Starting an Affiliate Program?

This is an area I personally have not ventured into but have a number of clients that have voiced interest in developing independently.

Product prices range $100 - $5,000K with $150 - $600 showing the best current conversions.

1. What are some affiliate approaches?

2. What are the normal/best conversion model to use?

3. What is a fair conversion percentage?

4. What is the usual responsibility of the merchant?

With sales worth as much as $5000 you will need to focus on how you integrate your online and offline efforts.
I suspect the phone will play a big part in your business.
I don't think you'll close many $5K sales with just your website.

This means you will need to organise a tracking method that will work both online and off.
You will also need to develop good relationships with your affiliates as they could be waiting a whole year to make one referral sale.

I would keep then in the loop through out the entire process and possibly look to pay for leads. Obviously you will be taking some risk by paying the affiliates for free business leads but I think they will appreciate you meeting them 1/2 way with the risk absorption.

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Can any one explain me how to start Affiliate marketing for a Travel site.

There's loads of affiliate programmes in this sector. I use Active Hotels (for European hotels) and Allrez for Wordwide hotels. They are both white label.

Then add to it with any of the hundreds of associated affiliates available (car rental, cruises etc.)

All you have to do is build a content rich front end and work hard on inbound links.