Set up your affiliate commission grid.
The next step for you is deciding on the affiliate commission grid. This can be fixed or variable, a fixed amount or a percentage.
The value of your commission is one of the most important attributes for affiliates, but it’s not decisive. A high commission value may not bring along a large number of affiliates and fantastic results in a short period of time. Why? Because no matter how small the commission value is, affiliates are more interested in the conversion rate of your entire store and the average order of a shopping cart. These two are the performance indicators affiliates follow the most.
Example: Let’s take the case of two advertisers from our platform:
- an affiliate generates 10.000 clicks
- commission value is 15%
- average shopping cart is 150 Euro
- conversion rate is 1.5%
- an affiliate generates 10.000 de clicks
- commission value 20%
- average shopping cart is 200 EURO
- conversion rate is 0.8%
At first glance, Advertiser’s Y offer seems more attractive to a potential affiliate, because it offers a higher commission value than Advertiser X. Also, the average shopping cart is higher. However, after doing the math, it turns out that things are not exactly how they seem:
- advertiser X → an affiliate generates 150 orders x 150 EURO/average shopping cart x 15% commission → the affiliate gains commissions of 3,375 EURO.
- advertiser Y → an affiliate generates 80 orders x 200 EURO/average shopping cart x 20% commission → the affiliate gains commission of 3,200 EURO.
The difference, though it may be small, only 175 EURO, becomes an important factor when talking about large volumes of generated commissions. The proposed affiliate commission grid offered to affiliates can also be made of variable values, based on the category of the purchased product. If on a product category, the advertiser has a competitive offer and has a higher margin, the commission might also be higher. For the product categories where the margin is lower, the commission rate may also be lower. In this way, the purchase costs for each category are being adjusted.
Affiliate marketing is about the program’s profitability and efficiency. Affiliates will always look for affiliate programs that offer the greatest profit margin under the cost conditions it has. At the same time, the advertiser must gain profit compared to commissions rate the program offers.