Affiliate Commission - What is it and what types are there?

If you are hearing or reading the term “affiliate commission” lately, it’s because you are wandering around the affiliate marketing world.

An affiliate commission as you might already guess is the compensation an advertiser pays to a publisher/affiliate to promote successfully their products. But the affiliate commission is not always a percentage of a sale.

In this article, we will tell you the different types of commissions an affiliate can get. But let us start by explaining briefly what affiliate marketing is and how it works.

What is Affiliate marketing?

Affiliate marketing is a model in which a company (advertiser) rewards third-party publishers (affiliates) to generate traffic, leads, or sales to the company’s products or services thru their affiliate programs.

What is an affiliate program?

We can think of the affiliate marketing program as the contract between publisher and advertiser. The advertisers create an affiliate program where they set the commission system and the game rules, for example, when does the publisher gets paid, is it when s/he reaches a certain amount in commissions? Or is it monthly? All that is stated in the affiliate program conditions.

When publishers affiliate with these programs, agreeing to these conditions, they get an affiliate link. This affiliate link is a unique URL that tracks the successful operations so the advertiser can pay the affiliate partner.

What is the mission of the affiliate link?

The affiliate link the advertiser provides to the publisher is inserted in the publisher’s content generally within a call to action (CTA) button. When the users click on the link, a cookie is installed on their browser. This cookie has a lifetime as we mentioned. Amazon associates, for example, works with a 24-hour lifetime cookie. This means that the affiliate gets paid if the user purchases amazon products for a period of 24 hours after they clicked on the affiliate link. But there are 30 days lifetime cookies, 90 days lifetime cookies, and more. This is a key point when choosing what to promote to make some passive income. Not only who offers the higher commission rate but what is the rear window.

And here is where affiliate commissions appear.

Every work deserves to be paid. Such is the case of top affiliate marketers. To be able to get some commissions they need to put some work in the investigation of the products or services, the construction of landing pages, and appealing content for the users to get interested. In affiliate marketing, the advertisers pay the publishers upon their performance. This means that they only pay when they bring quantifiable results.

Affiliate Commission paying models

Maybe you have been wandering also around other acronyms while investigating affiliate marketing like CPL, PPL, CPA, PPS…? Those refer to affiliate commission paying models. Here we will explain the most used ones CPL and CPA.

CPL

CPL means Cost Per Lead and it’s sometimes PPL Pay Per Lead. With this model, the advertiser pays the publisher every time they bring Leads.

What are leads? Leads are people showing interest in a certain product or service which makes them a potential customer. Emails, phone numbers, or other personal pieces of information are leads. After identifying these prospects, the brand will use other marketing strategies to convert them, but the affiliate is paid only for the lead, and it’s not responsible for the rest of the funnel of conversion.

CPA

Cost per Action is a model where the advertiser pays a commission to the publisher when the visitor completes a specific action. It can be confusing as CPA also covers other models, for example, CPL is a form of CPA.

A qualified action example can be a registration a download or a sale and the action is set by the advertiser. Action is at the bottom of the funnel of conversion, so the users that actually take action have been already touched by other marketing strategies before. If in the CPL model, the publisher would use a call to action like, learn more or contact us, here in the CPA case is Buy now, download or register.

CPS - Cost per Sale

Cost per sale is a very used model as well. As you might guess, it's when the advertiser pays a commission upon sales.

CPI - Cost per Install

This refers to the model where the advertiser pays for every installed app.
The CPI model can be used by any mobile developer or marketing team that intends to promote and distribute apps across a broad audience in a cost-effective way. These benefits, however, can impact different mobile businesses like game developers, App marketers, or DTC marketers.

Types of Affiliate Commission

Percentage rates

This type of commission is the most common one in affiliate marketing. The merchant pays to the publisher a set percentage of each sale or a percentage of the consumer’s total order. This commission type is attractive for affiliates for big-ticket items, premium products, or popular products even if the percentage is low.

Flat rate

Is a set specific fee per order or per product sold. A flat rate is fixed and paid to the affiliate regardless of the order value or any discounts. For example, the flat affiliate commission rate is $5, and the sold item is in sale for 3 dollars, the affiliate still gets paid $5. This type of commission is interesting if the affiliate program offers recurring commission and if the promoted product or services are very popular and the conversion rates are high.

Tiered Rates

Tiered rate commissions are an incentive-based model. It means that the goal is to motivate affiliates to sell more volume in order to earn higher commissions.

An example is

0-100 sales =20% commission

101-200 sales = 25% commission

201-500 sales = 30% commission rate.

Combo or combined commission

In the case of some affiliate programs like loans, some advertisers offer a flat rate plus a percentage of the financed amount.

Let’s imagine that the financial entity’s affiliate program offers a $10 US Dollars per lead plus 2% of the lent amount. If the customer borrows 50k the affiliate’s commission would be US$1000

Conclusion

Affiliate commissions are the money reward for the publisher’s marketing efforts to promote products or services without earning a salary by doing it. The brands incur the expense and the customer may not even notice that a third party is getting a commission out of their purchase.

Affiliates can earn high commissions for a single lead, or flat rate small but recurred commissions. There is no average affiliate commission answer. It all depends on the affiliate programs they decide to join and of course the work they put in creating content that is useful for their audience to take the desire action.

Our affiliate network puts together the best publishers and the best offers. If you are interested in creating an affiliate program we will be thrilled to point you in the right direction. Contact lemonads, our affiliate managers will give you the best advice whether you are a future publisher or a potential advertiser.