Affiliate marketing can be a profitable solution, especially if you choose the right marketers to promote your products. Given that both parties benefit from affiliate marketing, you must choose a payout method that is convenient for both your marketers and yourself. If you want to get familiar with different types of affiliate billing methods and ways to pay your affiliate partners, read on.
The first thing you need to do is choose the commission rate, then settle on a payment agreement, and finally decide how your affiliates will be paid.
Let’s take a look at Amazon as an example of commission structures. Amazon pays affiliates up to a 10% commission rate depending on the category the sold product falls under. The rule is that the more expensive an item, the higher the commission should be. Alternatively, you could also create commission groups, then choose which group of affiliates should be paid more and which should be paid a little less (because of lack of experience, quality of leads, etc.).
Segmenting your affiliates based on commission structures can be done with Post Affiliate Pro in a flash.
Once you have decided on commission levels, it’s time to focus on payment agreements. Let’s dive in!
What to take into consideration when choosing affiliate payment methods
Choosing the right payment method is crucial to make your affiliate program successful. Which factors should you pay special attention to when deciding on affiliate payouts?
- The number of affiliate partners. If your affiliate network is small, you can choose different payment methods for each affiliate. But as your network grows, you’ll need to choose your payment methods more wisely. Consider all of the pros and cons of paying your affiliates with different commissions. Is it worth the hassle? Is a mass action payment simply easier and more worth it?
- Currencies and legal regulations. Some affiliate payment methods aren’t compatible with foreign currencies, while legal regulations in foreign countries won’t allow you to use certain payment methods. If your affiliates come from different countries than yours, do some research first.
- Localization. Localization is important, especially if you have a global affiliate network. Let’s assume that you chose gift cards as your number one payment method. Are you sure that every affiliate will be able to use them? For example, Amazon is a very popular retailer, but its gift cards are not accepted globally. So if your affiliates live in Poland, it won’t be easy for them to use these gift cards.
- Competition. You should offer your affiliate marketers the most attractive payment methods and terms of cooperation. You should be aware of your competitors’ offers and offer your affiliates even better terms than they do.
If you have considered all of the above aspects, you’re ready to get to know the most popular payment agreements in affiliate marketing. Grab a pen and take notes!
Types of affiliate payment agreements
You’ve probably heard about affiliate payment agreements many times. There are three basic types:
- PPL (pay per lead) This method is based on the number of leads, i.e. visitors, to a specific page who completed a desired action. What does this mean? Subscribing to a newsletter, for example. In this way, a company receives information about a new user who can be targeted in future marketing and sales communication.
- PPC (pay per click) With this method, the number of website visitors is key. What matters is how many people are directed to your website, not how many visitors actually buy anything. PPC agreements generate up to a 10% conversion rate.
- PPS (pay per sale) We have already mentioned Amazon’s affiliate program. This is a great example of PPS, in which an affiliate earns a commission every time a customer buys something with their affiliate link.
All of the above-mentioned payment commissions are called CPAs (commission per action). With Post Affiliate Pro, you can easily adjust the CPAs in the merchant panel.
Some other examples of payment agreements are:
- Two-tier programs. This affiliate marketing method enables multi-level marketing. It’s also called network marketing. This system enables merchants to select and combine payout methods. In addition to the commission that affiliates receive, they also earn a percentage of money based on the activity of a website they use to promote your product.
- Lifetime commission. In this case, the affiliate receives a commission for an extended period of time. This is because the affiliate referred customers that made recurring purchases (e.g., a subscription) through the merchant’s store.
Now it’s time to get familiar with different payment methods. How will your affiliates receive their commissions? Choose the best option for you from the list below.
PayPal is one of the most popular and easiest to use affiliate payout methods. After some adjustments and configuration, you can pay your partners in just a few clicks. All you have to do is keep a positive balance on your PayPal account, and send out your affiliates’ commissions. The best part? You can send them their money through PayPal even if they don’t have a PayPal account themselves.
- Gift cards
Gift cards are not a very popular method, but they are still used. You can send your affiliates a code via email that will work like a gift card. This means that the affiliate is given their commission in the form of virtual money which can be spent at a pre-determined store.
In many cases, referrals are paid out as Tango or Amazon Cards, however, there are other gift cards you can choose from.
- Bank transfer
Of course, sometimes the best solution is the most well known. In this case, it’s a good old bank transfer. You need to remember to ask each affiliate for their bank account number when signing their contract. It will be your duty to remember to pay a certain amount of money to each of your partners for each agreed settlement period.
ePayments is a very easy-to-use platform, created in 2011, that may suit you best. Its goal from the very beginning was to facilitate payments in affiliate marketing, and this goal has been achieved.
You can choose an e-wallet or Prepaid MasterCard solution. You can also use systems such as WebMoney or Bitcoin. There is a huge range of possibilities! You may find that affiliates will appreciate this method very much, and this should be no surprise because ePayments doesn’t incur any fees for incoming transfers.
This is an e-wallet available in 22 currencies. One outgoing transfer will cost you 1.9% of the tariff, capped at $20. So if your affiliates earn relatively large amounts, this option might not be the best. To transfer money to Neteller, you can use credit cards, bank transfers, or even a Paysafecard.
Bitcoin is a popular payment method, especially among the younger generation. This cryptocurrency, which was created in 2009, has some advantages over other payment methods. The biggest one is the fact that all transactions are made without intermediaries (even banks).
It also keeps the transaction anonymous. What else speaks for Bitcoin is the fact that global transactions are not a problem at all. This is a very easy way to carry out international money transfers with no additional fees. The big disadvantage is that, as a cryptocurrency, it is quite volatile. There may also be problems monetizing bitcoins into other balances, e.g., credit card or transferring money to a bank account.
To sum up
Affiliate marketing generates 16% of all online orders. As such, it’s worth it to keep your affiliates well paid and motivated to do their jobs well. By reading this article, you will have learned about payment methods and how you should deal with all the financial aspects of affiliate cooperation.
We hope that you have learned a lot about the commission and found the most suitable affiliate payout method for you and your affiliates. Remember to keep your affiliates’ salaries adequate for their contributions and amount of work.
Post Affiliate Pro offers a variety of tools for managing and promoting affiliate programs, including email marketing strategies and affiliate network options. It also provides case studies and guides for newbies in the affiliate marketing field.
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Every affiliate program should have clear terms and conditions that establish rules and guidelines for cooperation between merchants and affiliates. It is crucial to define guidelines on the usage of branded materials, rules on using paid advertisements, exclusive promotions, sales cancellation policy, notice period, commission rates, payout dates, and penalties for non-compliance. Managers should regularly communicate with affiliates about the terms and conditions and remind them to follow the rules. Various email templates can be used for this purpose.
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