If you tend to launch your own affiliate program in your e-commerce website, you will need to establish the default commission structures first. It is seen as base commission rate which you will use it to apply for all types of standard affiliates in your affiliate program. You will still be able to change any terms or rules depending on different situations. However, your base commission rate allows affiliates to know the amount of money they are paid without any negotiation.
The first thing you need to consider is stakeholders who are involved in the transaction in the process of formulating a commission structure. Although affiliate marketing is based on affiliate’s performance. They are just paid when a products or service is sold. As a result, it can be that a number of different parties who takes a cut of that sale. To be more specific, the affiliate gets a percentage. The affiliate networks might also get a percentage and the affiliate manager can take a percentage. Affiliate program is seen as a no-risk marketing method which could be the one of your most expensive.
On the other hand, it is also one of the most effective marketing channel. The reason is that it provided that margins are properly managed. Here are three keys to set commission for Affiliate Program of e-commerce website.
1. New vs. existing customers – Helping you to build your Affiliate program in e-commerce website:
Actually, existing customers commonly have lower lifetime value than new ones. The reason is that new customer can increase your customer base. You will be able to pay less to convert customer in the future if you own more customers. You can take the advantage that customers who bought your products know clearly about their value, quality. Moreover, you can gain the customer’s trust. It costs more to gain a new customer because you need build buyer’s credibility and trust.
Because new buyers are valuable, it makes sense to encourage your affiliates to attract customers and generate fresh traffic.
For example, you can provide the Magento affiliate add-on which is called “Refer Friends” for your e-commerce website. Your customers can share the links of your products or services through their social channels or emails. It is quite simple and easy for them to do.
When they want to write message to persuade your friends or relatives to buy your products or services, you also do it easily and conviently.
By applying the purchase discount or other offer, you offer incentives for your new customers to generate other potential customers. And the same reason you offer the incentives is to encourage them to generate more new ones.
The other advantage of affiliates is the ability of attracting customers in over the world. You do not care about the language which your website uses. For instance, your e-commerce site uses English as the main language. But one of your affiliates who knows Spanish and translate into this language. Therefore, you have chance to buy for Spanish people. From that, you may expand your brand in Spain by this way.
2. Product categories with varying margins for your Affiliate program:
If you have a large number kinds of products, you can set the margins for each one. For example, cellphones might have a tight margin when books may have more leeway. But in term of situation that you want to set up a flat commission structure, you need to establish the revenue-share percentage, no matter what products or services the affiliates sell. After that, you need to evaluate what your product or service mix is. You need to identify the percentage of your sales what it is high margin and low margin for your affiliate system. By doing that, you can balance the profit for both of you and your affiliates when they enjoy the affiliate program of your e-commerce site.
You can set commission tiers based on specific product categories and the number of tiers. For example, your affiliate who is seen as the first one make their friend sign up to become an affiliate. When this friend who is seen as the second person sell a product, both of them will get commission from you.
Many merchants build the affiliate marketing by paying for leads. Leads can mean that the new account which signed up you e-commerce site or subscribers in newsletter.
The cons of the lead-based commission structure is fraud prevention. If the form is easy to fulfill as well as the payout high enough, the dishonest affiliate can decide the ways to auto-fill which form and collect commission on bogus leads. To avoid it, you need a devoted affiliate manager to force the quality of inbound leads. Warning signs consist of multiple leads which originate from the same IP address or patterns in data entry. When you police fraud, boot the affiliate from the program instantly, and notify the network. And notice to reverse any recorded leads associated with the bad affiliate.
Let’s set commission for affiliate program for your own e-commerce to encourage affiliates. By this ways, you can expand your brand, increase the number of sales and revenues.