If you run an affiliate marketing program, then you should know that the affiliate marketing commission rate you give to your affiliates is the motivation that will help them make more sales. When your affiliates make a sale through their affiliate links, they are entitled to a percentage of commission. Hence, you should not play with the rate you set for your affiliate marketing program.
However, you need to make sure the commission rate you set for your affiliates is one that is sustainable and keeps your affiliates motivated. If it’s too low, it’ll be difficult to get affiliates to make more sales or bring in customers. Also, if your rate is too high, it may be difficult to maintain it over time. Hence, we discuss how to set a sustainable affiliate marketing commissions rate.
Determine The Basic Type Of Your Affiliate Commission
You may decide to choose between rewarding your affiliates with cash or in store credits. Usually, cash is the most acceptable. Only a few brands pay their affiliates in store credits.
You should also decide if you’re going to set your commission rates in percentage or flat rate. This means that you can either decide to pay your affiliates per sale or set a fixed amount they get on each sale. If you’re going to set your rates in percentage, it should be between 5 to 30 percent. You can decide to employ a fixed rate commission if you’re selling only a few products per affiliate.
Know Your Average Customer Lifetime Value
The average Customer Lifetime Value is the average amount of money a customer brings in over the number of years the person stays a customer. This value is important in helping you determine how much you should pay an affiliate. You’ll also be able to determine a commission rate that’s sustainable over time.
For your affiliate commission to be sustainable and affordable, it must be below the average customer lifetime value for all your customers. It also should not be above your average customer acquisition cost. If you have customers that stay for a long period of time, you can afford to set higher affiliate commission rates.
Other Tips To Set A Sustainable Affiliate Marketing Commission Rate
You should analyze the commission rates of your competitors. Make sure you’re not far behind or far ahead with your rates. You’ll then be able to set a rate that’s not only sustainable, but also attractive.
You should also learn how to start low with your rates and then go high until the commission rate is sustainable.
To set a sustainable commission rate for your affiliate marketing program, you need to take some factors into consideration. You need to make sure your rates are attractive to your affiliates but also ones you can afford. We discuss how to set a sustainable affiliate marketing commissions rate.