Is the commission rate really that important:

By Bruno Delepierre
Posted Monday, August 9, 2004

A lot of affiliates think the commission rate is the most important thing when choosing a merchant program…In my opinion the commission rate is a wrong aspect to choose a merchant for. Although a high commission rate is important you shouldn’t automatically reject the merchant if they do pay you a low commission rate. If you have to choose between a couple of merchants it’s sometimes even better to use the merchant with the lowest commission rate. This may sound a bit weird but let me explain trough an example and you will immediately understand what I want to say :

Let’s say you have merchant X that pays you 15 % per sale and you have merchant Y that pays you a wonderful 25 % per sale. Both merchants sell similar products so almost every affiliate would use merchant Y right ? Wrong, sometimes merchant X will be the better choice. Don’t let merchants overwhelm you with simple numbers ! I’ll give you a couple of possibilities where you will see that merchant X will be the best choice although the merchant offers a smaller commission rate.

Suppose you send both merchants 10 sales. You’d think merchant Y would be the best performing merchant but what about this : you earn 15 % on 10 sales of each 30 $ . That will make you 45 $ . With merchant Y you get 25 % on 10 sales of each 15 $ . Merchant Y will make you 37.5 $. It’s clear that merchant X is better performing even with a smaller commission. If you would have been able to send the ten sales from merchant Y to merchant X you would have made 90 $. If you’d send the 10 sales from merchant X to Y you would have made 75 $.

My point here is that you have to look further than the numbers as they can very often mislead you. A remark however : If both merchants sell similar services at a different price ( eg. webhosting ) it can be interesting to use both merchants : Try to convince people to use merchant X but also add that there is also merchant Y that isn’t as good as merchant X but still is more than ok for people with a smaller budget.

A second example now : Again assume that you have two merchants A and B . Merchant A pays you 20 % per sale and merchant B only 10 % . Once again they offer the same thing at the same price and you send them the same amount of visitors .You would presume that merchant A is the logical choice.

Now your site sends 20 sales for a 100 dollar product. This means you’ll get 400 $ by using this merchant. Merchant B however receives 50 sales on the 100 dollar product. This will make you 500 $. Merchant B pays you more so you should use merchant B instead of merchant A !

What I’m trying to say is that a commission rate doesn’t say a thing. In the end it’s the actual commission you see on your check which is the most important element. Don’t rely on the commission rate but on the commission itself. A good commission rate is very appreciated but if you cannot send any sales or leads to that particular site you will earn nothing at all… Check out the merchant and see if people are convinced to buy something, see if the merchant site is easy to use. Also compare prices of equal products and see which is the best paying one.

A final remark however : Also keep other aspects in mind before you pick a merchant. It’s possible that you know your visitors to learn which budget they have and how much they want to spend. Things like the reliability of your merchant,user-friendlyness and uniqueness are all aspects that you should keep in mind when choosing an affiliate program.

About the Author
Written by Bruno Delepierre - Discover more information,tips and resources on affiliate marketing,webdesign and webpromotion on (http://www.4allsites.com). You can also subscribe to our newsletter on (http://www.4allsites.com/ourezine.html) for regular inside information and webmaster resources.