Good point was raised in one of the other posts that I think deserves to be in a topic of it's own.

What's a good (attractive) commission to offer to affiliates?
What's the industry norm?
Finally,how PROFITABLE is the 'attractive' offer for small hosting firms?

For the standard $5-10/month hosting account, a commission of anywhere from $50-150 is common. It's usually somewhere in the middle. Check out sites like Commission Junction (http://www.cj.com/ ) to get a better feel for the affiliate market.

thanx alot for that. I'll check it out now.

I still don't get the accounting for that...

grrrrr where do I go in CJ to find these affiliate offers?

Sign up for a free account as an affiliate. You don't have to actually use it. Then you will be able to login to see the individual affiliate offer terms.
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I would compare it to the cost of acquiring a customer through advertising.

If through advertising, you see on average 1 customer per $40, and through an affiliate it will cost you $100, then just do advertising. I need to spend more time studying affiliate/referral marketing, but there are some good books on it and I'd recommend looking around for some.

I would compare it to the cost of acquiring a customer through advertising.

If through advertising, you see on average 1 customer per $40, and through an affiliate it will cost you $100, then just do advertising. I need to spend more time studying affiliate/referral marketing, but there are some good books on it and I'd recommend looking around for some.Getting a customer for 40 dollars is rare here, if you have a niche its not too hard but most people just think a mass general host business plan is the way to go.

what is your niche and what kind of volume are you driving with a 40 acquisition rate?

If you take a local business owner out to dinner, it will cost you about $50 (depending on the meal), and you will probably get his business.

:)

Why is it that no one talks about residual commissions paid out on affiliate sales?

You do realize that if you make a sale for a CJ hosting advertiser and you get paid the commission and then if the customer cancels you will get a chargeback right?

With the residual offer there are no chargebacks as the commission is only paid on monies received. The only time a chargeback would occur is in the case of a fraudulent order.

No one seems to mention this model.

Curious to see what others say.

We pay on a net 60 basis. The client must be with us for 60 days with no charge backs or fraud reports before we do a payout.

Our current rate is $85 per sale.

If you take a local business owner out to dinner, it will cost you about $50 (depending on the meal), and you will probably get his business.

:)
LOL, good idea :D

Make sure you constantly check out affiliates, coz many of them are frauds or just refer themselves.

Affiliates don't want residual commissions. Remember that when running an affiliate program you are trying to attract affiliates, and it is a very difficult task. When your competitors are offering $100 up front commissions are you are offering $1.50 per month in commissions you are not going to have many affiliates working for you.

The bottom line is the big hosting companies running big affiliate programs are prepared to take a loss for the first year in order to gain the customer. Not many small companies can afford to do that, especially when you consider the volume some of the bigger companies achieve. Small companies want ROI on affiliates which is why they cannot compete. The bigger companies are not so much concerned with ROI but rather gaining a large affiliate network and a large customer base, even if it requires them to take a short term loss.

Affiliates don't want residual commissions.

WOW! Now that is a definitive and broad statement however I don't think you are the mouthpiece for all affiliates. Or are you?

Maybe it didn't work for you but that doesn't mean that model doesn't work at all. My companies are proof that it does work as we have many products that pay out residual commissions and we have THOUSANDS of affiliates working with us being paid out on residual commissions.

So therefore for you to state that:

Affiliates don't want residual commissions.

shows either your lack of experience or lack of knowledge.

Or, it just might mean that the poster did not take the time to word his post with all kinds of caveats, such as "in my experience", or "in this industry", or "the affiliates that I know" or "when the alternative upfront commission is this high".

Good enough?

Good enough?

In my opinion? No.

I pay high residual commissions to my sales team, one time (after 60 days) to affiliates. Affiliates are the only reason why "the big guys" exist. They are perpared not to make a profit on an account for 2 years.

I like my affiliates, I love my sales team. And I pay them well.

My companies are proof that it does work as we have many products that pay out residual commissions and we have THOUSANDS of affiliates working with us being paid out on residual commissions.



DON'T BE SHY TO SHARE MORE INFO .....

Why is it that no one talks about residual commissions paid out on affiliate sales?

With the residual offer there are no chargebacks as the commission is only paid on monies received. The only time a chargeback would occur is in the case of a fraudulent order.

No one seems to mention this model.


We pay 10%+ residual, over the average lifetime of a hosting client, the affiliate earns much more than if we paid out a simple $50 or whatever as a once off bonus.


Affiliates don't want residual commissions. Remember that when running an affiliate program you are trying to attract affiliates, and it is a very difficult task. When your competitors are offering $100 up front commissions are you are offering $1.50 per month in commissions you are not going to have many affiliates working for you.

1.50/month for 6 years (average lifetime of a client) is 144. Plus we find affiliates prefer seeing their monthly income grow as they bring in clients

Those affiliates interested in the quick-cash will prefer the "hit" of the big upfront amounts, those interested in building a business, who only refer people to business they trust, prefer the residuals.

We dont have an "army" of affiliates selling thousands of domains and hostig accounts a day, we have a few loyal promoters, who earn some cash back by having the links on their websites, have setup specific websites to "funnel" people through their link and so on.

IMHO residuals are where the serious affiliates are :)

For those of you who offer both residual and one-time commissions.. what affiliate management software are you using?

We've tried both JAM and iDev and found it really "clunky" for the affiliate to use. (ie: It's not user friendly from the affiliate perspective. It's hard for them to understand their options, etc.)

We currently offer an affiliate program as a one-time payment, but would like to offer residual commission as an option for our longtime customers... but so far we haven't found any software that works well for this.

Thoughts?

idev at the moment, just testing out v5 as we've had a number of "issues" with v4
looked at jrox, started out hopefull, but was unimpressed once started using it.

I expect we'll end up funding some development work with WHMCS to get all the featues we need in a program done and added to that, and some way of "importing" the non hosting products into it so we can maintan 1 affiliate program

We have our own software that we coded in-house.

The "out of the box" offerings we could find on the market just didn't fit the bill.

Ene, if you know so much about this then tell me why EVERY big hosting company that wants volume offers non-residual one time payments of $75 or more? Maybe they don't know anything? Maybe Midphase getting 6000 new customers a month don't know anything? Maybe ALL the big hosts at Commission Junction don't know anything?

I am not trying to be the voice of all affiliates around the world I am just telling you why residuals don't work in the hosting industry. It is not my opinion and I am not saying "from my experience". I am stating financial facts that are well known in the industry. Check out the big providers and the big affiliates and you will see the trend.

The large volume advertisers cannot afford to run their campaigns without being paid commissions up front. You think they all have many thousands of dollars to finance their campaigns and wait for the commissions to trickle in? Not a chance when the hosting company down the street will pay them 12 months commission up front.

thehostinglist, I think you might find that most company's that offer a "residual" option for affiliates are usually well above the industry average for pricing.

I agree that offering a residual affiliate program for hosting plans that cost $5/month is not going to be very attractive.

But if you offer a 10% residual program for hosting plans that cost $50/month, then this becomes a very good option for longterm affiliates.

:)

Ene, if you know so much about this then tell me why EVERY big hosting company that wants volume offers non-residual one time payments of $75 or more? Maybe they don't know anything? Maybe Midphase getting 6000 new customers a month don't know anything? Maybe ALL the big hosts at Commission Junction don't know anything?

Large companies have different calculation in this. Large companies CAN afford to offer high one time commissions and then take the loss for the first year or so.

Smaller companies can't do that. Or they could but it takes alot of guts and alot of from-pocket investment :) Noone is saying that what large companies are doing is bad - it's just not SUITABLE for most small companies.

The topic here is how can a SMALL company use affiliate programs to boost profits

Upfront commissions of $80 may be better but what good is that if they're not doable for small firms.

It's like saying 'it's a fact that if you hire Sachi&Sachi for your ad campaign you'll get more clients than if you hire a local firm down the road" ....No arguments there but small companies can't afford Sachi&Sachi to BEGING with so we have to explore other avenues..... what are they is a question here

I think residual commission CAN work well too if, like you said, it's not $5/mo plan
Here's why

When we started our company we decided to go for residual income (monthly payments) rather than yearly payments. In the last 6 months our orders have dropped significantly and if we didn't have residual payments we would've gone down (because very few new customers were comming in). But thanks toresidual payments we survived the crysis and recovered.

That's the benefit to present to your affiliates. Even if your site goes through the rough patch and you reffer no new clients, you're still gonna keep getting your monthly commission cheque. Some people will recognize this as a more secure way of doing things.
May pay less up-front but some people understand the importance of residual income (it's your job to help understand those that already don't).

YOUR OPPINIONS??? Am I missing something?

1.50/month for 6 years (average lifetime of a client) is 144. Plus we find affiliates prefer seeing their monthly income grow as they bring in clients

Or you can invest the $100 up-front payment that the other poster was comparing, and end up with a similar or sligthly greater amount, without as much risk. Put $100 in a mutual fund with an average yearly return of 8%, and you'll end up with $158 compared to $144, and that assumes that a 6 year average retention rate is really realistic. Personally, I'd much rather take the $100 up front.

Or you can invest the $100 up-front payment that the other poster was comparing, and end up with a similar or sligthly greater amount, without as much risk. Put $100 in a mutual fund with an average yearly return of 8%, and you'll end up with $158 compared to $144, and that assumes that a 6 year average retention rate is really realistic. Personally, I'd much rather take the $100 up front.Ditto, and most big affiliates will too.

1.50/month for 6 years (average lifetime of a client) is 144.

at investopedia:

net present value, presuming 8 percent discount rate, ignoring monthly compounding, the results for 1.50 per month X 12 months x 6 years are:

With a discount rate of 8.00% and a span of 6 years, your projected cash flows are worth $83.21 today, which is greater than the initial $0.00 paid. The resulting positive NPV of the above project is $83.21, which indicates that pursuing the above project may be optimal.


umm. optimal? the above does not even factor in the affiliate's cost of acquiring traffic!

Getting all of the payments would presume that the payor is still around in 6 years. To wait this long, banks want a lien.

As far as monthly residuals helping with low times, that is just masking poor cash flow planning. Take the money and put it into a reserve fund. A reserve fund that you control.

Old proverb, he who has the cash is king.
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Some sites offer 10% each month of the bill that they refer and 5% of the referer's referer. lol

The idea is to get the affiliates. And most affiliates want it all up front. IMO you shouldn't pay more than the hosting plan brings in in a year.

From my experience with affiliates, they put the hosts on the top that will make them the most money. Not just the ones who pay the most, but the ones who they'd get the most signups with.

It is all about how much money is brought in per visitor, not the bounty you pay. Don't get me wrong at Bluehost and Hostmonster we pay for affiliates to drive traffic, but often our "per sale" amount is less than others but affiliates want to promote us because our conversion rate is higher than most other companies. It's ALL about conversion rate and total $$ earned.

On a side note, I would say that absolutely none of our "big" affiliates (10 or more sales a day) is interested in residual income. They all want upfront money and aren't even interested in talking about residual.

On a side note, I would say that absolutely none of our "big" affiliates (10 or more sales a day) is interested in residual income. They all want upfront money and aren't even interested in talking about residual.
Ya I don't think any affiliates trust a hosting company to pay residualy :), plus they want the money to invest in getting more visitors to bluehost etc that next month.

do you think the bluehost/hostmonster affiliate program is what made those companies grow so quick?

does bluehost pay more for affiliates that drive a lot of traffic?

Ya I don't think any affiliates trust a hosting company to pay residualy :), plus they want the money to invest in getting more visitors to bluehost etc that next month.

do you think the bluehost/hostmonster affiliate program is what made those companies grow so quick?

does bluehost pay more for affiliates that drive a lot of traffic?

I didn't realize it at the time, but the reason Bluehost even exists right now is because of our in house affiliate program. We wrote our own 100% from the ground up. At the time our tracking was better than most and it is 100% integrated with our billing and CRM software which is also written from the ground up. This made the affiliates happy because we weren't looking for and finding ways to not pay them. We were do everything we could to make sure they did get paid. At the time we could go to the larger affiliates and buy signups for $80 in large quantities. Those days are gone now for anybody large but the principal is the same. Make SURE your affiliates make more on you than your competitors or you will become irrelevant in the market.

To answer your second question we do pay more to big affiliates for signups. We don't give out those details (Sorry), but we do it. Hope that helps.

Thanks,

Awesome thanks for the info!

Matt, your presence here really enhances WHT, do stay. :D

often our "per sale" amount is less than others but affiliates want to promote us because our conversion rate is higher than most other companies. It's ALL about conversion rate and total $$ earned
******Key Point********
The TOTAL $$ is what affiliates look at and that depends on balance between conversion rate and per sale payout. Weakness in EITHER one of these will reduce affiliates commissions and make the offer less appealing.
Is it just me or is noone mentioning conversion rates in their 'affiliate recruitment campaigns', everyone seems to focus solely on per sale rates....

Wanna know why? Because most hosts are weak weak weak when it comes to converion rates on signups. Affiliate know after 2-3 who will work out long term and how will be #1 on their list. For qualified traffic, if you are converting at less than 5% of all unique clicks into slaes you can be certain that the big affiliates are going to pass on you. On a unique click bases almost all our big affiliatess convert between 6-8%, and often times we will get 9-10%. I know that seems high, and it FOR SURE is only possible when the clicks are targeted like with 10 ten lists etc.

Oh well, l8r.

From my expereince, affiliates have a hard time selling the products. This is, I believe, is because their site don't always have high enough relevant traffic.

i offer just a flat rate of 10% of the what ever package the referring customer buys

Offering recurring commissions lets us keep income and expenses aligned. It also allows us to pay commissions to affiliates on their own purchases, for the same reason. To allow affiliates to grow their income base, we also pay second-tier commissions, for when their referrals become affiliates.

Having said that, what previous posters have said is also true: that the big guys all pay those big single-hit commissions. One of the freedoms of being a small business is the ability to do things differently. :)

We are paying 200% commission on all sales with the exception of specials. We personally believe higher commission gives the affiliate more of an incentive.

Offering recurring commissions :)

How's that working for you? You got much business from affiliates or just a few clients here and there?
Same question for you universal-webhost

Too soon to say in our case. Stay tuned. :)