Commission Structures In Affiliate Marketing: An Introduction

If you’re on a mission to develop a winning business, you've likely been looking into affiliate commission marketing — a highly effective way to connect with an audience with minimal resources spent on marketing campaigns.

But to have your product or service taken off the ground, first, you must set up an affiliate commission structure ideal for your business needs. If your business is not organized correctly, you'll have a hard time finding affiliates willing to work with you.

In this article, we'll explore 7 affiliate commission structures to give your business a strong chance of standing out from the rest by making the best use of your affiliates.

1. Linear

This ancient method allows advertisers to pay affiliates an evenly distributed amount based on how deep the customer dives into the purchasing process.

The sum and gross profit can be directly proportional, meaning that the affiliate will earn a pre-determined sale cut. This commission structure is perfect for campaigns that deliver a fixed revenue amount.

2. Competitive Fixed Margin

The fixed margin structure is one of the best ways to keep affiliates incentivized while also bringing in new affiliate partners. This type of commission structure usually involves using agreed-upon fixed commissions for affiliates that are not affected by the number of actual sales.

You could, for example, offer an affiliate a commission of 5% for sales on any of your brand's products. The fixed margin structure is easy to grasp and track for brands and affiliates while limiting discrepancy and incentivizing sales.

When setting up a fixed margin structure, one thing to keep in mind is that you always have to incentivize affiliates with good commission margins to ensure that they'll remain loyal to you.

3. Time-Decay

This structure rewards the affiliate with credit for influencing a conversion closest to the event. For example, an affiliate may have won a consumer's interest. Still, another affiliate will get the full commission or a bigger chunk of it if they reach the customer right before they make a purchase.

The time-decay structure is especially efficient for popular brands with saturated campaigns and companies that want to advertise across various traffic channels while using multiple affiliates.

4. Position-Based

Position-based commission structures reward affiliates for bringing in customers at key stages of their journey as buyers. This means that a company can offer a certain amount of money to an affiliate that initially engages the customer while also rewarding the affiliate who influenced the purchase.

This structure works by monitoring the customers' mental process and purchasing practices and paying the affiliates that contributed the most to their journey to investment.

5. Coupon Codes

Coupon codes are a popular commission tool that helps businesses work with more online and offline affiliates. The affiliate receives a cut for any transaction that comes through their special code, no matter how the customer may have gotten the code.

6. Cross-Platform Tracking

Cross-platform tracking is one the most used commission structures, as the buying journey of today’s customers often involves the use of multiple devices. For example, a customer learns of a product or service thanks to an affiliate while surfing social media on their mobile device, but later purchases their desktop computer. This type of structure rewards the affiliate even if customers use different devices during their buying journey.

7. Shopping Cart Disqualification

Businesses want to be sure that their money is spent wisely when used in advertising. Shopping cart disqualifications allow them to only reward affiliates that guide a purchasing decision rather than affiliates who become active after the customer has already made their decision.

Let's say a customer puts something in their shopping cart and then continues to surf the web or go through their emails searching for a discount code. Usually, the code would be connected to an affiliate, and they'll receive a cut for the purchase. However, with shopping cart disqualification, businesses can stop an affiliate from being rewarded if the coupon is used after the item has already been added to the cart and the customer pauses the process until they find a code they can use.

Final Words

Making the most of your affiliate program requires you to offer your affiliates commission structures that will be worth their time and effort. We have listed some of the most widely-used commission structures, but there are many more options available.

Incentivizing your affiliates to perform at their best doesn't have to be a strenuous task, and that's why Smartico.ai has developed an Affiliate Platform that can take the busy work off your hands, so you can focus on what truly matters.

To take your business to the next level and have all the elements in place for a successful affiliate program, book your free in-depth demo of TheAffiliatePlatform today.