Affiliate Program Types
SUMMARY: There are 3 main types of
affiliate program: pay per sale, pay per lead and pay per click
programs. Furthermore, programs can be flat fee, or
commission-based. They can be single tier, two tier (rewarding
those who bring in new affiliates) and multi-tier. Each type of
program has its advantages and disadvantages, and each is
relevant to different sites and situations.
Commission-based Affiliate Programs
Commission-based programs are by
far the most common type of affiliate program. They are nearly
always pay per sale programs, i.e. they pay a
predetermined % commission on the revenue generated by the sale
of products or services to a visitor who came from your site.
Some programs offer incentives to
more productive webmasters in the form of an increased
commission share on a sliding scale, or by offering their
best-performing webmasters cash bonuses or prizes. Many programs
operate on a flat commission rate, irrespective of the volume of
sales. A few curious programs "penalize success" by capping or
reducing commissions once affiliates go over a certain monthly
revenue level (e.g. an affiliate program may pay out a maximum
of $500 monthly commission per affiliate). Always read the fine
print of the Affiliate Agreement carefully to avoid affiliate
programs that tie your hands in this way.
Flat-fee Affiliate Programs
(per-lead and per-sale)
Although somewhat less popular than
commission-based programs, many affiliate programs operate on a
flat-fee basis. Essentially, a flat-fee referral program will
pay you a predetermined amount for every visitor who carries out
at least one purchase or other transaction at the merchant's
site, irrespective of the ticket value of that transaction.
Flat-fee programs can be as simple
as "US$10 per new customer" or "US$5 per order", or they can
have more complex fee structures depending on what mix of
products or services was sold and how many leads or sales the
affiliate closed that month.
Some flat-fee programs operate on a
per-sale basis. In other words, visitors have
to actually purchase and pay for a product or service in order
for you to qualify for the referral commission. Other flat-fee
programs, such as those for loans and mortgages, insurance
policies and so on, generally operate on a per-lead
basis. Each qualifying lead earns you the referral fee. The
criteria for qualification can range anywhere from "visitor
supplies their name and address" to "visitor completes a
multi-page survey and responds to an initial follow-up telephone
inquiry." The exact criteria vary with each affiliate program.
Pay per click programs
Pay-per-Click affiliate programs
(also known as click-through programs) pay a small amount for
every visitor sent to the target site. Typical payments range
from $0.01 to $0.20 or more per visitor.
Some pay-per-click programs pay on
a second-page-click basis: you will only get paid if a visitor
from your site clicks on one of the links on the page they get
to after reaching the affiliate site. Always read the details of
each program carefully to find out whether you're going to be
paid on a first-page or second-page-click basis as this will
have a huge impact on your potential earnings. Typically,
requiring a second-page click can cut earnings by 75%-90%
compared to a straight clickthough program.
Single-tier Affiliate Programs
Single-tier affiliate programs
offer the most straightforward tiered structure. Essentially,
they are a flat program that rewards only direct transactions
i.e. transactions that the affiliate has generated. There is no
reward on offer for signing up other affiliates. Single-tier
affiliate programs are suitable for any site; your earnings will
depend entirely on how well you are able to "pre-sell" the
product or service on offer, how many visitors you can send to
the target merchant, and how well they are able to work to
monetize your traffic.
Two-tier Affiliate Programs
Two-tier affiliate programs reward
affiliates in two ways: they reward transactions generated by
affiliates, but they also have a system in place to reward
affiliates for bringing new affiliates into the program. This is
the "second tier" part of two-tier affiliate programs.
Second-tier payments can be made on
a commission or flat-fee basis. For example, an affiliate
program might pay affiliates 20% commission on the transactions
they generate, plus 5% of the total earnings of the affiliates
that sign up directly under them (that's 5% of 20%, of course).
Alternatively, they may pay a flat affiliate referral fee, for
example "US$10 bonus for each new affiliate you refer that
produces at least US$25 in sales."
Two-tier affiliate programs are
good for affiliates who believe they can recruit other
productive affiliates. However, you should be wary of
any affiliate program that places more emphasis on the earnings
to be made by recruiting other affiliates than on the earnings
from sales - after all, ultimately someone has to close
those sales! You should also be suspicious of programs
structured with a very low first-tier payout but a very high
second-tier commission - again, that type of structure
emphasises the recruiting of affiliates over the sale of
Two-tier programs are less
attractive for affiliates who don't like the idea of essentially
recruiting their own competition, or who are exceptionally good
at pre-selling customers. In this case, a single-tier affiliate
program would be more appropriate.
Multi-tier Affiliate Programs
Multi-tier affiliate programs
reward affiliates who sign up other affiliates several levels
"deep". In other words, you sign up Bob and Bob signs up Sarah
and Sarah signs up John, and you get a percentage of Bob's
earnings, Sarah's earnings and John's earnings. The distinction
between multi-tier affiliate programs and pyramid schemes is
wafer-thin, and one which this site declines to pursue further.
You will not find any coverage of multi-tier affiliate programs
Key info to take away
Affiliate programs can fall into
any of the above categories. For example, some programs are
single-tier per-click affiliate programs, some are two-tier
per-lead programs. Some affiliate programs are hybrids,
combining several different types of reward system into a single
affiliate program. For example, a program may pay a small amount
for every qualified lead, plus a larger commission or per-sale
fee for those leads that become customers within a specified
period of time.