Action and Reward In Affiliate Marketing.

Action and Reward In Affiliate Marketing.

Affiliate marketing can be used to promote any type of website – there just

needs to be an agreed upon action resulting 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:

• Cost per Action (CPA) – a fixed commission for a particular action

• Cost per Lead (CPL) – 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

• Cost per Click (CPC) – this forms a very small part of the affiliate

marketing mix, and the merchant pays a fixed amount for each

clickthrough to their website.

Let’s look at an example of each of the first three actions above:

CPA

Here the action could be anything from downloading a white paper or software

to signing up to a newsletter.

CPL

Merchants who offer CPL commissions are usually those who need to convert

a lead into a sale offline. This means they will generally need to complete the

transaction over the phone with the customer, or that the process is quite

complicated. Typically insurance companies and banking institutions 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 that the

leads generated need to comply with as a 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. Websites

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 clickthrough to the merchant website. 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 website that is

being promoted. This means that any industry that is online can most likely be

promoted through affiliate marketing.

Affiliates have many options open to them to promote merchants’ websites.

But before we get to that, we need to take a look at tracking – the thread that

holds it all together.