Best commission structure for front end/back end?

[Ralf Skirr]

Hi,

Setting (it's theoretical, not an existing product line):
20 front end products between $10 and $100.
All customers of any front end product will be funneled into promotion for the same monthly membership for $27 / $47.

Now I'm looking into several options for affiliate commission:

1) 100% for front end - nothing for back end, commission directly to affiliate's paypal account OR
2) 75% front end - 25% back end, traditional affiliate payment: payout once per month for sales that left guarantee period OR
3) 50% front end - 50% back end, traditional affiliate payment: payout once per month for sales that left guarantee period

I have a strong tendency to #1, because I would not have to maintain a 'traditional' affiliate program for payments.
But I'm more interested now in the affiliate's point of view. Some may favor the fast payout of #1, some may favor the (possibly) higher recurring income from #3.

What do you think?
Ralf

[citrus]

Hi Ralf,

I would offer 100% on the front-end and 50% for the back-end membership. Instant payout for front-end, monthly payout for back-end.

Offering anything less than 100% for a low-ticket product would make your product unattractive to affiliates. Would you promote a $10 ebook for 50% commissions? Would you promote a product for which you don't receive anything for the back-end?

Your goal with this model should be to build a big list (of customers and affiliates), not to make money.

Curtis

[Ralf Skirr]

Your goal with this model should be to build a big list (of customers and affiliates), not to make money.


Thanks for your ideas.

I wonder, however, how you would know what the goal with that specific product should be?


What if it was created to make money?
Not every product on the planet is meant to be a list builder.
Some products should actually be created to provide value and create profits.
Right?
What if the membership was a support and work intensive service that is maintained by a staff of employees, that can not be funded when paying out the 100% / 50% commission scheme you suggested?


I believe Aweber and 1shoppingcart payout somewhere around 20% or 25%. Do affiliates still promote them?
Obviously.

Amazon pays out way below 10%. Do affiliates still promote Amazon? ...

Some products simply don't have the margin to pay out 50% or 100% to affiliates.

Does this mean they lose their chance of being promoted through JVs?
That's a very important question indeed.

Ralf

[citrus]

I suppose it depends on the price point. You're right that some people are happy to promote Aweber and Amazon, but most of these people don't mail out to their lists telling them to check out "this cool autoresponder service" or "this cool gadget on Amazon". I'm not sure about this, but I'd say most affiliates for these sites get their sales passively through blog traffic, PPC, or organic search traffic for example. Their money comes in without the effort of having to mail for and personally endorse a product, so it's not so bad that the commission levels are lower for such affiliate programs.

If we're talking digital products like what you want to sell, I'd say be as generous as you can. Trust me - a $17 ebook at 50% commish is going to be a hard sell to affiliates. On the other hand, this same commission rate for a higher ticket product ($47-$97) would be more acceptable.

For the back-end membership's commission level, the price point matters as well. It's tough to say without knowing what your service is, but again, I'd say be as generous as you can. Can you share some details about this service?

Curtis

[Ralf Skirr]

Hi Curtis,

thanks for your ideas, points taken.

I'm in early planning, considering several (very different) options, so I don't really have the details yet.

Ralf

[Dean Holland]

Hey Ralf

Here's my advice...

Much like Curtis, if your frontend is low ticket you need to give affiliates a reason to promote.

You should not be looking at your front end as the money maker, simply the lead generator.

I take on board your thoughts and I used to have the same viewpoint, however until I stopped looking at the frontend as an income source then I struggled.

Here's the view from an affiliate prospective,

I could promote your product for 50% of your $10 and get $5

Or I could go promote X's product for 75% of their $77 product and get $57

Both will take the same ammount of 'selling' so why would I choose yours?

Ok so now you bring the backend into it... This is where you should be aiming to make your money, but not just here, you obviously have your list now of buyers.

These people will make you and only you even more money as you build your relationship with them and promote further products in the future.

That said my advice give as much as possible to your affiliates, at the end of the day wouldnt you rather take a smaller slice of a constant stream of on-going traffic from affiliates because you reward them highly for their efforts

or

A larger slice of a few one-off hits of traffic because you're not giving enough reason for people to promote you.

The setups as you have mentioned I would give 100% commissions on the frontend (Preferably immediate payout)

Then at 50% of your recurring backend

Try and build in different levels of membership at varied prices that increase to say $97 PM.

The more affiliate attention you can get the more money everyone makes, then you have your biggest asset - Your list :)

Hope that helps

Dean

[Ralf Skirr]

The setups as you have mentioned I would give 100% commissions on the frontend (Preferably immediate payout)

Then at 50% of your recurring backend

Sorry guys, if I give 100 on front end and 50 on backend that service will be dead.
It is support intensive and employees need to be paid somehow.
::)

The core product as well as the support needs qualified people, and I don't want to reduce quality so that I can produce cheaper and keep affiliate commissions high.

I see your point of affiliates rather promoting other stuff then, because they can make more money from that given promotion. Maybe then I'd have to change the model.

So I bring up that question from above again:
Does this mean they lose their chance of being promoted through JVs?

Obviously a business does not necessarily have to rely on JVs and affiliates.
There are other ways to promote it.

Ralf

[Dean Holland]

Hey man

I am a little confused to be honest...

Are you saying that if you made $5 from your front end sale that this will cover all your costs?

IMO that is highly unlikely

If you insist that you cannot give 100% commissions on a frontend product costing just $10 then I think you are going to have to change your model.

With that said I wouldn't change the model

I would work with what you have

If you are worried about the 100% commission frontend of the $10 product then this means your backend is not deep enough.

Fill out your backend and make it more profitable, lets say you give 100% on the frontend $10

Then you have you your recurring backend, give 50% on that

But then you want more products, don't stop there... Upsells for those that take that offer, downsells for those that don't

Then more products ... keep it going

If you arn't making enough profit becuase you are giving away 100% on a small $10 product then your funnel isn't deep enough IMO

Hope that helps, just some thoughts :)

Good luck with it !

Dean

[Ralf Skirr]

Dean,. the front end as well as the back end in that case are support intensive.
They are not simple downloads.

So both together must generate the money to fund everything.

As stated in my first post I'm happy to give 100% on the front end, but that means I'm going negative there since I have to cover expenses each front end customer generates. If I then give away 50% from the back end too, the thing will not be profitable.

In other words: there's a reason why I gave the specific options in my first post:
1) 100% for front end - nothing for back end, commission directly to affiliate's paypal account OR
2) 75% front end - 25% back end, traditional affiliate payment: payout once per month for sales that left guarantee period OR
3) 50% front end - 50% back end, traditional affiliate payment: payout once per month for sales that left guarantee period

Ralf

[Dean Holland]

Hi Ralf

I understand what you are saying

In which case I would completely change your front end. Your front end shouldn't be labor intensive and have staff costs IMO.

Personally IMO you either need to give 100% frontend which you state you cant do... Or change the product to increase the price on the frontend.

The only other way I an see it working as it is at those prices is if you tie the frontend to the continuity. What I mean is make it so if they take the $10 product it comes with a trial to the continuity so they are into the continuity as a result of the purchase.

This gives more incentive to promote.

I have a membership site that works like that with forced continuity and makes 5 figures a month, soon to be six figures a month. It works extremely well.

As long as you work your conversions and improve it consistaently then affiliates will love it. Just be sure to pay them well

Hope that helps

Dean

[Ralf Skirr]

Hi Dean,

thanks for the input, some good ideas.
I consider adding some changes to the front end as well as expanding the back end.

I like the forced continuity idea. It's easy to justify as front end and back end actually DO belong together.

There has been a lot of discussion about forced continuity, mostly about offers that did it covertly.

How do you introduce the it to your front end customers? Is it stated explicitly on the sales letter already? Part of the order form? Hidden?

Ralf

[Tanner]

Coming at this from a different angle, it looks like to me you may be pricing yourself right out of business.

What it looks like are that your margins are way to low for such a 'support intensive' product, especially if you can't even breakeven on the back end after paying out a commission.

Can you increase your prices up to the next acceptable niche price point? Even a tiny 10% increase across the board on your back end should make a significant different.

Also loss leader products on the front end are great if you have deep enough pockets to absorb the upfront costs until you can make it up on the back end, but from reading the posts in this thread, it looks like your back end isn't priced properly to accommodate for it.

another option is to introduce a high margin product into the mid point of your sales funnel. In your case this should be a low support or no support product like an info product. Use the sales of this product to absorb your upfront costs and pad your pockets before they move further along your sales funnel.

On your monthly back end option to help offset your support costs you could also add an initial payment, something like $47 upfront + $27 per month. Call the $47 a set up fee and don't give a commission on it, but do give a commission on the residual, or flip it and give a commission on the set up fee and keep the residual for yourself.

Just a few ideas for you to consider.




Dean,. the front end as well as the back end in that case are support intensive.
They are not simple downloads.

So both together must generate the money to fund everything.

As stated in my first post I'm happy to give 100% on the front end, but that means I'm going negative there since I have to cover expenses each front end customer generates. If I then give away 50% from the back end too, the thing will not be profitable.

In other words: there's a reason why I gave the specific options in my first post:
1) 100% for front end - nothing for back end, commission directly to affiliate's paypal account OR
2) 75% front end - 25% back end, traditional affiliate payment: payout once per month for sales that left guarantee period OR
3) 50% front end - 50% back end, traditional affiliate payment: payout once per month for sales that left guarantee period

Ralf

[Ralf Skirr]

Coming at this from a different angle, it looks like to me you may be pricing yourself right out of business.

What it looks like are that your margins are way to low for such a 'support intensive' product...

Hi Tanner,

thanks for that, makes a lot of sense.

Actually I did not put too much thinking into the pricing so far.
You may be right that I simply have to up the pricing and add some extra margin for the affiliates.

I still don't think that every affiliate program should have payouts of 50% or more including backend, but that probably needs to be tested and will certainly depend on many factors.

Ralf

[Kunj K]

Every person who buys your front-end product should be given as a bonus:

"Free eBook/CD/Video Just For TRYING (Frontend)"

Basically a one month free subscription into your continuity program. It shouldn't be forced, but it should be "checked" at your order form.

Your affiliates will appreciate the monthly commission, and your conversion on the continuity will be very high.

I learned this from Eben Pagan, who stated in his Altitude program that 1/3 (!) of his $20m business is based on his $19.95/month continuity programs!