As a merchant, to get the attention of committed affiliates that will work hard to maximize your sales, you must attract them with compensation that makes a difference in their lives. The more you pay your affiliates, the more time and energy they can justify investing in your program.
It really makes sense to be as generous as you can, within reason. You see, affiliate sales are sales that you would have otherwise missed; they are extra income to you—icing on the cake.
Everybody wins with the affiliate model: You make more sales. The affiliate gets a commission. And the customer finds the product or service they want with minimum trouble.
You should research both your own profitability (your ability to pay commissions) and also what your competitors are offering. Then strike a balance between what you can pay and what established, successful affiliates expect.
It really depends on your industry and product. The range of compensation is huge; from perhaps 3% for tight-margin hard goods up to 60% or even more for high-margin downloadable information products (e-books, multimedia training, etc.). Some programs pay out a fixed dollar amount per sale or lead. A few high-dollar programs like commercial loan referrals pay out a very low percentage which still can amount to thousands per transaction for the affiliate-publisher.
How commissions are paid is also a factor: some programs only pay the affiliate for the first sale, others on a recurring (residual) basis for each additional sale. Some only pay if the site visitor orders in the first ten days, while others pay for the lifetime of the customer.
While you're thinking this through, be aware that super affiliates are in demand; they carefully select the programs they want to participate in from many different business niches. They tend to choose the merchants that pay best and treat their affiliates in a respectful, intelligent way. And they also tend to seek out niches in which they have a special affinity or knowledge.
As a merchant, you are competing against ALL other affiliate programs, even those entirely out of your industry. To be successful, seek out and accommodate the super affiliates. You might go so far as to "fire" your low-performing affiliates and put all your energy into the affiliates that truly make a difference.
Merchant (also called the advertiser) – A merchant is a person or a company that wants to market their products or services on the web.
Affiliate (also called the publisher) – A person or a company that assists the merchant in marketing products and services in return for a commission.
Merchant-Affiliate Relationship (the affiliation) – The affiliate acts as an independent “salesperson” who promotes the merchant's products and services. The merchant tracks incoming visitors to determine which affiliate sent them the sale and credits them accordingly. Tracking and Management Solution – To track the incoming affiliate-referred traffic to their sites, merchants use special affiliate software.
Click-through – A click-through takes place when a visitor clicks on a link on an affiliate’s site that refers them to the merchant’s site.
Content – Primarily, the textual material on the site, but also audio and video. Content should attract, educate, and motivate visitors to take action.
Impression – An impression occurs when a page containing the merchant’s ad or link is loaded on an affiliate’s site. Impressions are also called page views.
Two-Tier – A two-tier commission structure pays an Affiliate commission on each sale (or lead or click-through) they refer, and a second commission on each sale referred by any second-tier affiliates they have recruited into the program.
Link – A link is a hyperlink (http://www.yourdomain.com) or an image or text that contains a hyperlink. A link is placed on one site and when clicked on leads the visitor to another. In the affiliate marketing industry, affiliates place links on their sites that point to the merchants’ site.
Landing Page – A page that your affiliates point traffic to (not necessarily your home page). Visitors coming from your affiliates’ sites will “enter” your site at this page. This is also the entry point for text and display ads. Each keyword or ad should have a landing page that meets the visitors' expectations.