Choosing the Best Commission Structures

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If I offered you a dollar to eat a bee, you’d probably tell me to go sting myself. But if I offered you $1,000, you’d at least consider how it might taste with some ketchup.

Money influences behavior. That’s not exactly breaking news, but it is important to keep in mind when designing your affiliate program. You have hundreds of important decisions to make when building your network, but one of the most important is how are you going to pay your affiliates?

Typically, we think of commission structures as rather straightforward. You might offer an affiliate 10% of the sale price for every one of your products they sell.

This method is good because it’s simple and easy for everyone to understand exactly what they’re owed.

But by using customized commission structures, that reward certain achievements and behaviors, you can provide your affiliates with the incentives they need to push your product even harder and you can distinguish yourself from your competitors, by building out models that provide your affiliates with even greater rewards.

Here are a few different structures to consider for your campaign.

Tiered Commission Structure

This is probably the simplest structure beyond a flat fee, but it also makes the most sense if you want to create additional incentives and rewards for your top-performing affiliates.

In a tiered commission structure, you establish specific sales goals for each affiliate, and if they exceed those goals, they get either a direct cash bonus or a larger percentage of the commission for every product they sell for a defined period of time.

This allows you to reward your top performers and it creates an incentive for those affiliates who are close to hitting their bonus to push your product just a little bit harder. You want the affiliates you work with to feel like they’ll be rewarded for their hard work and a tiered commission structure does exactly that.

Position Based Commission Structures

Once you’ve built out your network, it’s likely that consumers will engage with multiple affiliates before they make a final purchase. Consider a shopper who wants to buy a high-end camera. They’ll likely start with one of your content partners to read reviews on the camera they want. Then, as they get closer to making a purchase, they could check in with a cashback or loyalty rewards affiliate.

Rather than working on a last-click attribution model, where just the final affiliate before purchase makes all of the commission, a position-based commission structure rewards every affiliate who was a part of the purchase journey. This system is effective because it keeps affiliates who were important to the sale but not the last affiliate clicked motivated to sell your product.

Time Decay Commission Structures

This structure is similar to a position-based structure but awards the commission based on time, rather than position.

Under this structure, affiliates that were clicked closest to the actual purchase date will receive the majority of the commission, the idea being the last affiliate had the greatest influence on the buyer. So if two affiliates are clicked 30 days apart, the last one used will get all or the majority of the commission. However if those same two affiliates were clicked on the same day, they would share more of the commission.

This commission structure usually works best for larger brands that have huge affiliate networks. If your customers click on a dozen different affiliates before making a purchase, then the commission could be divided up to the point where it’s almost worthless.

Non-cash Incentives

Money isn’t the only way to reward a high-performing affiliate. You can also provide unique coupon codes, early access to sales or even free products to your affiliates who hit certain benchmarks.

This method isn’t as effective as cash, but it can work well if you use it in conjunction with one of the structures we listed above. Affiliate marketing is a competitive field, and every incentive you can provide your affiliates with does have value.

Creating the right commission structure is an essential part of achieving affiliate success. Don’t be afraid to experiment and find out which one works best for your brand.

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