Awarding commission appropriately is among the biggest challenges of affiliate management, and can ultimately make or break an affiliate programme.
Commission through the channel simply has to be a two way street. As a business, you have to be comfortable with the level of commission you are offering, and subsequently, the affiliate has to be happy that the commission they will earn will be worth their while promoting your business.
Before deciding on a commission structure, there are a number of questions that you should consider:
- Do you want to offer a higher level of commission for new customers, or are you happy paying a set amount for all custom generated through the channel?
- How much commission can you offer, whilst still leaving room to increase (if necessary) and also run promotions, such as sales and vouchers?
- How much commission will an affiliate require to promote my business?
- What commission level are your competitors offering?
These are the key questions that must be answered before deciding on any structure. While all businesses wish to continually bring through new customers, and therefore offer a higher commission amount for these customers, this can often complicate things for an affiliate, who believe they should be awarded an equal amount for any custom they generate.
Secondly, settling on a commission amount which still gives rooms for increases/sales/vouchers is crucial, as you do not wish to give away your highest possible commission straight away – allowing yourself leeway will give you options throughout quiet or busy periods.
Taking into account what level of commission an affiliate requires is also vitally important. An affiliate simply has to see that promoting your business will be worthwhile for them. If an affiliate is spending an abundance of time promoting your business, delivering a lot of traffic and sales, yet being rewarded with a really low level of commission, they will quickly look to increase this, or cease promoting your business.
Finally, competitor analysis has to be taken into account. If you are in the affiliate space, and competing with similar retailers, you have to be competitive. While some customers will always stay loyal to a brand, customers these days are becoming increasingly deal savvy – if they can receive free delivery, a 5% off voucher, or even something as small as 1-2% more cashback, they will take it.
Competitor analysis must also be taken into consideration when working with affiliates; if your competitor is offering a higher level of commission to an affiliate you are also working with, it is highly likely this affiliate will favour working with your competitor.
In addition to the above, you may also wish to offer different commission on different products. With different products having different profit margins, this will mean you are able to increase your commission offering on said products. This can be a great way of ensuring increased levels of promotion for certain ranges your business is offering.