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Lets say that your product is priced at $100. Lets also assume that it cost you $10 to make it. This leaves you with $90 profit.
How much of this do you want to give away to
person that made this sale possible?
Personally, I believe that you should give a rather high percentage of profits back to affiliate (Depending on how many sales they regularly generate), because without them, you wouldn't have made that particular sale at all, so reward them for it.
A fairly decent reward is about 50% of revenue generated. Your product is priced at $100 so a $50 commission is quite generous. It really depends on your other costs (such as a mortgage) you have, which would help decide on a fair commission to both you and Affiliate.
Another factor which plays a part is how much additional advertising you do, such as pay per click. For example, if you rely solely on your Affiliates to Market for you, then you may want to reduce commission you pay to them to help you survive. However, you may want to pay them more, to encourage them to send more sales you way. It really is a judgment call.
On other hand, if you advertise in other ways effectively, then you can afford to pay higher commissions, because you're not putting all your eggs in one basket.
In end it's all down to how greedy or generous you are. The best advice I can give you is to pay affiliate what you think he/she deserves. Hopefully that way everyone is happy and earning their fair share.
That is key to a successful affiliate program.
Stephen Warren, the creator and webmaster of http://www.marketershandbook.com , a completely free business and marketing resource which anyone may use.
