How do I decide on the ideal commission for Affiliates to my products?

Increase your billing in partnership with Affiliates

Working with Hotmart’s Affiliate Program is a great way to increase your chances of selling more. A solid network of contacts will generate significant results, including greater publicity, better segmentation of your audience, increased traffic to your website, and higher rates of conversion. This means more chances to sell! 

Got questions about the numbers? We can help you!

Do you still have questions on how to define the commission percentage to be offered to each Affiliate? So, pay attention to the rest of this text. We’ll tell you important details about the three basic steps that you need to follow when making the calculations. So, grab a calculator, pen and paper, and let's get started!

 

First step: cost survey

The commercialization of your digital product does not generate expenses with physical space, logistics, or employees, but that does not mean that the business has zero cost. So, jot down what your monthly expenses are. 

Consider everything from investment in advertising to your internet and energy bills. This result should be divided by the average number of items sold per month, in order to define the cost of each unit. Finally, the amount must be added to the fee paid to Hotmart.

An example to help

Imagine that you are selling an ebook for $50.00. Every month, you invest around $1,000 to maintain your sales, considering advertising costs and general maintenance expenses.

In the same period, the average is 250 units sold. This means that each item has a marketing cost of  $4.00. In addition, for each digital product sold, you pay a fee of $5.45 (9.9% + $.50) to the platform. So, in the end, the individual cost of your material is $9.45. Simple, right?!

Well, then we can move on to the second stage: setting the price

Second step: pricing

We will continue to consider that you are selling an e-book for $50.00. To find out if the value of the product is adequate, never forget the basic principle that: digital products need to be more accessible than physical items, as few people will buy your material if they find similar, cheaper content in conventional stores. Always do your research!

Check the price of the main publications out there at the area in bookstores and also check how much your virtual competitors are charging. Reasonable prices will ensure that your material has good competitiveness. It's also important to study the commissions offered by competing products on the affiliate market that have the same theme or niche. 

In the end, if after making the withdrawals you come to the conclusion that you have set a very high price, the solution is to lower it. This does not necessarily mean losses. If your price is more suited to the content that will be delivered, it is likely that there will actually mean an increase in sales.

Well, now that you know the marketing costs for your product and have also set an appropriate price for it, it’s finally time to get to the last step.

Third step: setting the commission rate

Let's go back to the hypothetical situation that your ebook is sold for $50.00, with total expenses of $ 9.45. In this case, you will have an amount of $40.55.

That amount is your profit! Based on this, the percentage of commissions must be calculated. Now, the main question to answer is: how much of your profit are you willing to invest in advertising partners?

Commissions may vary depending on the product. Working with very small amounts is not advisable, as this can make your digital product unattractive to Affiliates, who are important partners in your business and need to have advantageous working conditions. Affiliates will be investing in your product,  presenting it to their audience, or buying traffic. They want to get paid for the work. 

The golden rule is: consider that the Affiliate wants a return of twice as much as they invested in promoting your product to pay their costs and make a profit. If each sale made costs them X in advertising, they want to receive 2x for the sale.

On the other hand, offering excessively high commissions can end up losing you a lot in revenue. There is no doubt that the help of the Affiliate is valuable and that it should be well paid, but it is also fair that you keep a good part of the profit.

For this reason, offering more than 65% in commissions requires studied sales strategies, with well-done calculations, so that afterward you don’t realize that you are losing money.

TIP!

Offer a minimum of 30% commission so that you can attract the attention of partners. Also consider the possibility of increasing this margin a little more, getting up to around 50%.

Keep in mind that the more Affiliates you attract, the greater your chances of selling. In practice, this will mean more money in your account! Anyway, know that there is no magic formula with a predefined percentage. Each case is different! 

If you have any questions regarding this issue, we suggest direct contact with our Customer Support team. We’re ready to help you!



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