Understanding Affiliate Commissions and Strategic Value to Make Informed Decisions.
TL;DR
If you’re considering a brand deal offering a percentage commission for sales driven by a promo code, evaluate the potential earnings and effort required. Expect earnings to be low.
With an unpredictable conversion rate and multiple touch points needed with the brand to spark a user to buy, you’re unlikely to make significant income, if any. Focus on negotiating for a flat fee or bonuses based on the brand awareness and Earned Media Value (EMV) you bring. I explain what that is below.
Remember: your value as an athlete goes beyond direct sales.
Should You Accept That Brand Deal? Breaking Down the Numbers and Key Considerations
As a professional athlete with a solid following, you’ve likely been approached by brands before. But how do you evaluate whether their offer is worth your time? Let’s walk through the numbers, the factors that affect your commission, and the questions you should ask yourself before saying yes (or no) to that deal.
Here’s the scenario:
You have 50K followers and a 20% engagement rate.
A brand wants you to post 1 in-feed post with a promo code and 1 Instagram Story per month.
You’ll earn 15% commission for each sale made with your promo code. Their average order value (AOV) is $55. Should you take it? Let’s break it down.
Step 1: Understand Your Earning Potential
The first step is calculating how much you can reasonably expect to earn based on your audience size, engagement rate, and the brand’s AOV.
Here’s the math:
- Engaged audience: With 50K followers and a 20% engagement rate, you have about 10,000 engaged followers (50,000 x 0.20). Engaged followers are people who actually see, like, comment, save, share, etc. your posts.
- Conversion rate: Industry data for Instagram Story posts suggests a conversion rate of around 0.5%, but to remain conservative, we’ll use 0.05%. This means that 5 out of every 10,000 engaged followers might make a purchase (10,000 x 0.0005).
- Adjusted for the Rule of 7: On average, it takes seven interactions with a product before a customer decides to buy. To account for this, divide the potential buyers by 7, resulting in less than 1 purchase per post (5 buyers / 7 = 0.7).
- Average order value: At an AOV of $55, each sale generates $8.25 in commission (15% of $55).
- Total earnings per post: With less than one likely purchase per post, your earnings would be around $8.25 per month at this rate.
This illustrates how challenging it can be to generate meaningful income from deals relying solely on commission-based sales, particularly with low conversion rates and minimal posting frequency.
Step 2: Consider the Value You Bring
Before you agree, think about the value the brand is getting from this partnership. Are you giving them more than you’re getting?
What the brand gains:
- Brand exposure: Your posts and Stories introduce them to your highly engaged audience, creating long-term brand awareness.
- Credibility: Your endorsement adds trust and credibility, especially if you’re selective about the brands you partner with.
What you’re giving:
- Your audience’s trust: Every brand deal affects how your followers perceive you. Partnering with the wrong brand can hurt your credibility.
- Your platform: The brand gains access to your audience, which you’ve spent years building.
If the brand is getting much more value than you are, consider negotiating for a better deal or walking away.
Step 3: Key Challenges and Considerations
Here are some critical points to think through before deciding:
- Multiple Exposures Needed: The “Rule of 7” suggests that users need to see a product at least seven times before making a purchase. With only one in-feed post and one Story per month, this deal likely won’t generate enough repeated exposure to drive significant sales.
- No Links in Feed Posts: Instagram doesn’t allow clickable links in organic feed posts, which means your audience must remember the promo code and manually enter it during checkout. This friction often results in lower conversions.
- Low Earnings Potential: With a low conversion rate and limited exposure, athletes and influencers often earn very little from these commission-based deals. For example, even if you post consistently for several months, you’re unlikely to see significant returns without more frequent posts or a higher commission rate.
- Effort vs. Reward: Creating content for minimal financial return may not be the best use of your time, especially if the brand is benefiting significantly from your platform.
Step 4: Negotiate for More / A Different Arrangement
If the deal feels a little one-sided, don’t be afraid to ask for a different arrangement that better reflects the value you bring. As a professional athlete, the primary value you offer isn’t necessarily sales but brand awareness.
While it’s not always easy to directly tie brand awareness to sales, there’s a concept called Earned Media Value (EMV) that can help quantify the impact of your influence on social media.
What is Earned Media Value (EMV)?
Earned Media Value in influencer marketing measures the monetary impact of organic engagement, such as views, likes, comments, shares, and broader reach. In other words, it reflects how much your posts are worth in terms of exposure and influence.
One way we look at this is that Earned Media Value is an equation that shows how much I brand would have to pay in real dollars for a different type of media reach yet earning the same results. In other words, how much would a brand have to pay to put up a billboard, do a professional product, shoot out an ad in a magazine, etc. versus the exposure your post will help them receive, for a fraction of the cost.
For example, if your post generates 50,000 impressions, 10,000 likes, and 500 comments, that engagement is worth real money to the brand, even if it doesn’t immediately convert to sales.
As a professional athlete with a high engagement rate, your EMV is likely substantial. This is what you should be measured on, not just the level of sales you bring. Use this to your advantage when negotiating.
What to Propose Instead:
- Flat Fee + Commission: Ask for a guaranteed payment (e.g., $1,000/month) to account for the EMV you provide through brand awareness, alongside the 15% commission for sales.
- Earned Media Bonuses: Suggest bonuses based on metrics like impressions, engagement, or reach. For example, a $500 bonus for every 100,000 impressions your posts achieves.
- EMV-Based Valuation: Share engagement data from past collaborations to demonstrate your EMV and justify a higher commission or flat fee.
- Content Licensing Fees: If the brand plans to repurpose your posts for their own ads, charge a licensing fee for the content.
By reframing the conversation around EMV and brand awareness, you can negotiate terms that better reflect your true value to the brand.
Step 5: Know When to Walk Away
Not every deal is worth it, and that’s okay. Here are some red flags to watch out for:
- Being open to commission only: If the brand is not open to exploring your value in other methods, it’s probably not a fit.
- Unclear expectations: If the brand hasn’t outlined what they expect from you or how they’ll support you, proceed with caution.
- Misalignment: If the brand doesn’t align with your personal values or audience’s interests, it’s better to pass.
Final Thoughts: Make the Right Choice for You
At the end of the day, this deal might make sense if you genuinely believe in the brand, the effort required aligns with the payout, and the partnership feels authentic to you. However, if you’re unsure or feel undervalued, don’t be afraid to negotiate or decline.
Remember, your time, audience, and platform are valuable. Choose partnerships that reflect your worth and align with your long-term goals.
Feel free to reach out to me if you ever need help evaluating if a deal is right for you: nickey@playerpartnerships.com