Setting up an affiliate program? One of the most important things you need to understand is how to structure your commissions. Let’s dive into the different ways you can pay your affiliates and how to choose the best structure for your business.
Starting Simple
When you’re new to affiliate marketing, it’s best to keep things simple. You can always make your commission structure more complex as you gain experience. Here’s a pro tip: research what your competitors are doing. This will give you a good idea of what’s normal in your industry and help you set realistic expectations.
Types of Commission Structures
1. Cost Per Acquisition (CPA)
- Pay a fixed amount for each customer who makes a purchase
- Example: $30 per new customer
2. Revenue Share Model
- Pay a percentage of each sale
- Example: 25% commission on a $100 sale = $25 for the affiliate
3. Hybrid Deal
- Combine CPA and revenue share
- Example: 15% of the sale value plus $10 per acquisition
- Great for businesses expecting repeat purchases
4. Ongoing Commissions
Decide how long you’ll pay commissions for each customer:
- Lifetime Commissions: Pay for all future purchases
- One-Time Payment: Pay only for the first purchase
- Limited Time: Pay for purchases within a set period (e.g., 12 months)
5. Commission Tiers
Encourage affiliates to sell more by offering higher rates for more sales:
- 10 sales per month: 20% commission
- 50 sales per month: 25% commission
- 100 sales per month: 35% commission
Special Considerations
Upfront Payments
Some affiliates, especially influencers and bloggers, might ask for upfront payments:
- Example: $1,000 per month, plus regular commissions
- This guarantees some income for the affiliate
Custom Rates for Key Affiliates
Be ready to offer special rates to your top performers:
- Example: 35% instead of your standard 30% commission
- Many tracking platforms let you set individual rates
Choosing a Tracking Platform
Not all affiliate tracking platforms support every type of commission structure. Make sure the platform you choose can handle your desired setup and allows for flexibility as you grow.
Wrapping Up
Creating an effective commission structure for your affiliate program involves:
- Starting simple
- Understanding your competitors
- Gradually adding more complex models
Consider CPA, revenue share, hybrid deals, ongoing commissions, and custom rates to find what works best for your business. Always ensure your chosen affiliate tracking platform supports your commission structures.
Remember, the right commission structure can motivate your affiliates and drive more sales for your business. Don’t be afraid to adjust your structure as you learn what works best for you and your affiliates. Happy affiliate marketing!