Win-Win Commissions: A Guide to Building a Thriving Affiliate Program
Affiliate marketing success hinges on a mutually beneficial partnership. Here’s how to set commission metric rates that attract stellar partners and fuel affiliate sales:
Before thinking about how much you are willing to pay for a Click, Lead & Sale – think about the time, effort, energy that goes into each one currently.
A good way is to take the average hourly rate within your business & divide by 60.
e.g. £75 per hour/60 mins = £1.25 per minute.
Once you have distilled down each activity in terms of time now multiply your per minute value by the time it takes currently to generate a Lead for your business.
This may be through activities such as emailing, calling, event shows …
The power of digital marketing cut’s through all this. And Affiliate Promoters are happy to go with a sensible compensation to promote your business.
- Know Your Profit Margins: Commissioners shouldn’t eat into your profits. Calculate your margins and business costs. If a rate cuts into profits, it’s too high!
- Understand Your Customer: High customer lifetime value (CLTV) allows for higher commissions. Consider what you’re willing to pay per customer acquisition.
- Research Your Industry: Benchmark against competitors in your niche. If competition is fierce, higher rates might be necessary. Highly specialised products might also require higher commissions to attract affiliates.
- Factor in Product Prices: Having a range of Higher-priced products and lower priced products will appeal to customers. Work out your Average Order Values (AOV) and base your Commission % based on this. i.e. Items #1-4 average £25, Items #5-10 average £100.
e.g. the Average Order Value would be £60, and at 10% commission on an average CPA would be £6 commission for the Affiliate Promoter. - Consider Incentives: Motivate Affiliate Promoters with unique offers, special discounted prices for the same product.
- See it From The Affiliate’s Eye: High commissions are attractive, but having a sellable product through an efficient customer journey is equally as appealing to Affiliate Promoters. Dedicated landing pages, compelling product reviews, and effective marketing campaigns can peak appetite as well as good commission rates.
Bonus Tip: Build win-win reciprocal marketing by providing promotional space to promote their products/services! See our guide here in what makes a good ad, and recommended ad sizes.
Further reading in understanding Return of Investment in the value of Clicks, Leads & ultimately your Sales.