 |
| Amazon Associates is a popular revenue share affiliate programme |
Action and reward (or horses for courses)
Affiliate marketing can be used to promote any type of web site – there just needs to be an agreed upon action that will result in an affiliate earning commission. Different types of merchants will have different required actions. The actions and the type of commission can be summed up as:
CPA (Cost Per Action) – a fixed commission for a particular action
CPL (Cost Per Lead) – a fixed commission for a lead (i.e. a potential sale)
Revenue Share (also CPS or Cost Per Sale) – an agreed percentage of the purchase amount is awarded
CPC (Cost Per Click) – this forms a very small part of the affiliate marketing mix, and the merchant pays a fixed amount for each click through to their web site.
Let’s look at an example of each of the actions above:
CPA
Here the action could be anything from downloading a white paper or some software to signing up to a newsletter.
CPL
Merchants that offer CPL commissions are usually those that need to convert a lead into a sale offline. This means that they will generally need to complete the transaction over the phone with the customer, or that the process is quite complicated. It is typically insurance companies and banking institutions that will offer this type of commission.
Membership sites which offer a free trial period, such as online DVD rental, can also use this commission structure.
You might be wondering why merchants are willing to pay for a lead, instead of only for completed transactions.
Well, affiliates prefer this model, as they are not in control of the offline conversion process. It is the merchant’s job to be able to complete the transaction. Some merchants may be wary that the leads will not be of a high enough quality. This is why they will usually have conversion targets with which the leads generated need to comply as a means of quality control.
Revenue Share
Revenue sharing is the ideal commission structure as both the merchant and the affiliate are rewarded for performance – the more sales, the more revenue generated for the merchant, and the more commission for the affiliate. Web sites where a sale can be performed instantly are ideal for revenue sharing. Online retailers and instant online travel agents are perfect examples of merchants who offer a revenue share commission. The affiliate earns a percentage of the sale.
Affiliate marketing can be used to promote any type of web site – there just needs to be an agreed upon action that will result in an affiliate earning commission. Different types of merchants will have different required actions. The actions and the type of commission can be summed up as:
CPA (Cost Per Action) – a fixed commission for a particular action
CPL (Cost Per Lead) – a fixed commission for a lead (i.e. a potential sale)
Revenue Share (also CPS or Cost Per Sale) – an agreed percentage of the purchase amount is awarded
CPC (Cost Per Click) – this forms a very small part of the affiliate marketing mix, and the merchant pays a fixed amount for each click through to their web site.
Let’s look at an example of each of the actions above:
CPA
Here the action could be anything from downloading a white paper or some software to signing up to a newsletter.
CPL
Merchants that offer CPL commissions are usually those that need to convert a lead into a sale offline. This means that they will generally need to complete the transaction over the phone with the customer, or that the process is quite complicated. It is typically insurance companies and banking institutions that will offer this type of commission.
Membership sites which offer a free trial period, such as online DVD rental, can also use this commission structure.
You might be wondering why merchants are willing to pay for a lead, instead of only for completed transactions.
Well, affiliates prefer this model, as they are not in control of the offline conversion process. It is the merchant’s job to be able to complete the transaction. Some merchants may be wary that the leads will not be of a high enough quality. This is why they will usually have conversion targets with which the leads generated need to comply as a means of quality control.
Revenue Share
Revenue sharing is the ideal commission structure as both the merchant and the affiliate are rewarded for performance – the more sales, the more revenue generated for the merchant, and the more commission for the affiliate. Web sites where a sale can be performed instantly are ideal for revenue sharing. Online retailers and instant online travel agents are perfect examples of merchants who offer a revenue share commission. The affiliate earns a percentage of the sale.
Merchants tend to structure their commission offering so that affiliates who perform better, earn a higher commission. For example, a merchant might offer the following tiers of commission:
1 – 10 sales: 10% commission
11 – 25 sales: 11% commission
26 – 50 sales: 12% commission
51 or more sales: 15 % commission
CPC
CPC commission is rarely used, and is primarily a way of driving large volumes of traffic, usually to a new site. An affiliate would be awarded commission for every click through to the merchant web site. Although this type of commission was prevalent in the very early days of affiliate marketing, it has been largely abandoned due to click fraud.
We have seen that there are different types of actions that can result in commission being awarded, and that these usually suit the web site that is being promoted.
This means that any industry that is online can most likely be promoted through affiliate marketing.
Affiliates have so many options open to them to promote merchants’ web sites. But before we get to that, we need to take a look at tracking – the thread that holds it all together.
1 – 10 sales: 10% commission
11 – 25 sales: 11% commission
26 – 50 sales: 12% commission
51 or more sales: 15 % commission
CPC
CPC commission is rarely used, and is primarily a way of driving large volumes of traffic, usually to a new site. An affiliate would be awarded commission for every click through to the merchant web site. Although this type of commission was prevalent in the very early days of affiliate marketing, it has been largely abandoned due to click fraud.
We have seen that there are different types of actions that can result in commission being awarded, and that these usually suit the web site that is being promoted.
This means that any industry that is online can most likely be promoted through affiliate marketing.
Affiliates have so many options open to them to promote merchants’ web sites. But before we get to that, we need to take a look at tracking – the thread that holds it all together.
