does an agency provide to their clients and how much does that cost? And you really feel like you need transparency on that. Well, definitely check out that page, JEBCommerce.com/elements.

[00:01:36] We have four packages for our clients to choose from, four service levels, everything from Bronze to Platinum. Whether you need a little assistance to keep things moving forward, or you need top-shelf guidance, strategy, and execution for your affiliate program, we have those packages for you and it lists everything that is done on your behalf.

[00:01:57] You get a bunch more transparency than has been allowed in our space in the past. So definitely go check that out: JEBCommerce.com/elements.

[00:02:07] Now, I’m just going to talk about this right off the cuff. I didn’t prepare any notes today, but was going through some conversations that we’ve been having with our clients lately, and especially new ones we’ve onboarded, and this comes up quite often.

[00:02:20] The concept of, or our clients will say, ” we have products that have high margins, but we also have products that have low margins. So we need to offer a commission rate that takes all that into account when figuring out what it is.”

[00:02:35] So maybe they will have margins of 40 or 50 percent on some products. Usually that’s products they manufacture, and brand on their own. Then they have much smaller margins, say maybe 10, 15 percent on products that they resell, or just generally, maybe there are products that to be competitive, they have to price in a way where they can’t earn as much. So what do you do?

[00:02:56] Well, the most simple way to do this is to get a blended average of what you can pay and put that out there. When you’re looking at commissions, you always have to look at your peer group. And you really have two peer groups when you’re looking at your commission rate.

[00:03:14] You have the peer group that you think is the peer group, and then you have the peer group that your affiliates think is your peer group. And sometimes those are dramatically different, but you have to look at both because the affiliates may not be comparing you against the people in your peer group. They may be comparing them against other people. You may look at that and go, “well, I’m offering a really good commission within my group.” And they may look at it and go, “now within your group that we think you’re in, your commission is woefully under what it should be.”

[00:03:43] So you look at the competitors, but then you also have to look at your margins. Even if all your competitors are giving a hundred percent commission, you may not be able to do that. Most likely if they’re giving 10%, you may only be able to go up to seven.

[00:03:56] You have to look at your margins. Now, a lot of times when that blended average of what you can offer commission is low, we will recommend you commission by product type, by product category, or by individual product.

[00:04:10] Now, I have run programs that have done the blended average commission. I have managed and run successful programs where it was based on the margin of every single product that they had. And both have been very, very successful. So one is a question, that I’m asking you, do you know that you can offer different commission rates based on the product, the product category, some other characteristic. Affiliate platforms like Rakuten, AvantLink, LinkConnector, CJ, Partnerize, Impact, Affiliate Window, ShareASale all of those offer ways where you can pay out based on a number of different factors, one of them being the SKU.

[00:04:51] With one of our clients that we managed for many, many years, they had a ton of SKUs and those were SKUs that they manufactured themselves and there were various different levels of resale that they had all the way down to ones the margin was so low they could offer no commissions.

[00:05:07] What we were able to do is work on a data feed of commissions, so that data feed would come through of all the product information. In there it would include the commission that they could afford to pay. So based on the margin the advertiser was able to pay zero all the way up to 10%. 10 percent was wildly competitive, like that was double most of their competitors.

[00:05:30] Technically that’s how it worked, there was a data feed set up and they were able to calculate the margin and put in there what the commission rate would be. We helped them figure out what that was.

[00:05:39] So an affiliate could promote all of those products and they would get paid differently based on what that is. We were able to use that to recruit good affiliates, and we focused on the products that were high margin. Like everyone wants to do that, right? You want to have, you want to sell the products that are high margin on the advertiser side, because you’re going to be more profitable on those products. A lot of times they want to sell more of those high margin products because it’s their product. It’s their brand.

[00:06:10] We have a outdoor and gear company that we have worked with for over 10 years now, and that’s the case with them. They resell a lot of outdoor and gear stuff from other brands, and they are tied to what they can pay because of manufacturer resell agreements, but on their products they can pay out much higher. And they want to grow their brand. In a perfect world they would only be selling their brand and you would only be buying their brand.

[00:06:35] So it’s a way to incentivize from the top to the bottom on what you want to promote Now technically how you would do that is you can set up a data feed that includes a commission rate. A lot of networks will allow you to set up tiers of commissions and add a SKU list into each tier. So if SKU equals this or any one of these thousands of SKUs, then the commission rate is zero.

[00:07:00] If SKU equals one of these SKUs, it’s 1 percent and so on and so forth. So there’s a bunch of different ways. If you don’t know exactly how it’s done with the network that you’re on, then definitely you can reach out to us at gethelp@jebcommerce.com. We can answer that for you, or you can reach out to your network contact and they can answer that as well.

[00:07:19] So that’s technically how that can happen. You can also just say, “you know what? I’ve got five products that have high margin I want people to promote,” and maybe I want people to promote all the time, maybe you just want to promote them for Q4.

[00:07:33] You can add usually an offer level or an addendum to your current commission offer and say, “Hey, these five SKUs, they’re going to be paid out more.” Now you want to tell affiliates that they’re paid out more. You want to clearly outline that.

[00:07:47] Again, this can help you move product. Say you have some stuff in your warehouse and you need to get that stuff out the door and you don’t care what it goes for. You commission them higher say, “Hey, these 10 products we need to move. We’re going to double the commission rate.” And you provide links to your affiliates to do that. Get them sent out in the newsletter. You can do that to move products.

[00:08:08] You can increase your profits and margins. You can move product that you need to. You can also use it to incentivize affiliates. So maybe you have a content affiliate that will really move a certain product or a certain category of product, and you can commission them based on that product SKU that way. You can give it to the whole program, you can give it to one affiliate.

[00:08:27] There is one area that you’ll find and one category of affiliate that struggles with this. And that’s the cashback and loyalty sites. They will ask for the blended average.

[00:08:38] Because their product is really cash back to the consumer. That’s what they’re offering, cashback opportunities. And when you have a product feed-driven commission structure, or you have different tiers of commission based on the product SKU, they’re going to really struggle with that because what’s the cashback?

[00:08:56] Well, it depends on the product. That’s really hard to put in a list of potential advertisers and manufacturers a customer can choose.

[00:09:05] So it really adds a complexity that is difficult for them to market. A lot of times when they have that level of complexity of commission structure, they just won’t work with you. Or you’ll have to do paid placements and then you’re going to have to offer them a flat rate.

[00:09:20] And that’s okay. You can offer the blended average when you compare that with what your peer group is doing, you can offer them that commission. It’ll be like 6 percent or whatever that is that you can manage.

[00:09:31] With those types of affiliates know if you move to a product SKU based commission level, that category of affiliate, if you want to work with them, want to optimize and grow that category of affiliates, you’re going to have to offer them a flat rate.

[00:09:46] So figure out what your blended average is, what you can maintain that helps you reach your goals. And that’s what you’re going to have to do with the cashback sites.

[00:09:54] So anyway, wanted to make sure those advertisers, affiliate managers out there, you knew you have an opportunity to commission based on product SKU or product category, you have the opportunity to do that program-wide to everybody, or even do it to one affiliate. You can do it for all your products, or you can set up a separate commission rate for certain SKUs only.

[00:10:19] And that the one area where you’re going to run into a problem is within the cashback and loyalty sites. They’re going to want a flat rate. That’s one thing you can avoid. That conversation will happen unless you have this set up beforehand and you can set up a commission level for everyone, and then you can set up a commission level just for the cash back and loyalty. All the networks have that.

[00:10:40] If you need help figuring out the strategy and then how to execute it, we would love to help you. That’s what we do at JEBCommerce. You can email us at gethelp@jebcommerce.com. You can go to JEBCommerce.com/elements to learn about the packages that we have available for you.

[00:10:56] And reach out at gethelp@jebcommerce.com. We’ll set up a time no obligation on your part. We’ll set up a time to talk about what you need. Maybe explain more of this topic for you, help you figure out exactly what you need to do. And then we can actually execute that for you and help you achieve that growth.

[00:11:13] Really, thank you so much for spending a couple of minutes with me today to learn about this topic. I’d love to hear what you think. Send me an email, gethelp@jebcommerce.com. Did you find something useful? Is there something you’ve done specific in the past that you feel our listeners should listen to? Maybe I’ll bring you on the podcast and we can talk about that specifically.

[00:11:32] But it really would help if you share this podcast, if you found it useful, share it on Facebook, LinkedIn, X. Send it to someone that may benefit from that. It really would help us as well. If you want to help us get the word out about these episodes, leave us a five star review, whether it’s Apple Podcast, or Spotify, or the podcast player of your choice.

[00:11:52] And if you’re a advertiser, you’re trying to figure out how do I incorporate my affiliate program? How do I optimize it? How do I grow? How do I make sure I’m doing the right things to reach my goal? We would love to set up a time and help you with that; gethelp@jebcommerce.com is the email address to use for all those things.

[00:12:11] Well, thank you so much for listening today. Hopefully this was helpful. I hope you have a great day and a great week. Thanks.