I thought I would start of the blog with a post about recruiting affiliates. This post came about after I was recently asked by a reader how to compete with competitors who offer very high affiliate commissions that you cannot match without becoming unprofitable.
This is a common problem when competing for affiliates online with any type of product, not just software. It can be quite frustrating trying to recruit affiliates when it seems your competitor is very happy to give away almost all his revenue to affiliates. These competitors will always fall into 2 categories. The one who is simply happy to generate a small amount of revenue either because this is not a priority for them, a hobby or side project or they simply don’t know what they are doing. Then you have the dangerous competitor that is using the high commission as part of his marketing strategy.
Either way, when faced with this problem, and its clear you are loosing many potential affiliates to them, you need to modify your own strategy.
1. If you do not want to increase your commission to match, you need to make sure that you have a higher quality product that converts site visits & downloads into sales better then your competitor. A good affiliate (the type you really want) will promote the product that is of better quality and converts to sales best, and NOT the product with the highest commission. One possible way to track your competitors conversion rates is to sign up as an affiliate for them and send them traffic (via adwords etc) and track the sale conversion rates. Yes, this will come at a cost, but its competitive research and is very valuable information when fighting for affiliates.
2. If you have multiple products or a “lite” + pro version of a product, you should promote one of the products to affiliates at a very high (even 100%) commission rate as a way to generate a large list of affiliates very quickly. You then promote your other products to these affiliates and if possible automatically approve them as affiliates for your other products, and since they are already promoting your 1 product, they are very likely to promote your other products which are set at more reasonable commission rates. This will result in affiliates promoting your other products when usually they would simply have passed over these products previously in the affiliate network list, since the affiliate rate was not as good as your competitor who was listed above or below you.
Another part to this is getting affiliates to promote a high commission product (perhaps a lite version) and then you integrate an “upgrade to pro” option or recommendation to another related product within your software package. Many users will upgrade (if you make it worth it to them) and you will then keep 100% of the revenue from the upgrade. When you work the numbers this can result in only making 5$ on your initial high comm sale, but an additional 20$ per purchase on upgrades later on. A total value of $25 per sale instead of $5. Plus you have generated a large list of affiliates!
Basically the theory is that you use low cost (or high comm) products to act as lead generators to generate a list of customers or subscribers (or affiliates) who you can promote other or more expensive(profitable comm) products to on the back end.
The above strategy is exactly why some companies seem to be able to sell their products at so crazy cheap (or at such high comm) and still make a large profit. Because they have an effective back end sales funnel. It really is critical to have multiple products and a back end funnel to be able to stay competitive online.
