Affiliate Program - Commission Structures
By Michael Russell
As many affiliate programs as there are, there are also that many commission
structures. While we can't possibly go through all the different kinds, we are going to
cover some of the more common ones. Hopefully, this will give you a decent idea of how
commission structures work and which one is best for you.
The simplest commission structure for an affiliate program is the single level or
1-tier structure. This is where you get paid a certain percentage of the sign up fee for
that program or product. Most single level structures pay around 50%. Some a little more,
some a little less. But for the most part, you're looking at a $10 profit on a $20 sale.
The good thing about single level commission structures is that you do get a decent chunk
of the sale price. The bad thing about it is you have to do all the work. You get no help
from any of the people you sell to. Their efforts are pretty much worthless to you. So if
you're not a good sales person, a single level commission structure is one that you probably
want to stay away from as you need to make too many sales to make a decent profit.
The next type of commission structure is the multi-level. This can be two-tier all the
way to infinity. This is where commission structures start to get very complex and careful
examination of each one is needed in order to decide if a particular one is good for you.
For the most part, multi-level commission structures are great for people who feel that
they can make just enough sales to bring in others who will do a good portion of the work
for them. Unfortunately, the hardest part of this is actually finding these people. Most
Internet marketers are very poor at recruiting others. In other words, out of every ten
people you make a sale to, you're lucky if you find 1 who does anything at all.
With a multi-level commission structure, the 50 percent commission, or whatever it may
be, is divided up between the many levels. For example, with a program that goes down three
levels deep, the commission structure may look something like this.
Level 1 - 30 percent
Level 2 - 15 percent
Level 3 - 10 percent
In this structure, the total payout is 55 percent, which is actually pretty good. So if
the sale price is $20, you would make $6 for every personal sale that you make. But, for
every sale that your direct sales makes you would receive an additional $3. And then
finally, for every sale that their sales makes, you would receive $2. And this is a
relatively simple structure. Some programs will have what they call leadership bonuses. In
other words, you only get paid on your lower level sales if you get at least 1 sale for
the month. If not, all those commissions go up to your next level.
Yes, it can get very complicated and we've just scratched the surface. In a future
article we'll go over advanced commission structures.
Michael Russell - Your Independent guide to
Affiliate Programs
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