Just starting a marketing program and find it hard to offer large discounts on a product that i have worked so hard to build. However, with a COGS at $25/item plus a small $10/item profit I got $65 to use towards building a customer/reseller base. Thoughts?
The best answer depends largely on your product and the available market. I have been a Value-Added Reseller and have sold products and services through VAR's. I helped one of my current clients set up their reseller and affiliate program.
If your product can, in fact, be sold to your target market for $100. And, if your COG's before commissions is $25, that leaves you $75 for operating revenue. Let's break that down.
A reseller will need to be paid commensurate with the amount of work involved in selling your product. If the product needs to be purchased in advance and, therefore, stored by the reseller, that also is a factor.
If your product can be sold by more of an affiliate marketer without inventory and with little effort except to drive traffic to their site, that is a different situation.
There is no easy answer with such little information.
But, as a general rule of thumb, a reseller may want 35-50% of the retail sale. That amount also is included in your top line COG.
Let's say that you settle for 50% commission to your sales channel. At $100 retail, that leaves you $25 operating revenue after deducting your above mentioned $25 COG. Can you run your company on a gross operating revenue of $25? Sounds like a slim budget.
I'd love to know more about your product so I can give you more accurate and specific advice.
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