Understanding Affiliate Marketing Commissions

Understanding affiliate marketing commissions is foundational for launching and running a successful affiliate marketing business, and it takes at least a rudimentary understanding of statistics to better understand affiliate commissions.

If you have a distaste for statistics and you’re involved in affiliate marketing, you’ll probably be disappointed to know that it’s an essential component to your success. In fact, you’ll have to understand statistics in order to determine the viability of a program.

Statistics will also help you determine how you can win in terms of affiliate marketing commissions, without which your program will be inadequate and your efforts useless. You’ll also need to learn how to ‘read’ the numbers so you can maintain a sufficient balance in the factors that may affect your future income.

Now this post is not going to be all about statistics, however, I’d like to give you just one example of some statistics I think are relevant to the subject matter at hand.

Statistics example: ClickBank offers many digital products for aspiring and seasoned marketers alike, and with each product comes with a set of statistics. The two main statistics I look at when deciding on which product to promote are:

1) Popularity

Popularity is determined according to the net sales of a publisher over the latest time frame. The popularity statistic is used to determine how popular a product and is, and it is also used to reward ClickBank vendors who have many affiliates promoting their products. Basically the popularity statistic determines how many ClickBank affiliates are promoting a particular product.

2) Gravity

Gravity considers the number of affiliates who received a commission for promoting a product during the previous 12 weeks. 

The gravity amount of a product is meant to serve as an indication of the number of affiliates who are currently making sales of the product. When the gravity amount is higher, it means that there is a higher number of affiliates who have earned commissions from that specific product during the previous 12 weeks.

ClickBank defines Gravity or Grav as Gravity performance statistic. The number represents ClickBank’s unique calculation which considers the number of  affiliates who made a commission through promoting the product over the previous 12 weeks.

If, on the other hand, a product has a low gravity score this means few of any affiliates have made a sale of that product during the previous 12 weeks.

When I promote a ClickBank product I primarily use the gravity statistic, and I look for a high score (100+) because it tells me that a good number of sales are being made which in turn tells me that there’s a market for the product and I’m likely to make sales.

Okay, enough of statistics talk, let’s move on.

Increasing your affiliate marketing commissions

Earnings from affiliate marketing programs come in the form of commissions, similar to the type of earnings that salespeople receive based on the sales they generate. Commissions are a type of performance-based income, in that the amount will depend on how much an affiliate can produce based on the sales brought in by his leads.

There are several factors that will affect the amount of commissions you’ll earn from an affiliate marketing program. These are:

The choice of affiliate marketing program

Not every affiliate marketing program pays the same amount of commissions to its affiliates. Affiliates will have a choice of programs offering a low pay scale ranging from about 5 to 15 percent per sale or performance while others may pay as much as 60 to 75 percent, depending on the type of products or services being offered.

All things being equal, choosing the program that pays a higher commission may well result in greater overall revenue being produced by your business. As a general rule, signing up for affiliate marketing programs that pay higher commissions will be a no brainer.

The type of earning opportunities affiliate programs offer will also make a difference to the amount of commissions you can expect to earn. Two-tier programs, for example, offer a better income-generating opportunity than flat programs. Two-tiers offer two income sources, generally from commissions on sales of a product or service and from recruitment of new affiliates.

Income from recruitment can either be a one-time cut (usually a flat rate) for recruiting each new member, or a commission based on the sales revenue those new members’ generate.

Some affiliate marketing programs may also offer recurring commissions, in which affiliates can earn every time a customer or member renews a subscription or a membership. This type of program means you can earn, what we call in the industry, a residual income.

Over time, residual income can really add up. Typically, residual income starts off small and builds as time goes by. The ideal commission structure you should probably shoot for is a combination of upfront sales with residual sales on the back end.

Upfront sales deliver instant cash flow which is usually needed for pressing business expenses. Whereas backend residual income works to build long term wealth. There’s no hard and fast rule here, but generally speaking this is how successful affiliate marketers set up their commission structure.

The product

Affiliate marketing commissions will also depend on the type of products or services the program offers. A product that has the misfortune of belonging to a market that’s already heavily saturated can be difficult to sell. On the other hand, a popular item can mean large sales if you have a strong and ready market.

This blog, for example, is one product (tool) that I use from an extensive marketing tool suite, which is very popular among newbies and seasoned marketers alike. We have a strong and ready market, so much so that our products literally fly off the shelves, so to speak.

The market

Affiliate marketing commissions rely heavily on how effective an affiliate’s sales and marketing strategies are. This is where proper affiliate marketing training comes into the picture. Learning how a product fits within a niche, and how to market to the people who are interested in that niche is of paramount importance and will have a direct impact on the amount of commissions you’ll be able to generate.

In many ways, an affiliate’s commissions will also depend on the relative popularity of the affiliate and on the type of market he chooses to sell to. We call this in our industry, the know, like, and trust factor. But more on this in another post.

The conversion period

Once you have selected the best and most profitable affiliate marketing program in terms of commissions, your next concern would be how to shorten the conversion period of your customers.

The conversion period refers to the time from which you bring in your lead until the time that he performs a desired action. This action can vary – a lead may subscribe to a service, purchase a product, participate in an online poll or become a recruit.

Since the incentive that drives leads to perform a specific action can vary, conversion periods can last anywhere from a very short 24 hours to about 30 to 60 days.

Your job as an affiliate is to persuade your leads to shorten their conversion period and thus increase your affiliate marketing commissions within a reasonable amount of time. This is where automated emailing systems work their magic. It’s said that it takes 7 to 10 exposures to a product/service before a potential customer will make a purchase.

Setting up your autoresponder (automated emailing system) to deliver helpful content relevant to your subscribers niche will, over time, work to bring about conversion. For more on email marketing and automated marketing systems visit us here to see the marketing training and tools we offer.

Conclusion

The above points are a general overview of how affiliate marketing commissions work. Understanding affiliate marketing commissions and how they can be structured will prove to be foundational for building a successful affiliate marketing business. Learning how to use statistics, at least at a basic level, will help you to understand and structure your business on your terms.

Paul Beamon