Best Ways to Make Commission Payments to Affiliates and Influencers

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Affiliate marketing is now a $17 billion business, with 83% of marketers using it to drive brand awareness. Creating a program that incentivizes high performers is only half the battle. You have to pay your affiliates!

And if you don't find a way to do this in an organized and timely manner, your affiliates will abandon the co-op just as they came.

For affiliate marketing, making the promised payments is just the end game. It's a common tactic where ad networks, advertisers, retailers, and/or agencies pay publishers (called affiliates) for embedding sponsored links or placing creative ads.

Compensation for publishers (content creators, marketers, bloggers, etc.) is often determined by the commission structure you design.

So what is a commission payment and the best way to pay affiliates? Read more...

What are Commission Payments?

Commission payments, very simply, are transactions where an employee is paid based on sales.

There is no hourly wage, overtime, minimum wage or additional wage. Some earn commission on top of their base salary, while others choose to work only on commission.

When a commission is made, the employee earns a percentage of that sale. For example, if an affiliate makes $200 in sales and the commission is 10%, they earned $20 for that sale.

Brands can determine their affiliate commission in different ways. Payments can be based on the method:

• Selling a lot
• Selling often
• Selling a lot

This helps encourage affiliates to sell more products/services and earn more.

Commission-based payments are beneficial for sellers because they have more control over the total amount of money they make and don't put a cap on how much income they can bring in.

What are Commission Payments in Affiliate Marketing?

Commission payments are the backbone of productivity in any affiliate marketing program. They are the incentive that keeps affiliates motivated and the marketing machine running. If you run an affiliate program with commission on sales, it is important that your employees are compensated for each sale they contribute (through your affiliate link).

Commission payments in affiliate marketing are made to influencers, bloggers, and other publishers who refer their readers through their unique links. They work to drive traffic and increase brand awareness. Some brands choose pay-per-click, while others find value in pay-per-action (requires lead information).

In affiliate programs, percentage commissions are the most popular, with average rates ranging from 5-30%. If you sell a variety of products/services, percentage commissions may motivate your affiliates to promote products with higher average order values.

Commission Structure for Affiliate Marketing

In terms of the different ways to pay affiliates, the following are the most popular commission structures:

• Revenue Share Model: Publishers receive a share of revenue from sales made from the publisher's website.
• Pay-Per-Action: Publishers get paid after a visitor completes a specific action. Commission payments by action include:
  • Pay-per-click (PPC) or cost-per-click (CPC): Publishers are paid based on the number of clicks from their site to the merchant’s site.
  • Pay-per-acquisition (PPA): Publishers are paid based on a specific action, such as when a new visitor signs up for a merchant’s newsletter or purchases through an affiliate’s link.
  • Cost-per-lead (CPL): Publishers are paid for the contact information of genuinely interested prospects. A dealer or sales team contacts the prospect.
  • Pay-per-impression (PPI): Publishers are paid based on the number of times a site visitor sees an ad.

  But running a successful affiliate program is not just about the compensation model and payment terms. Publisher royalties play a big role and are a factor that is strongly influenced by recurring commission payments.

  How Does Commission Pay Work in Affiliate Marketing?

  It can be hard to find value in referral marketing, and determining the right commission rate is a balancing act. You need to choose a rate that is high enough to attract top talent, but not so high that you can’t pay them consistently.

  Paying too little will make it harder to recruit affiliates; they’ll be tempted to move on to better competing offers; and paying too much in your compensation plan will eat into your earnings.

  Understanding the perfect affiliate payout terms and determining the right rate takes work. Here are some steps to set a competitive, yet sustainable commission amount for everyone:

  #1) Choose the Type of Commission Payment

  99% of the time, affiliates ask for cash payment, but credits and other payment methods are also valid. So, the first step is to decide how you want to pay them.

  Then decide if you want a percentage-based commission or a flat rate. What percentage of the total amount of the sale will the affiliate pay you, or is it a set amount per sale?

  If you sell a variety of products, a percentage-based commission will motivate your affiliates to promote products with a higher average order value. But if you only sell a few specific products, and the prices are fixed, a fixed system commission will be most effective.

  #2) Calculate the Average Customer Lifetime Value

  The amount you can pay your affiliates depends on your profit margin. But profit margins are difficult to determine and tend to vary depending on the products you sell. To make everything easier, let's calculate the average customer lifetime value (CLV).

  CLV is equal to how much money an average customer brings you over the course of your business (minus the cost of acquiring that customer). The more customers you acquire, the higher your CLV.

  With a deeper understanding of average customer lifetime value, brands can better determine affordable and sustainable commission rates.

  CLV Equation

  To calculate average customer lifetime value, answer the following questions:

  • How much does it cost, on average, to acquire a new customer?
  • What percentage of customers do you retain/retain each year?
  • How much revenue does each customer bring in?

  Average CLV = (average annual profit earned by average customer (x) number of years they are a customer) - initial customer acquisition cost per customer

  For affiliate commissions to be sustainable, they need to be well below the average CLV. If they are the same, there is no reason to start an affiliate program.

  #3) Analyze Competitor Commission Rates

  Look at brands that attract a similar audience as yours.

  Find at least two direct competitors with established affiliate programs.

  Analyze the commission rates and online real estate of each program.

  • Each industry has a set of typical commission revenues. Keep in mind that the average price of each product and/or service line will help you determine your actual payout.
  • Look at how each competitor structures their affiliate commissions. Ask questions like:
  • Is the payment cash or a credit for a product?
  • What will be a payment trigger? Is it sale, a lead, or something else?
  • Is the commission percentage for sales or a certain amount?

  Is there a bonus for the top performer?

  #4) Start Low

  Is there a ste p-up affiliate commission (higher as top performers)?

  These ideas can help you configure your own programs to attract top affiliates to become a competitive commission.

  Based on the competitive analysis, let's start with the lower rate and the lower one. Doing so later will create room for raising the commission rate.

  #5) Decide on Bonuses

  No one gets angry if you raise the fee later, but if you lower it, everyone will get angry and the rumors may spread. So it's best to start late and work at a competitive commission rate.

  • By doing so, you can freely try out various levels of payouts and bonuses. The lower the commission rate, the higher the profit, so you can afford to consider promotion and other rewards for excellent affiliates.
  • This is a great way to reward affiliates. However, not all small and mediu m-sized enterprises can afford to make a bonus payment. There are several ways to introduce bonuses. There are the following methods:
  • Give a present to affiliates that have achieved a certain lifetime income or affiliate that have been set in a certain maximum percentage.

  Providing bonuses. This occurs when the affiliate achieves the prescribed amount in a workwear or papiliode, and is unlocked for a highe r-time percentage.

  #6) Decide on Affiliate Conditions

  Create a step structure and unlock the commission rate with a higher specific lifetime sales.

  If you pay regular products and services, you can also provide regular commissions to affiliates. In this case, each time the customer updates, the affiliate will receive the following payment:

  The setting of the rate is only part of the process. You need to set the conditions and sales targets that affiliates should be rewarded to get rewards. Usually, companies pay a commission check only when they are sold through affiliate links.

  In many programs, if the returned product or service is canceled within a certain period of time, affiliates cannot hold a commission.

  This is a low risk of the program because you will pay only when you are convinced that your business has received a return to your investment. However, for top talents, who are used to paying, they may find it uncomfortable.

  This is especially true if you have a large sales cycle. In this case, it may work better to pay your affiliates for both sales and leads. This will help keep your freelancers motivated to have potential buyers research your products/services.

  #7) Set up a Tracking System

  If you decide to pay your partners for leads, make sure they are all qualified. They need to fill out a form and provide you with their contact information after clicking your affiliate link. Set a smaller fixed commission for leads and a higher commission for completed purchases.

  Don't reward your affiliates for clicks or impressions. Unethical merchants can easily exploit this type of commission structure with various affiliate fraud techniques that you may not even be aware of.

  How long after someone clicks your link can the affiliate get paid? Will the commission only occur if a purchase is made on that day, or is there a longer period?

  If you want to reward freelancers days, weeks, or even months after they click your link, you should use affiliate cookies, known as tracking links.

  #8) Periodically Check and Adjust the Rate

  Affiliate tracking links are very important if you have a long sales cycle, especially if your prospects do a lot of research before buying. You need to decide how long your affiliate tracking links will last to remain competitive with other affiliate programs.

  The cookie lifespan should be representative of how long it takes someone to buy your product/service. Any longer and you will lose revenue, any shorter and you will lose talented affiliates.

  Commission Payment Processing

  The price you pay your affiliates should not remain constant for long. It should be constantly monitored and adjusted according to market fluctuations. If your competitors increase their rates, you may lose top talent for not adjusting.

  Also, the change does not have to be permanent. An easy way to adapt is to identify periods when you can add bonus structures that could increase sales. It is a great way to increase productivity during months of low activity.

  Commission payouts are a complex process because affiliate marketing has cross-functional workflows. Document audits, printed forms, manual income taxes, and other time-consuming tasks are no complement to a salary based on commission residuals.

  By utilizing technologies such as automation and sel f-service portals, brands can rationalize complex processes to pay expensive commissions to the increasing affiliate network.

  For example, IRS requires companies to confirm all royalties, both in Japan and overseas. For this reason, when paying for multiple affiliates, tax compliance is a huge task, especially on global scale. A lum p-sum payment platform, such as a tiparty, can automatically check the recipient's national ID and tax payment requirements through a global database.

  Should You Automate Commission Payments?

  Payment of affiliate reward is not just money. The successful affiliate marketing program builds and maintains the relationship with the issuer using rational processes.

  Masspay platform enables administrators to undertake the difficult aspects of affiliate marketing, such as the development of various publishers, the development of a global affiliate program, and the tax system. Eventually, you will be able to focus on a strong relationship with publishers, freelancers, affiliates and influencers.

  • Affiliate Marketing Platforms Affiliate and Influencer solutions allow administrators to track various affiliate marketing campaigns. However, managing advertising performances on a separate platform from a lum p-sum payment provider will result in a long and complicated workflow.
  • Tracking advertising performance and payment issuance in a single solution can significantly reduce the work load. Affiliate Software Automation of commission payments has a lot of benefits:
  • Paying the latest rewards to affiliates will increase affiliate morale and increase the continuation rate.
  • Increased expenses management by automation
  • Eliminate the use of unnecessary paper forms

  Does your business rely on the digital economy?

  Save time with more accurate reports

  How to Show Publisher Loyalty to Affiliates

  Fostering active and ambitious human resources

  Offer Exclusive Deals

  Chips should not miss a chance when paying a partner.

  • If you get affiliates that are compatible with your brand, it is important to make an effort to maintain them. The competition to acquire such excellent human resources is fierce, so always be grateful to highly productive people. Let's introduce some ideas:
  • If all affiliates provide the same offer to the audience, it is very effective to create a limited offer for one affiliate. Prepare special bonus content customized for the affiliate promotion. This has the following:
  • Limited version of product/ service

  Unable bundle package

  Repository of Content

  Custom content

  • Providing something that no one has, will be an unforgettable experience for all stakeholders.
  • Provide hig h-quality sales promotion materials so that affiliates don't need to take time to rebuild the wheels. This includes the following:
  • banner
  • Landing page

  Brand graphic

  Video content

  Free Merch

  Affiliates don't look up or develop on their own, but only choose from the prepared materials, so the work speed is much higher.

  If you have sufficient sales, consider providing landing pages and other content specialized for specific affiliates.

  Access to Tools

  Providing brand products and free products to affiliates indicates that affiliates are viewed as indispensable to your business and team. Giving T-shirts and coffee cups may not be a big deal, but it may not be done by competitors.

  Certainly, cash speaks loudly, but I don't know when a cool T-shirt will be pleased. If your affiliate is a video content, you can display it during the post, so it's even better. Advertising your business and creating an affiliate opportunity to make money is a quick and easy way to enhance the brand royalty.

  Simple Recognition

  Whether the affiliate is a blogger, an influencer, or an artist, they need a program to put trains on track. By providing access to various platforms and tools that create efficiency, make it easier for them to work and do things.

  For example, if you work as a social media manager, provide a programming tool subscription. If you are a graphic artist, you have a design program.

  Additional ways to show loyalty include:

  • Praise for affiliates who have achieved milestones is very useful for raising their confidence and reducing motivation. If someone is doing a good job, tell them! Consider not only the affiliate will also be pleased, but also a special feature with a newsletter or mention in social profiles. Take a step further to tell them what you are grateful.
  • Let's add gamification to the sales target. Give affiliates the opportunity to get badges and titles and compete with each other. It is a wonderful way to stimulate affiliate's motivation and increase productivity.
  • Pay on the deadline every time
  • Always provide new opportunities

  Summing It Up

  Always maintain the communication line

  Negotiate

  When starting with a new affiliate, create an FAQ section and make sure to include a disclaimer regarding your payer program. Explain all elements of your commission, including interest rates, how it works, terms, and expectations, to ensure everyone is on the same page.

  About the Author

  If you change any details on both sides, update your affiliate marketing agreement to reflect that. To motivate your affiliates, make sure they always get paid on time and at a competitive rate.

  

  Elim Poon - Journalist, Creative Writer

  Last modified: 27.08.2024

  As we've discussed, AffiliateWP is a great way to incentivize your influencers and showcase what they can achieve through collaboration with. If you prefer to earn a recurring commission, be sure to check out Teachable's program. According to its website, affiliates earn on average $ per month. I walk through affiliate programs with the highest earning potential to ensure you can make money from the content you provide.