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A fair commisson plan

Does anyone have any experience setting up a commission plan? I've had some interest from someone who wants to sell my software for me.

My problem is that my software can be sold as both a stand alone app and as a service. Its easy when someone sells the software as stand alone, they just get X percentage of the sales price. But how do you handle when its sold as a service. Should I give them X percentage of the monthly service fee? Do I pay them for the life of the contract, or for some set period?
xdavidx Send private email
Thursday, September 17, 2009
 
 
50% is normal for one time sales, adjust up or down as your product converts better or worse for your affiliates.

50% for ongoing 'money for life' or 1-3 months for subscriptions, probably based on your ability to retain + how much they earn per signup & how well it converts for them.

It all comes down to balancing how much money you make vs. how much money they make - if they don't make enough, they won't promote you.
Jos Stoned Send private email
Thursday, September 17, 2009
 
 
Make sure you don't allow empty redirects. Amazon recently changed their affiliate terms. Until recently, there were a lot of people doing Google PPC advertising, pointing straight to Amazon sales pages. This is what a lot of the internet marketing "systems" really were.

Let's say you were selling product X on Amazon. You're doing PPC advertising, paying $0.10 per click, conversion rate of 2%, profit per sale of $20. You're making $0.40 per click, minus $0.10 for the ads.

Now someone starts a PPC campaign, bouncing through their affiliate link straight to your product. First, your CPC (cost per click) goes up because there's more competition in your niche. Second, they're siphoning off sales that would have been yours anyway. Third, you're paying them half the commission, so you're only making $10 for each of those sales.

And while you're improving your product, they're improving their PPC campaign -- because that's their whole business model -- siphoning off even more of the sales.

Amazon had to change their ToS to combat this, and they'll withhold payment from abusers. You don't want to fight with people over payments for sales already made. Get this language into your affiliate agreement up front, and keep an eye on anyone doing a lot of volume to make sure they're not abusing it.
Drew Kime Send private email
Thursday, September 17, 2009
 
 
add a term in the agreement, that affiliate relationship can be terminated at any time without prior notice or cause.

This way, you can drop anyone that does anything you would not want them to.
Anonymouse Send private email
Thursday, September 17, 2009
 
 
With all due respect to Drew, you're probably not Amazon, so the comparison may not hold up.

Amazon probably have a team of people figuring out the search engines, figuring out the best ads, best possible keywords, all worthwhile small search engines, etc. For all their major products.

You probably don't.

They also rank reasonably high in the organic results for virtually every all their products.

You probably don't.

So they wouldn't benefit from a bunch of commission-only people filling the gaps that they otherwise would have missed.

You possibly might.

Amazon probably have a ton of loyal affiliates already, and possibly don't care too much if a few of their affiliates switch to promoting other vendors

You possibly don't, and might care.
--

It also always amazes how many people say affiliates don't produce sales, but then pay them a pittance, or make it virtually impossible for them to get paid, and put a ton of restrictions on top to cap it off.

I'd suggest you put the least restrictions that you can (you can always leave an open clause saying you reserve the right to remove affiliates or add restrictions), and pay them the most they can.

If you don't want them advertising on particular keywords or search engines, say exactly that. No more. For example, if they can find a way to profitably advertise your stuff on a search engine that you're not even advertising in, you should be glad, not putting obstacles in their way.
S. Tanna Send private email
Friday, September 18, 2009
 
 
Good points. I'm probably being excessively paranoid. And the general purpose "discontinued at any time for any reason" language is probably enough to cover it.
Drew Kime Send private email
Friday, September 18, 2009
 
 

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