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How much do affiliates charge?

between 5-30% The average affiliate commission rate is between 5-30%. Most businesses start on the low side and raise their commission rates as the company grows. You want a rate that is enticing to your affiliate but affordable to your business.

leaddyno.com - 3 Reasons to Increase Affiliate Commission Rates - LeadDyno

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#2 Determine the average commission rate between your competitors

Direct competitors in your niche likely have an existing affiliate program. And if not, other companies in industries adjacent to yours are competing for your affiliates. To complete this research, find three direct competitors running affiliate programs. We also recommend finding at least one or two companies that aren’t direct competitors but offer a similar product or service and attract a similar audience.

How do your competitors set up their affiliate programs? What action triggers the payout? How are affiliates paid? How are commissions structured: are they a percentage of the sale? Per lead? Does the competitor offer any bonuses for top-performing affiliates? Are there tiered affiliate commissions?

Most especially look for the commission percentage, structure, cookie duration, and any additional bonuses.

Your program should be competitive with your competitor’s affiliate offerings.

#3 Determine average customer lifetime value (CLV)

A CLV asks “when a customer signs up with you, how long do they stick around?” This determines how much you can afford to pay affiliates as profit margins are difficult to determine and prone to fluctuations. So instead, affiliate marketers use the average customer lifetime value (CLV) as a guide. CLV is how much money the average customer brings in throughout their time as your customer, minus the average cost of obtaining said customer. The longer a customer stays with you, the higher your average CLV value. And knowing this helps you determine a sustainable commission rate for your business.

The CLV formula is:

Average annual profit earned from a customer x Average number of years customer stays with your business – Initial cost of customer acquisition per customer

To calculate your average CLV, answer the following questions:

How much money does it cost to acquire a new customer?

What’s your customer retention percentage per year?

How much revenue does each customer bring in?

In order to have optimal program sustainability, your affiliate commission rate must be below your average CLV. If it’s equal, you’ll merely break even with your affiliate program. If you have a higher customer retention rate, you can afford to increase your affiliate commission rates.

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#4 Set conditions for how to earn a commission

Once you’ve set a commission rate, you need to establish what you require of your affiliates. You need to determine what conditions must be met for affiliates to earn a commission. As we reviewed above, you can pay per lead, per sale, per action, per click, or however you like. Some businesses pay affiliates to generate leads and sales. Leads and sales: If you reward affiliates for bringing in leads, consider paying for only qualified leads or leads that give you additional personal information like an email address after clicking your affiliate’s link. Set smaller commission rates for the initial lead and larger commission rates for the finished sale. Impressions and clicks: We don’t recommend rewarding affiliates for impressions or clicks as affiliates can take advantage of you. Unfortunately, sometimes affiliates find fraudulent ways to gain clicks without putting in the effort.

Are you going to use affiliate tracking cookies and if so, how long?

Tracking cookies are files created and stored on a visitor’s web browser when they click on one of the affiliate links, allowing you to track the affiliate’s sales numbers. If you decide to use them, determine the cookie’s duration. Cookie duration means that if a user comes to your site using an affiliate link and purchases something within 30 days. The referring affiliate receives a commission for this purchase. Cookie durations can last between 1-90 days with 15-30 days the standard duration. Longer cookie durations are more attractive to affiliates because it provides a larger window for them to make sales and earn a commission for that payout period. There are other ways to track affiliate sales, but cookies remain the most popular.

leaddyno.com - 3 Reasons to Increase Affiliate Commission Rates - LeadDyno

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