February 25, 4 min read

Why affiliate marketers prefer commission based strategy

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Most affiliate marketers prefer to work on a commission based model. But, how good is the commission system for marketers?

More than 80% of advertisers and publishers get a benefit from affiliate programs. It's all about the right strategy. Most affiliate marketers prefer to work on a commission based model. But, how good is the commission system for marketers and can it really bring a good income? Let’s find out it.

Commission is a fee that an advertiser pays to a publisher in exchange for the services. Commission calculation depends on the structure of the underlying commission agreement. Simply put, an advertiser pays to publishers only for a measurable result.

Creation of a right affiliate commission strategy can be a complex endeavor, but after a while, you’ll see that efforts pay off. A smart compensation strategy stimulates the right sales behavior and increases customer interaction.


source:targetmarketmedia.com

For someone, determination and establishment of a correct commission can be a headache, especially if you are not familiar with the characteristic of affiliate marketing. But this case is fixable.

Fortunately, there is a lot of information on the internet. You can easily decide on a commission for the affiliate work with the help of simple calculations. Let’s take a look at the 4 basic elements for determining commission strategy.

4 components of a commission based strategy

There are 4 main factors that help to determine your commission: margins, customer acquisition cost, affiliate rates of your competitors, and bonuses. Consider them in a more extended version:

Gross profit margin
Gross profit margin is a measure of your product profitability that shows the percentage of the revenue. It indicates how successful your business is. The higher the number, the more effective management is.

Start by analyzing the profit margin of your brand, find the minimum and average gross profit margins on items you want to promote. Calculate the average return rate, assumed discounts and processing fees, because you would need to leave a space for these costs.

Customer acquisition cost
Customer acquisition cost or CAC is the value of a new customer attraction. Again, a rate per customer acquisition depends on your incomes. If you can safely spend 10% to attract new customers through your ad channels then you will afford yourself to pay this rate to your affiliates.

It just means that you have to optimize your ad spends. In fact, to calculate the CAC you can divide all the costs on marketing expenses by the number of customers acquired at the moment when the money was spent.

For instance, if a company had spent $10,000 annually on marketing and attracted 100 customers, the CAC will be $100.

Competitor affiliate rates
Comparing your rates with your competitors will help you to get an understanding of industry standards. There is no standard commission for affiliates. But there are some firm prices. For example, there is an average commission from 25% to 75% for digital products, sometimes you can meet even 90% (if the company can afford it, and the affiliate guarantees traffic quality).

In short, your commission for affiliates should be without cutting into your profit margins or rising prices. If you’re not sure about the commission in your sphere, then don’t be shy to check out what your competitors offer and how they structure their affiliate programs.

It will also allow you to make healthy competition to your contestants (because publishers always choose products that convert well and offer a decent payout).

Bonuses and incentives

source: gifer.com

Bonuses and incentives are payments that are above a base rate. They are awarded to the affiliates who have performed above expectations. In this case, awards are a good motivation for your affiliates.

You can offer performance-based bonuses or those who are based on affiliate recruitment. It enables you to limit your payments and still rewards your hard-work affiliates. Allowing bonuses and incentives will provide you to be more flexible in your bets.

Features and benefits of the commission strategy



  •  Affiliate marketing is so flexible that allows all the partners to earn real money. Advertisers don’t even have to pay upfront (only for the results of the work). You only need to reward your affiliates once a sale or other actions had been made.
  • Affiliate marketing allows four working rewards or commission types:

Pay-per-sale. Advertiser pays a percentage of the sale price for every purchase that was made by a customer and that came to advertiser via affiliate marketing (publisher receives payment from every sale made by his help).

Pay-per-click. The commission depends on the number of users that are directed to the advertiser’s app by the affiliate (regardless whether the purchase was made or not).

Pay-per-lead. In this case, affiliates get a reward for each referred user to the advertiser's app that left his personal information.

Pay-per-action. The commission depends on a specific action that was pointed by the advertiser in the offer. It can be a subscription, app installation, views, leads, sales. It’s a wider pricing system, that can include in it all the above models.

  •  A sales commission rate allows you to link your affiliates performance with their monetary compensation. It works when you point a fixed sales commission rate which is a percentage of the sales value.
  •  With the help of commission calculations, you can reward affiliates who deserved (that bring you good income) and find those who work unfair and send you fraud.
  •  You will not overpay those affiliates who don’t perform well (that will be fairer and even more beneficial for your business).
  •  Affiliate marketing is a great source of passive income and commissions rates do a great job with this.

Numerous affiliate marketers prefer commission based strategy because it is strong and scales their marketing campaign quickly. It also helps to clarify relationships between advertisers and affiliates.




February 25, 4 min read

Why affiliate marketers prefer commission based strategy

Most affiliate marketers prefer to work on a commission based model. But, how good is the commission system for marketers?

More than 80% of advertisers and publishers get a benefit from affiliate programs. It's all about the right strategy. Most affiliate marketers prefer to work on a commission based model. But, how good is the commission system for marketers and can it really bring a good income? Let’s find out it.

Commission is a fee that an advertiser pays to a publisher in exchange for the services. Commission calculation depends on the structure of the underlying commission agreement. Simply put, an advertiser pays to publishers only for a measurable result.

Creation of a right affiliate commission strategy can be a complex endeavor, but after a while, you’ll see that efforts pay off. A smart compensation strategy stimulates the right sales behavior and increases customer interaction.


source:targetmarketmedia.com

For someone, determination and establishment of a correct commission can be a headache, especially if you are not familiar with the characteristic of affiliate marketing. But this case is fixable.

Fortunately, there is a lot of information on the internet. You can easily decide on a commission for the affiliate work with the help of simple calculations. Let’s take a look at the 4 basic elements for determining commission strategy.

4 components of a commission based strategy

There are 4 main factors that help to determine your commission: margins, customer acquisition cost, affiliate rates of your competitors, and bonuses. Consider them in a more extended version:

Gross profit margin
Gross profit margin is a measure of your product profitability that shows the percentage of the revenue. It indicates how successful your business is. The higher the number, the more effective management is.

Start by analyzing the profit margin of your brand, find the minimum and average gross profit margins on items you want to promote. Calculate the average return rate, assumed discounts and processing fees, because you would need to leave a space for these costs.

Customer acquisition cost
Customer acquisition cost or CAC is the value of a new customer attraction. Again, a rate per customer acquisition depends on your incomes. If you can safely spend 10% to attract new customers through your ad channels then you will afford yourself to pay this rate to your affiliates.

It just means that you have to optimize your ad spends. In fact, to calculate the CAC you can divide all the costs on marketing expenses by the number of customers acquired at the moment when the money was spent.

For instance, if a company had spent $10,000 annually on marketing and attracted 100 customers, the CAC will be $100.

Competitor affiliate rates
Comparing your rates with your competitors will help you to get an understanding of industry standards. There is no standard commission for affiliates. But there are some firm prices. For example, there is an average commission from 25% to 75% for digital products, sometimes you can meet even 90% (if the company can afford it, and the affiliate guarantees traffic quality).

In short, your commission for affiliates should be without cutting into your profit margins or rising prices. If you’re not sure about the commission in your sphere, then don’t be shy to check out what your competitors offer and how they structure their affiliate programs.

It will also allow you to make healthy competition to your contestants (because publishers always choose products that convert well and offer a decent payout).

Bonuses and incentives

source: gifer.com

Bonuses and incentives are payments that are above a base rate. They are awarded to the affiliates who have performed above expectations. In this case, awards are a good motivation for your affiliates.

You can offer performance-based bonuses or those who are based on affiliate recruitment. It enables you to limit your payments and still rewards your hard-work affiliates. Allowing bonuses and incentives will provide you to be more flexible in your bets.

Features and benefits of the commission strategy



  •  Affiliate marketing is so flexible that allows all the partners to earn real money. Advertisers don’t even have to pay upfront (only for the results of the work). You only need to reward your affiliates once a sale or other actions had been made.
  • Affiliate marketing allows four working rewards or commission types:

Pay-per-sale. Advertiser pays a percentage of the sale price for every purchase that was made by a customer and that came to advertiser via affiliate marketing (publisher receives payment from every sale made by his help).

Pay-per-click. The commission depends on the number of users that are directed to the advertiser’s app by the affiliate (regardless whether the purchase was made or not).

Pay-per-lead. In this case, affiliates get a reward for each referred user to the advertiser's app that left his personal information.

Pay-per-action. The commission depends on a specific action that was pointed by the advertiser in the offer. It can be a subscription, app installation, views, leads, sales. It’s a wider pricing system, that can include in it all the above models.

  •  A sales commission rate allows you to link your affiliates performance with their monetary compensation. It works when you point a fixed sales commission rate which is a percentage of the sales value.
  •  With the help of commission calculations, you can reward affiliates who deserved (that bring you good income) and find those who work unfair and send you fraud.
  •  You will not overpay those affiliates who don’t perform well (that will be fairer and even more beneficial for your business).
  •  Affiliate marketing is a great source of passive income and commissions rates do a great job with this.

Numerous affiliate marketers prefer commission based strategy because it is strong and scales their marketing campaign quickly. It also helps to clarify relationships between advertisers and affiliates.




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