How Should You Set Your Commissions?

There’s a lot to think about.

Wondering how you should be setting up your affiliate commissions? Your good buddies here at Refersion are here to help!

There are four key points to consider when determining your ideal commission structure.

1. Evaluate Your Products

It’s important to figure out which percentage of your products’ sales are high margin and which percentage are low margin. This will help you establish a blended commission rate that’s profitable for both you and your affiliate.

You can also opt to create varying commission levels depending on the product category, if sticking to a flat commission structure isn’t appealing to you.

2. Offer Incentives For New Customers

New customers have a higher lifetime value than older ones, but are more expensive to acquire. It takes time, money, and effort to obtain fresh traffic, which is why you should be offering incentives for your affiliates to send new people your way.

3. Sales Incentives For New Products

Your commission rates should be structured in a way that allows for sales incentives. Temporary increases (or sales bonuses) can be offered when affiliates hit certain targets. These sales incentives are useful for when you release a new product or feature and decide you want your affiliates to focus all of their marketing efforts on this new product.

4. Be Prepared To Pay For Leads

Consider paying your affiliates for any leads that they generate. For example, you may decide to pay an affiliate if a potential customer signs up for your newsletter or gives out his or her email address in an effort to gain more information.

Be warned though: lead-based commission structures can get a little dicey. If your sign-up form is super easy to complete and the lead commission enticing enough, some unscrupulous affiliates may be tempted to mass fill out the form to generate fake leads and collect the resulting payout.

In order to curtail this practice, you’ll need an astute affiliate manager to evaluate the quality of incoming leads and keep an eye out for any shenanigans.

Still need to brush up on the affiliate management nitty-gritty? We’ll help you figure out how you should set your commissions at Coffee Time!