In affiliate marketing, when an affiliate promotes your product through their referral link or code, they earn a commission on it. This system of marketing is based on the revenue-sharing model, where the merchant offers a financial incentive to people who promote their products.
Affiliates in your program can use social media platforms or blogs to share and promote your store products with their followers. The affiliate will earn a commission when any of their followers visit the store using their referral link and make a purchase. This model offers great benefits to the store merchant, like a higher number of sales and reach.
Affiliates use their outreach by promoting products either on their website, which is dedicated to reviewing and promoting different products, or can be on social media platforms such as Facebook, Twitter, and Instagram or even reviewing products by making videos on YouTube or TikTok.
A great example of commissions is:
If you have a product say a shirt that you sell in your store, your objective is to sell as many shirts as you can. For driving sales up, you use an affiliate marketing app such as GoAffPro, where you set up an affiliate program. Affiliates in your program will promote the shirt in your store and it will create a demand for your shirt, therefore, making more people buy the shirt from your store.
After a customer buys a shirt from your store using the referral link of the affiliate, the affiliate will earn a commission on it.
GoAffPro lets you handle commissions with ease, it lets you set commission rates as per your requirements.
The appeal of affiliate marketing is that it involves minimal risk, with no cost to set up, you pay the affiliate only when they get you sales on your store. If the margins are sufficient, then affiliate marketing virtually costs no money. It is significantly cheaper than traditional advertisements.
Commission rates heavily depend upon the product or service that an affiliate will be promoting. The rates will mainly vary with the category and price of the product.
A great way to understand commission rates is by looking at how Amazon sets commission rates for its products:
Furniture, Home, Home Improvement, Lawn & Garden, Pets Products, Pantry
Headphones, Beauty, Musical Instruments, Business & Industrial Supplies
PC, PC Components, DVD & Blu-Ray
Physical Video Games & Video Game Consoles
Here we see that Amazon sets different commission rates for different categories of products, for more expensive products, the commission rates are higher compared to cheaper products.
Here, you have to calculate the revenue you earn from each affiliate's referral and set the commission rates accordingly.
Commissions are applied on product price, shipping charges, and taxes, however, they can be excluded when calculating the affiliate's commission.
Types Of Commissions
- 1.Default Commission
- 2.Product Commission
- 3.Collection Commission
- 4.Fixed Commission
GoAffPro lets you set up a default commission, which is the commission rate that applies to all the products and affiliates. It is the commission that will be applied by default. Any product that is purchased using an affiliate's referral will have this commission rate applied to it. The default commission will apply to all products except those, mentioned in other commission types.
An example of default commission is, that if you sell shirts and shoes in your store when you set the default commission rate to say 10%, the commission rate will be applied by default to all the shirts and shoes in your store. When a customer purchases any shirt or shoe in your store, the affiliate (whose referral the customer used) will earn a commission from the sale.
When you set the default commission rate to say 5 percent. When an affiliate's referral is used to buy shoes worth $100, the affiliate, in this case, will earn $5 as a commission on it.
In product commissions, you can set different commission rates for particular products or affiliates. You have the choice of setting different commission rates for different categories of products. It is useful for setting up say, higher commissions on products that are more expensive, where your margins are high, and setting up a lower commission on products that are cheaper and have lower margins for you.
For Example, If you sell shirts and shoes on your website store, then with the product commission option, you can set a higher rate of commission for shoes that are generally more expensive than shirts. It will encourage affiliates to actively promote more expensive products that have a higher margin of commission rate since they provide a higher financial incentive.
Here we have set up a 5% commission rate for shirts and an 8% commission rate for shoes, therefore, this will encourage affiliates to promote the shoe more actively. This will mean better margins for you (the merchant), with an increase in the number of sales of higher-priced products, translating to more sales.
When the product commission rate is set to 5% for the shirt and 8% for the shoes and a visitor buys both of them. Then the affiliate referral used to buy the $50 shirt, will earn the affiliate a $2.5 commission and for the $50 shoe, the affiliate will earn $4 in commission.
A higher rate of commission can also be set for products that have fewer sales, or for clearing inventory of a product. Similarly, you can set up lower commission rates for products that are cheaper or have higher sales.
Collection commission is useful in setting up commissions for a collection of products or a category of products. You can select particular products that you want to add to a collection and then set a common commission rate for that whole collection.
It is useful in setting commissions for seasonal sales such as summer, and winter collections for clothes. It is also useful for setting up a higher rate of commission on products that need to be cleared from your inventory (like in a clearance sale). Affiliates will then be incentivized to promote these products.
For example, for collection commission, we can set up shirts such as these in our store as a summer collection, where all of them will have a common commission rate of 6%, this is useful in bringing newer stocks of products such as seasonal clothes and also clearing up earlier inventory.
Fixed commissions are the commission earned from the sale of particular a product or collection that can be set for an affiliate. When a sale of that product or collection takes place, regardless of the affiliate who refers it, the affiliate for whom the fixed commission is set will earn a commission. It is also called a royalty commission.
For example, here we can set the shirt for affiliate A and the shoe for affiliate B, so even when affiliate B's referral is used in the sale of the shirt or vice-versa, both affiliates A and B will earn commission over the sale.
In specialized stores, which sell products where users can make design or art submissions, fixed commissions are useful in getting these users (affiliates) commission every time there is a sale of their designed product. It is similar to setting up royalties for a designer.
You can check out instructions on how to use the commission tab below: