Forum Moderators: skibum
Can you think of any incentives (for example, some sort of bonus, exclusivity contract, etc.) which would fairly condone the raising of commission rates for certain individuals/companies?
If I understand your questions correctly, than this is what Amazon does in (one of their many) compensation structures. If you reach a certain volume of sales, then your commission rate is increased when calculating total commissions for that period. Many companies such as Amazon disclose this policy, although you are right that many more affiliate programs probably make special arrangements with super-affiliates and don't publicize it.
In most of these cases, I would guess the criteria for offering increased commission rates is high sales volume, whether the company makes this information generally available or not.
Clay
It seems to me that offering higher commission on higher sales volume is only a real incentive for the super-affiliates. In order to qualify, a smaller site would probably have to get more incoming visitors, ie., spend the time and money on better SEO -- something which they may not be in a position to do.
Secondly, the actual examples I've seen out there do not to conform to reality. For instance, one affiliate program offers a +3% commission if total referred sales double to $3000 per month. That is completely unrealistic for most affiliate sites.
Also, it does not give the affiliate a tangible method for attaining higher commission rates, only an end goal.
Does anybody have ideas for incentive programs which offer higher commission rates for increased performance?
I think I understand a little better now where you're coming from. It sounds like it would be useful for you to have some ideas for rewarding quality affiliates that may not be directly tied to their volume (since as you noted this is only useful to super-affiliates).
If you wanted to encourage affiliates who focus their efforts on pre-qualifying their traffic, you could increase commission rates based on conversion rate, the percentage of traffic that affiliate brings that converts to paying customers. In theory, the affiliates who have good mini-sites or good copy on whatever marketing vehicle they use should have a higher conversion rate.
Assuming your affiliates are okay with it (and some wouldn't be), you could also post a list of the affiliates with the top 10 conversion rates. Have links to these top 10 sites or emails or whatever. New affiliates could then model their efforts on these examples. Of course, many of your top affiliates wouldn't want to give away their secrets.
Another idea might be to stick with the volume sales goals, but calculate different break points for each affiliate based on their past sales. If someone sold $50 last month, then improving to $55 this month would give them a 3% bonus to their commission. An affiliate who did $3000 in sales would have to increase to $3300 or $3600 to get a 3% bonus.
Of course, if it makes sense for your product line, you really motivate your affiliates by paying them a commission for repeat customers. This makes business sense, as well, since repeat customers are the life-blood of most businesses.
Hope that helps.
Clay
Firstly I’d like to point out that I think all affiliates managers should be running at close to their profit margin on affiliate commissions.
When considering your costs with affiliate marketing you can broadly divide them into two distinct groups (as is the case with most marketing endeavors). Fixed and variable costs.
Fixed costs are those that do not change no matter what volume of traffic or sales an affiliate produces. An example might be the cost of printing and mailing a monthly affiliate commission check. If you are writing a check for $50 or $50,000 the cost of the postage stamp, envelope and time are the same.
Variable costs are those that increase proportionally with the activates taking place. For example; bandwidth costs for an affiliate would generally increase as the volume of traffic/sales they send increased.
(note: I’m aware of small indiscretions above, like increased bandwidth becoming cheaper or increased taxes associates with large checks but I’m just keeping things simple)
Now if I’m running at a 0% margin on $500 a month worth of sales (i.e. paying the entire revenue amount to an affiliate) I am not in a position to increase payment to the affiliate in question.
However, if that affiliate was to start sending $50,000 a month worth of traffic I could factor in the saving I have made on my fixed costs. This could quiet easily equate to $500 in banking fees alone.
So I don’t think it is about being fair I think it is about sensible business practices.
We discussed the issue of exclusivity. But no one trusts any one, and there's no way they could tell if I have another site that is using another program, so therefore, exclusivity is not an issue.
In my experience, its worth contacting the programs to see if you can renegotiate rates. Things are getting much more competitive.
[forums.prospero.com...]
I just received this email from Amazon.com:
We offer two types of compensation structures, Classic and Tiered. Our Tiered compensation plan allows you to earn higher referral fees as you generate more qualifying items. However, to participate in the Tiered compensation structure, you must opt into the Tiered structure by October 22, 2003. If you join the Associates Program after the October 22 deadline, you will be automatically assigned the "Classic" referral fee structure. If our Tiered model continues to be offered in future quarters, you will have a chance to choose that option at that time.
Seems to me that the Tiered model wasn't working very well. Perhaps it did not turn out to be such good business practice as spikedo55 or cherrytron suggested.
Howe about give them $5 for each day where they have more sales then the day before, regardless of volume. Make the little guy who sells once every two days, try to sell every day. Make the big guy with the steady sales try to increase.
I know I would appreciate these incentives. Mostly I have a choise which merchant to promote. But if one of them gives me incentives for continuity, steady sales or increasing sales, I'd be throwing away those bonuses by giving SOME of my sales to his competitor. I'd certainly bite.
SN
