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Types of Affiliate Programs

1. PAY PER SALE (commission based)
You get paid a commission for each sale you generate. If you refer a visitor to the merchant's site and the visitor makes a purchase, you get a percentage of the sale as a commission. Some programs offer a sliding scale for the amount of commission to reward affiliate sites with high traffic, while other programs stick to a flat commission rate for any level of sales. Depending on the merchant, the commission may be for that purchase only, for all purchases that customer makes within a fixed period of time (usually six months to one year), or for all the purchases that customer makes in his or her lifetime. (tracked by cookies)

Advantages to you
You get paid for every sale that is generated by a visitor referred from your web site. If the affiliate program matches the content and tone of your site, you are likely to get good results from a commission based pay-per-sale system.

Disadvantages to you
This kind of program usually has a low click-thru to conversion rate. This means most likely only a small percentage of your visitors will click on the banner or link let on be converted to make a purchase.. Often frustrating, as affiliate members may find though they have had thousands of visitors, yet netted zero sales. However, the more you can coordinate your affiliate program with the merchant's site, the better your chances will be to make money.

Advantages to merchant
In essence, the merchant gets an additional, free shopping front and, with all combined affiliate sites, has the potential to reach a very broad audience.

Disadvantages to merchant
A merchant will need to pay commissions out of his\her own gross margin.

2. BOUNTY (flat fee referral)
Should a merchant agree to pay a one-time bounty payment per each customer referred, you will not be entitled to receive any future commissions on subsequent purchases. Typically, bounty payments fall in the range of $10 to $20 per customer.

Advantages to you
You get paid for every visitor you send to the merchant site (target zone) who makes a purchase.
Disadvantages to you
Unfortunately, you will only receive compensation for the initial visit. So should that customer make repetitive purchases your sales will no way benefit. Hence, as your web site needs to have new visitors all the time, you must employ numerous methods and avenues from which to secure fresh visitors.

Advantages to merchant
Essentially, they will be receiving free advertising, as you will place their banner(s) on your site for FREE. It's the cheapest advertising a merchant can get. 5.000 page views could cost up to $100, now only $10-$20.

Disadvantages to merchant
None. He receives free advertising and the cost for each new-found customer is only payable one time and is quite minimal.

You get paid for every visitor you send to the online merchant through a banner or text link, regardless of whether or not a sale is made. Usually, companies pay $0.05 - $0.10 per click per visitor.

Advantages to you
As opposed to only getting paid for each visitor who makes a sale, you will get paid for each person who visits the target site.

Disadvantages to you
The problem with this form of affiliate program, is over saturation. In most instances, merchant sites may have upwards of 5,000 banner impressions. Hence, the odds of visitors selecting your site diminish with each additional banner.

Advantages to merchant
The merchant receive free advertising as you are responsible for placing their banner(s) on your site for no additional charge. In return, for providing the merchant with this very inexpensive form of exposure. For each additional web page, the merchant has, the more his\her costs decrease..

Disadvantages to merchant
None. Basically, the merchant receives free advertising.

You get commission on the direct sales you originate, plus you get commission on sales generated by affiliates which you recruit. Merchant companies typically pay 15 percent commission for direct sales and 5 percent for sales generated by affiliates you recruit.

You get paid a one-time fee for generating a lead for the merchant. Similar to a bounty program, you usually earn between $2 and $5 per each referred visitor who fills out a questionnaire or an application. Same (dis)advantages apply as for the Bounty programs.

There are three basic types of affiliate program payment arrangements:
Pay-per-sale (also called cost-per-sale): In this arrangement, the merchant site pays an affiliate for every customer they successfully draw to the web site and makes a purchase., an example of the pay-per-sale arrangement, pays the affiliate a percentage of the sale, whereas others may pay a fixed amount per sale.
  • Pay-per-click (cost-per-click): In these programs, the amount the merchant site pays the affiliate is based upon the number of visitors who click on the link which brings them to the merchant's site. It is not required that visitors buy anything, merely that they come to the merchant's site.
  • Pay-per-lead (cost-per-lead): Companies employing these programs derive pay to their affiliates upon the number of visitors they refer and sign up as leads. Generally speaking, this means the visitor provides the information requested during their visit to the merchant's site. In turn, the merchant site may then use this data as a sales lead or turn around and sell it to another company as a sales lead.

There are a number of other arrangements as well. Basically, a company could set up an affiliate program based on the principal action that will benefit them the most, and then pay their affiliates based upon the number of customers they receive via the affiliates who perform that action.

There are a couple of very popular variations on these basic payment plans:

  • Two-tier programs: These affiliate programs have a structure similar to multilevel marketing organizations (also known as "network marketing") such as Amway or Avon, which profit through commission sales and sales recruitment. In addition to receiving commissions based on sales, clicks or leads stemming from their own site, affiliates in these programs also receive commissions based upon activities that occur on affiliate sites.
  • Residual Programs: And it gets better, as affiliates in these programs can also continue to reap monetary rewards from visitors they send to the merchant site should they make multiple purchases goods. Many online merchants who receive regular payments from their customers (i.e. through monthly service fees) operate this type of affiliate program.

Additionally, there are several pay-per-impression affiliate programs. Companies running these programs, also called pay-per-view programs, pay affiliates based upon the number of visitors who see their banner ad. Typically, not as structured as an affiliate program, the advantage pay-per impression programs have over traditional advertising is that the merchant gets paid even without converting a viewing to a purchase.

Hence, as traditional advertising is considered to present a greater financial risk, it tends to be much easier for Web sites to join affiliate programs than it is for them to secure advertisers.

Affiliate Program Networks
Affiliate networks, also known as affiliate brokers, act as mediators between affiliates and merchant Web sites tracking activities, facilitating payments, and assisting affiliates to set up the necessary links on their Web site.

Additionally, affiliate networks help recruit affiliates by including an online merchant's affiliate program in their directory. Though special features offered vary from network to network, most have a help-center, as well as, a forum where affiliates and merchants can view their respective traffic reports.
Affiliate networks are a real convenience for prospective affiliates because they present a wide variety of affiliate programs in one central location. Plus, they simplify the process of finding a like-minded program for your site.

However, not completely altruistic, affiliate networks, who take a commission of anywhere form 10 to 20 percent, tend to make a tidy profit in exchange for the convenience they offer.

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