Affiliate Program – Commission Structures
As many affiliate programs as there are, there are also many commission structures. While we can not possibly go through all the different kinds, we are going to cover some of the more common ones. Hopefully, this will give you a decent idea of how commission structures work and which one is best for you.
The simplest commission structure for an affiliate program is the single level or 1-tier structure. This is where you get paid a certain percentage of the sign up fee for that program or product. Most single level structures pay around 50%. Some a little more, some a little less. But for the most part, you're looking at a $ 10 profit on a $ 20 sale. The good thing about single level commission structures is that you do get a decent chunk of the sale price. The bad thing about it is you have to do all the work. You get no help from any of the people you sell to. Their efforts are pretty much worthless to you. So if you're not a good sales person, a single level commission structure is one that you probably want to stay away from as you need to make too many sales to make a decent profit.
The next type of commission structure is the multi level. This can be 2-tier all the way to infinity. This is where commission structures start to get very complex and careful examination of each one is needed in order to decide if a particular one is good for you.
For the most part, multi level commission structures are great for people who feel that they can make just enough sales to bring in others who will do a good portion of the work for them. Unfortunately, the hardest part of this is actually finding these people. Most Internet marketers are very poor at recruiting others. In other words, out of every 10 people you make a sale to, you're lucky if you find 1 who does anything at all.
With a multi level commission structure, the 50% commission, or whatever it may be, is divided up between the many levels. For example, with a program that goes down 3 levels deep, the commission structure may look something like this.
Level 1 – 30% Level 2 – 15% Level 3 – 10%
In this structure, the total payout is 55%, which is actually pretty good. So if the sale price is $ 20, you would make $ 6 for every personal sale that you make. But, for every sale that your direct sales makes you would receive an additional $ 3. And then finally, for every sale that their sales makes, you would receive $ 2. And this is a relatively simple structure. Some programs will have what call their leadership bonuses. In other words, you only get paid on your lower level sales if you get at least 1 sale for the month. If not, all those decisions go up to your next level.
Yes, it can get very complicated and we've just scratched the surface. In a future article we'll go over advanced commission structures.