Marketing Sales Commission Rate Help

Discussion in 'Internet Marketing' started by JMasterJ, Dec 3, 2010.

  1. JMasterJ

    JMasterJ
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    Hi all... question here for any of you who are experienced in sales and marketing in the internet world, based on commissions.

    I need to know the age old question of "What is a Fair Commission Rate" for the marketing specialist? Here are the components, and maybe one or more of you can either point me the right way or give me some numbers to work with. I understand there are a plethora of factors, so I am not looking for a definitive answer unless you can give me all the details behind it. Also if you can, please let me know your experience/expertise in the answer and field or please state it is just "what you would do." Thanks!

    1. The business is a startup with zero presence right now, and will go live in January.
    2. Products are health and diet related
    3. Products can be sold as small as one little bottle or a boxed year's supply or more
    4. Initial cost of product (includes shipping, labeling, etc.) starts at about $12 and up
    5. Sale price will start at about $20+ and up, so we are looking at about a 100% markup
    6. Estimated monthly sales target is about $25k/mo which may happen by early next year or mid summer
    7. Marketing will be done on all fronts, from internet, social, and print/ads/hard materials
    8. My (M) responsibilities will be building the web site (for which labor was paid up front), setting up the shop cart, link to merchant acct, maintaining back end, and all internet and web related promos and marketing, including FB, Twitter, articles, etc, and designing hard marketing material to send to the printers
    9. The other two involved are the owner/President (P) who is fully funding (and paying us) and running the op.... the other is a partner (X) who will overlap the owner's duties, which include checking/taking/shipping orders daily, distributing hard marketing materials as well as writing some content, and any other remedial job that needs to be done that doesnt involved marketing on my end
    10. My commission will be based on TOTAL net profits, which includes sales from other sources, internet or not. However we are not using phone orders right now so all orders will be going through the web site

    So in order to start somewhere, I will put out some numbers, keeping in mind that I am not a sales commission expert, and these numbers may be way off, but it is something to guide you in what kind of info I need:

    Commission breakdown (of total net sales profit):
    P: 50%
    M: 30%
    X: 20%

    I would also like to see if I can add a clause for a gradated percentage increase after certain milestones have been reached (I have heard many people use this), i.e.,

    "At the time when the total gross sales amount since the inception of the program equals $50k, my commission rate will increase to 35%, and after the $200k mark has been reached, it will increase to 40%. This contract will hold at that position until both parties mutually agree to dissolve this business relationship."

    I think thats about it, LOL... sorry for the length, but I rather have this than having people go back and forth asking for more details... I hope I have included enough info. Thanks!
     
  2. Fergal

    Fergal
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    Welcome to our business forum JMasterJ, thanks for joining and posting your business questions. Are you are a part owner of the business? Are you an employee on a salary or will all your income come from commissions?

    I've worked on a commission basis in the past but it was for business to business sales and higher value contracts, the closest experience I have relevant to what you are asking is in relation to affiliate commissions. Speaking of affiliate commissions, it would help you to look at various affiliate programmes relevant to the health and diet industries to see what commission levels they are offering. http://www.cj.com/ and http://affiliate.com/ would be good places to start.

    It might also be useful to look at some drop-shippers in the same industry. This will enable you to see what you could acquire similar products for and hence calculate how much profit you would make, by selling them at a certain price. I'm not sure if you are familiar with drop-shipping - but basically how it works is that you would promote the product, capture the order details on your website and accept payment from the customer for the order. You would then pay the drop-shipper for the product and pass the order details to the drop-shipper who ships the product to the customer.

    Sorry I can't give you estimates as to how much commission you should be paid, but hopefully the suggestions above will help you to better evaluate the appropriate figure for yourself.

    Please do post back with your thoughts and to let us know if you have any further questions.
     
  3. JMasterJ

    JMasterJ
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    Hi and thanks for your response....

    Of the 3, only the owner is the one who can be called "owner" and the two others are employees or consultants, or whatever. I am assuming the owner will pay for any actual expenses, and has already paid for the web site design, there should be added expenses for the shopping cart, etc...

    This cant really be compared with affiliate marketing, like the ones I have done anyways where the commissions are very high, some over 50%, because those are mostly digital products.... our products need to have orders taken and shipped out on a daily basis, which the other two (not me) will do.

    I know about drop shippers, but this owner is the source I am workig with, ie, I am not just looking to get into this business with anyone, only this owner. And I am sure I will get a better piece here than any drop shipper, I know their cuts are pretty bad for the end seller.
     

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