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 products.
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 on SiteCash.com.
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.