Your Ultimate Guide to Affiliate Commissions
Ultimate Guide to Affiliate Marketing Commissions
Affiliate marketing is a low-cost, high-impact way for businesses to generate and track sales leads. It is a form of performance-based advertising, in which the affiliates get paid only when they drive qualified sales leads or new customers from their ads. The numeration advertisers usually pay is based on a pre-determined commission rate on individual orders that come from the affiliate’s link or site.
Because of its rather simple implementation process and obvious advantages for both parties, affiliate marketing continues to grow in popularity among marketers and businesses. Through the years it proved to be one of the most fast-growing methods of generating sales leads and tracking results.
One of the crucial steps in setting up an affiliate or partner program is standing still on affiliate commissions. Businesses shouldn’t start setting up a program before they know which events they are willing to pay for (only sales or also downloads or impressions?) and how much they can give for that. Thus, in this article, we will have a closer look at popular affiliate commissions that are used every day by advertisers.
What are Affiliate Commissions?
An affiliate commission is a percentage that affiliates earn when they drive traffic or sales to advertisers’ products. Altogether at the end of the month, all commissions amount to a publisher’s salary. The average affiliate commission rate varies greatly depending on an affiliate vertical and a product type, but it is common for the commissions to vary between 5 and 30%.
What are the most common affiliate commissions?
You can set up your affiliate program with different types of commissions, but the bottom line is whether you pay for predetermined actions or you share a part of the derived revenue. To that end, affiliate commissions can be primarily divided into CPA, or cost per action, and RevShave (Revenue Share).
If you google what CPA stands for, you will always find two transcriptions: Cost-Per-Action and Cost-Per-Acquisition. Both of them are actively used in affiliate marketing. However, the baseline is Cost-Per-Action. Under the CPA scheme affiliates agree to a fixed amount or percentage of an action defined in the affiliate program guidelines of a particular advertiser.
Types of CPA commissions:
- Cost-per-impressions / Cost-per-mile (one thousand views)
In marketing terms, impressions are simply views. Affiliates could be also paid just for views that do not end in clicks or sales. However, in order to be qualified for a reward, you need to drive a higher number of impressions. Usually, it is a one thousand, or a mile – CPM model.
This is one of the most common affiliate commission types. The advertisers will pay a certain amount of commission on each click that comes from the affiliate’s link. The amount could be anywhere from $0.50 to $5.00 and more.
This type of commission is used when a merchant prefers to pay a certain percentage of the sale amount to their affiliates. This is different from pay-per-click commissions in the sense that the affiliate will only be paid if the customer buys a product or service. The most important thing to consider here is what sales should be traced back to the affiliate’s link.
This affiliate commission model is relevant only for mobile user acquisition campaigns. It is a typical CPA campaign the result of which is an install of an app, usually driven by an online banner.
You can also find a few custom commissions like “Video-viewing” or “eBook download” commissions.
- Video Viewing Commissions (Earnings per thousand videos viewed)
Advertisers can also pay a specific amount for each video their affiliates promote. For affiliates to get paid under this scheme each video must be watched for at least 10 seconds.
- eBook Download Commissions (Earnings per thousand eBooks downloaded)
The so-called eBook Download commissions are often used by merchants who sell digital products and services, a significant part of which are B2B products. In this case, affiliates receive a set amount either for each eBook download or for a bulk number of downloads, most often for one hundred or one thousand.
In comparison to CPA, the RevShare commission model implies sharing a percentage of the revenue brought by the paying visitors. The difference in the percentages paid under the CPA scheme is that in RevShare this payment doesn’t have a one-time nature. Under RevShare affiliates can get a percentage from the buyers they brought during their entire lifetime.
RevShare is not the most widely-spread model throughout all affiliate marketing verticals – it is used mainly by casinos, betting, and gambling affiliate programs. RevShare commissions range from 5% – to 25%, but the biggest part of the commissions that affiliate programs offer lean towards the lower end.
Factors Influencing Affiliate Commissions
Affiliate programs are complex and many other factors can affect affiliate commissions. Some of the most common factors include the product’s conversion rate and length of the sales cycle. If a product has a low conversion rate, it’s unlikely that affiliates earn much. The length of the sales cycle is also important. There are a few factors that can adjust commissions for affiliates.
Commissions Based on Sales Volume
Some affiliate programs will pay out a specific percentage of sales, which you can calculate based on the average sale price. You can also work with your affiliate manager to determine the most appropriate calculation for your products or services. This is a great option for products that have a high average sale price. Earning commission on a small number of large sales can be very profitable.
Commissions Based on Lead Quality
Some affiliate programs will base your commission amount on lead quality. Lead quality is typically determined by the number of leads that convert into sales. This is a good option if you’re promoting a product or service that has a low average sale price with a high volume of sales. You can make up for the smaller per-sale profit with a large number of sales. There’s no upper cap on the percentage of sales volume that affiliates can earn with this type of affiliate program. Paying affiliates based on lead quality also allows you to track the quality of leads being generated by the affiliate program. You can track the conversion rate of each affiliate’s leads and use the data to inform future decisions.
Lead quality is undoubtedly a factor that both advertisers and affiliates are looking for. For the first, it means customers with longer lifetime value and paying potential, for the second, it means a better reputation and probably a higher commission if they work on the terms of lead quality. Without the help of technology, it is not an easy task to find the best match for offers. Smart tools like IREV Lead Distribution capture, validate, and distribute leads in real-time matching leads with the most compatible offers.
Commissions Based on Lead Quantity
Some affiliate programs will pay out a specific percentage based on the number of leads generated through your affiliate links. This is a good option when promoting a product or service that has a low average sale price with a low volume of sales. Earning a small commission on a high number of leads can add up to a significant amount over time.
Often affiliates will be encouraged to drive more sales by a bonus they can get once they reach a certain number of sales. This strategy is called Commission tiers. There are two ways of rewards here. After reaching a specified number of sales (or other actions) affiliates get either a one-time bonus or an increase in the percentage they earn for the following sales.
How to Set Up Affiliate Commissions for Your Products?
The questions of which commissions are right for a product is something that racks the brain of many business owners. On the one hand, you need to make your commissions attractive for affiliates, on the other hand, they still need to be reasonable for your profits. Some of the important factors to consider before determining your commissions are:
- How relevant is your product to the affiliate’s audience?
- How much work do affiliates need to do, e.g. building & hosting a funnel (landing page)?
- How much profit could affiliates make and what is your estimated earning from a newly brought customer?
- Do your competitors have partner programs? Which commissions do they offer?
- Does your product have a long customer journey?
The goal of this analysis is to find a commission rate that is reasonable for your business and attractive for affiliates.
Instead of Conclusion
Determining your affiliate commissions is one thing, tracking events subjected to commissions is the other thing, worthy of special attention. With several tracking methods available at IREV, your data is in the right hands. By tracking the whole history of your deals, from clicks to conversions, we ensure extra insights about the whole acquisition cycle. You can easily find out which offers work better and which traffic you should send to particular offers.
As a new advertiser, you need a reliable platform to manage and track your campaigns. If you are looking for one, we will eagerly show you how you can start your affiliate program at IREV. Just book a time.
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