Not all Commission is Equal!

Posted on 14. Feb, 2007 by in Education

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What’s this I hear you cry, something else for me to factor in when I pick a Merchant that is selling basically the same product as another Merchant, well sadly yes. It will also be something that you won’t really know is going on without really digging deep, as sadly the information is not always given by a Merchant or displayed by a Network, there will also be a few Merchants that have not update the new deal after making a change to stop paying commission on the vat or delivery at the command of the company financial director.

What should you expect as an Affiliate when % is worked out?

Well basically you should only expect to get paid commission on the product sold before vat and before delivery is charged to the customer.

But that’s not what you always get!

There is whole maze of deals to be had, some times the Merchant doesn’t even know they are doing it, other times there lack of technical ability and means you get additional commission.

Some merchants over charge for delivery as way to make money and you as an Affiliate should really be getting a commission from this also, however not every Merchant looks at it this way.

Keep in mind if a Merchants is making a loss, breaking even or only making a slight profit (pennies not pounds) from postage and packing after you factor in staff time, systems, packing and postage then you shouldn’t be expecting a commission as that’s only fair however strangely enough some Merchants pay you a commission on delivery when they don’t have to and are not reaping the benefits of this generosity as they don’t tell the Affiliates about this extra commission.

Another twist is when some Merchants actually charge the Affiliate for free delivery offers, by removing the delivery from the product price and then giving the commission on the product price minus what it costs them for delivery, is this fair, well not really if you don’t know that’s part of the deal, if you have been told up front then you can’t complain but the problem is most of the time your in the dark in an effort to make there offerings sound more attractive than the competitors.

Examples

So let’s take basic examples of couple of Merchants all offering 10% commission, they are all selling the same thing, but who do you go with? For these examples you need to exclude other factors such as is it a brand or ease in purchasing the product, that’s not the point of this article but is something in the real world of “who do I promote” you should be thinking about also. This article is trying to show you that 10% commission is not always 10% commission.

  • Merchant A – 10% commission on the product sold excluding vat but including delivery.
  • Merchant B – 10% commission on the product sold with vat and delivery.
  • Merchant C – 10% commission on the product sold with vat but excluding delivery.
  • Merchant D – 10% commission on the product sold before vat and delivery is added.
  • Merchant E – 10% commission on the product sold excluding vat but has free delivery.
  • Merchant F – 10% commission on the product sold excluding vat minus free delivery that actually costs the company £2.95 and that is taken from the cost of the product before the commission is worked out.

I actually had a few more examples to put here but as I feel I have got my point across I will stop here, so look at the 5 examples, can you correctly put them in order of who is offering the best commission deal? Answer is down the page a bit more if you want to try and figure it out.

Now if you are trying to work this out, my point is that it’s not always clear what the best deal is. I believe that most Affiliate don’t take the time to work out who is offering the best deal and are promoting the wrong Merchants or wrong deals as they either confused, or not given the full facts up front (very common) or are just lazy and stick with well this is working for me so why rock the boat, and that’s fair enough.

Have you passed the test?

So what was the correct order if everything equal and you had to pick purely on commission? B, C, A, E, D, F is the order you should be promoting the same product from different Merchants. Offers from Merchant C & A in the list are interchangeable based on if the delivery costs more than the amount removed to make the before VAT price, in the majority of cases C should beat A.

Merchant B basically said look whatever the customer pays us in total, we will pay you 10% in commission. While this is technically not correct, as you really should not be getting commission on VAT (VAT is Sales Tax for my USA friends reading this article) but delivery is at discretion of the retailer and decision to pay commission on this has to be based on will it cost you money to give the Affiliates commission on delivery, if the answer is yes then don’t but if you make money from the additional income from the delivery then you should be thinking about rewarding your Affiliates with commission on this also.

Ok I have gone and wrote a novel on what should be simple, but as you can see when a Merchant screams out that they offer 10% commission when a competitor is only paying 9% you need to ask yourself, is the deal on a like for like basis.

Last example: A product selling for £100 + £5 delivery.

Merchant A offering 10% on sale before vat and delivery is £8.51 (that’s 10% of £85.11 the price after vat is removed from the item selling for £100 to the consumer)

Merchant B offering 9% on the sale with vat and delivery is £9.45 (that’s 9% of £105.00 the total price if vat and delivery is not removed before commission is worked out).

Your actually £0.94 better off if you promote the Merchant B offering 9% commission than you are with the Merchant A offering 10% due to the way the deal is actually worked in practice.

I hope I have enlightened you to the fact not all deals are the same, Merchants and Networks often fail to get across that while there percentage looks lower on paper, in practice it’s actually worth more money a big plus for the Affiliate to promote that Merchant gone to waste. Due to the lack of information given up front you could be worse off promoting someone that sounds good on paper and you may never no this fact unless you buy something yourself and work out what you got the commission on.

3 Responses to “Not all Commission is Equal!”

  1. Frostie

    16. Feb, 2007

    My head hurts! I actually had to print this post out to understand all the scenarios!

    I noticed this a number of months ago, and after realising it, contacted a few merchants to pinpoint the differences. Some were willing to change my comm’s strucutre and others weren’t even willing to discuss it. Obviously those links were changed immediately!

    Also it’s worth remembering that some items are VAT free and last year there was a problem with DVD.co.uk deducting VAT before paying commissions even thought the goods ordered were books and hence VAT free.

  2. Clarke

    16. Feb, 2007

    Hi Frostie, yeah it’s a lot to take in; you understand the issue and have noticed it also. However it’s not a new one but you know for the extra examples I didn’t post, it never crossed my mind that Merchants would remove the vat (17.5% currently) from non-vat items such as book before paying commission, clearly that sounds like a system mix up in that when they factored in removing the vat from a DVD but not from the Books, but how many people will have noticed? Not many I can tell you, some people that have read this article have told me, they never even thought about this issue until I posted about it.

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    […] What exactly is the deal we affiliates reiceive on commission and are you entirely sure? This was discussed in general conversation many moons ago and unfortunately there is still lack of clarification generaly in the marketplace. […]