Affiliate Summit West is in its second day, and, judging by the #ASW13 tweets, affiliates are stronger than ever! Keeping with this theme, we’re happy to feature today’s guest post by Jim Wang of Microblogger.com on how to negotiate a better affiliate payout in order to secure a higher sale price.

We work with a lot of businesses looking to sell and one of the best ways to make your company more appealing is to have it generate more income. When you look at the sites on Flippa, which are the more appealing ones? The ones that make $0 a month or the ones that make $1,000? What about the ones that make $10,000 or more? The reality is that if your business generates significant revenue, it’s a far more appealing asset to a buyer.

One of the great things about websites and web businesses is the sheer number of revenue generating opportunities available to them. If you have a successful high traffic website, it’s very easy to start leveraging affiliate marketing to increase your revenues. If you are already using affiliate marketing, it’s very easy to negotiate higher payouts if you haven’t already.

Today we’ll spend some time discussing some time honored strategies for working with your affiliate manager and increasing your payouts so you can boost your bottom line. We’ll start with a very brief look at how an affiliate manager thinks, which should help you suggest ideas that are mutually beneficial.

Then, we’ll go over these strategies:

  • How just asking for a raise often works best
  • How to trade placements & promotion for higher payouts
  • How setting incentivized goals benefits you both
  • How shopping around can benefit your bottom line

Understand the Affiliate Manager

Let’s first understand the relationship from the affiliate manager perspective. Affiliate managers are extremely busy and they often manage many affiliates. So in order to get the attention of your manager, you need to perform or show the ability to perform. Next, they may have some flexibility in the payouts but anything extra means they need to make the case to their boss. Everything you do has to be in support of that case. Lastly, good affiliates are the ones that the manager can trust: managers don’t want to up your payout, see an increase in conversions, only to discover you were ripping them off. Build up that trust with a history of performance backed up by strong lead quality and negotiation is made all the easier.

OK, enough with the rudimentary lesson, much of which you probably already knew, and onto the good stuff. How can you get a better payout from an affiliate company? There are a few things you need to accomplish before you should even consider trying to negotiate a higher payout or more favorable deal terms with an affiliate manager.

One of your biggest challenges will be to demonstrate strong performance, either today or in the very near future. This can mean strong performance in their program, a high rating in the affiliate marketplace, or simply a reputable way to drive traffic to the offer either with an email list or an existing site. “Strong” will vary from company to company but start communicating with your affiliate manager to get the conversation started. If you can demonstrate that you are an asset, rather than a liability, the manager will be your ally and that’s the ultimate goal.

Once the lines of communication are there, it’s time to start negotiating for a raise.

Just Ask

Affiliate managers are always on the look out for good affiliates. With so many affiliates out there, it’s a challenge to find the ones that perform well and drive quality leads. Sometimes a great way to separate yourself is to open up the lines of communication and make your case that you will be a strong driver.

Unless you are starting a business from scratch, you have metrics you can use to convince a manager that you should get higher than the standard payout. Let’s say you have you a high traffic page on your site that is ideal for an offer. Tell the affiliate manager that you have this page, it gets thousands of visits a day, and the offer is a great fit because there’s a competing offer on that page already. If you can offer up statistics on that offer’s performance, to the extent that you don’t reveal too much proprietary information, that can be a proxy for your performance with the current offer.

Offer Better Placement

The key to getting a higher payout is to offer something in return for that payout. Think about how you are promoting that affiliate offer. Is it on a page with other offers? If so, suggest to place the offer higher up on the page in return for a higher payout. You should do the math to make sure your generate a higher profit on the page, given the move, and ensure you are compensated fairly for it.

For example, let’s say you have three offers on a single page. The first offer, Offer A, gets 50% of the clicks to the page and converts at 8% for a payout of $50. The second offer, Offer B, gets 30% of the clicks and converts at 10% for a payout of $30. The third offer, Offer C, gets 10% of the clicks and converts at 15% for a payout of $15. For every 100 visitors, Offer A earns $200, Offer B earns $90, and Offer C earns $22.50. If you start talking to Offer C, you can ask that they give you a higher payout in return for moving the offer up the page.

What would you need the payout to be to take over the 2nd slot? Assuming the clickthrough rate and conversions hold true, you wouldn’t need much since Offer C converts at a higher rate (15% vs. 10%), to beat Offer B. A commission above $20 would make Offer C in the 2nd slot above Offer B in the 2nd slot. If Offer B falls to number three, then it would generate $30, which is better than Offer C in the third spot.

Offer Additional Promotion

How do you promote offers? Is it through email? All on a page that you push organic and paid search traffic? Is it through social media? In line with offering higher placement, offer additional promotional channels in return for a higher payout. Remember, affiliate managers want to see more conversions and leads when they bump up your rate so if you can offer these up during your negotiations, they’re more apt to agree to i ncreasing your ate.

Set Sales Goals

Regardless of the outcome, whether the manager approves an increase or declines it, set sales targets for more increases in the future. Setting goals like this has two clear benefits.

First, this lets you compare your performance on a month to month basis. Are you increasing traffic to your site? Has that resulted in increased sales? How does this compare to last month? Will you hit your growth numbers? What steps can you take to achieve this? These will put you in an active mode, rather than a passive one in which your goals either happen or don’t.

This has the added benefit of helping you understand what you need to do to reach the next performance tier. The manager may tell you that an extra 10% in conversions will result in a bump in your commission rate. You can start planning your strategies for pushing to the next level because know your rate will increase as a direct result of your activity. Sometimes managers will bump your rate even if you’re close, simply because a good affiliate is hard to find.

Find Another Offer

If you have cable service, chances are you know this strategy but I suggest you tread carefully with it. Sometimes you need to leave an affiliate offer, or bump it down a few notches in your promotional schedule, in order for that company to appreciate you. If you’ve made inquiries as to the possibility of increasing your commission and the manager says he or she can’t, review your options.

Programs are always popping up and one of the many jobs you have is to review them for suitability in your efforts. If a new offer comes along that is enticing and tests well, you may want to tactfully bring that to your affiliate manager’s attention to see if there’s anything they can do for you. It’s crucial that you test it first because not all programs are equal. The new offer may be some fly-by-night offer that leaves you with a fat accounts receivable, rather than a big payout. Also, you never want to burn any relationships so be very tactful when bringing this up.

Finally, and this is similar to looking for another offer, try another affiliate company entirely. Sometimes a program is available through multiple companies and a different company will be able to give you a better payout. Be sure to do your homework and compare conversion rates, landing pages, and the rest because a higher payout doesn’t always translate to more dollars in your pocket.

These are just a few techniques I’ve used to increase my affiliate commissions and hopefully they will work well for you. Even if you aren’t looking to sell your business, when is more revenue a bad thing?