Or even currently doing affiliate marketing then you are really missing a fool.

Affiliate marketing evolved from the simple concept that if another website sends you a visitor and that person becomes a customer of yours in which case you should say thanks to the other website by giving them a small joint of the pie.

Affiliate marketing has now become a lot more complex however basics are still the same. You want as many sites as possible to always be shouting about you to their visitors so that they come and see your wares, and then in return you pay a suitable reward to that webpage based on your business profitability and margins.

In this article I will deal with a few of the things that a newcomer should consider when setting up an affiliate marketing programme:

1) The best commission/reward structure for your business

2) The best network/s to work with based on their affiliate base elizabeth. g. the kinds of affiliates that are with them and that they normally attract.

3) How to get visibility on the key affiliates web-sites and with the affiliate network.

4) Working on new promotions and even incentive schemes to motivate affiliates to promote you in place of your competitors.

Deciding on an affiliate reward structure for your business The initial thing to look at is your new customer recruitment costs, e. he. If over one month you spend £5000 on marketing and everyone recruit 100 new customers then your new customer recruitment cost you is £50. Cross reference this with your customer long time value(if you know it) to work out how much commission you can pay for your affiliates.

A Basic explanation of how you could calculate this is often as follows: The customer lifetime value will be the average top tier profit that each customer brings you over their lifetime.

Towards calculate a customers life time value the best way maybe to look at a group of customers that you recruited within a months date vary and to track their spend over a few years, you will burn some of these customers, but others you will maintain so you will need to have a good sample size for the calculation to be worthy.

1000 customers recruited in June 2008.

Across the following 2 years they spent an accumulative 1, 000, 000GBP therefore you have a customer lifetime value of 1000GBP
HOWEVER ,
Cost of goods sold were 700, 000GBP
Business resolved costs were 100, 000GBP
Variable business costs was 80, 000GBP
Therefore a total profit for these 1000 prospects of 120, 000GBP over 2 years, and a per user profit of 120GBP/customer.

This is obviously a very rough fag packet example but it is worth doing this exercise so that you can then simply determine the profitability of all of your marketing channels through viewing what their cost per new business customer acquired is certainly and comparing it to the customer lifetime value.

Regardless, to keep from steering too wide form the point belonging to the post... From this figure you can then determine how much you are ready to spend per customer on your affiliate marketing.

You now know that if you happen to spend 120GBP per customer acquisition then you will break even regarding that customer so if you build in that you want to make fifty percent profit and spend 50% of the customer value you'll be able to spend 60GBP per customer acquired.

Now, if you workout regularly the average number of orders of those 1000 customers over the 24 months then you will know your average order size through separating total revenue by total orders.