In affiliate marketing, when a person promotes your product through an affiliate network, 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 your product.
The affiliates in your network can use social platforms or blogs to share and promote your product to their followers. The affiliate will, therefore, earn a commission, when any of his followers visit your website store and make a purchase. This financial incentive provides great benefits to both the merchant with a higher number of sales and more expansion.
Affiliates use their outreach by promoting of products either on their website, that is dedicated to reviewing and promotion of different products or can be on social media platforms such as Facebook, Twitter, Instagram or even reviewing products by making videos on YouTube
A great example of commissions is,
If you have a product say a shirt, 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 network. These affiliates will promote the shirt on your store to their followers, this will create a demand for your shirt, making more people buy the shirt on your store.
After a customer buys a shirt from your store using the referral link that your affiliate used in promoting your shirt, your affiliate will earn a commission.
GoAffPro lets you handle commissions with ease, it lets you set commission rates, make changes to the commission system for your affiliates.
The appeal of affiliate marketing is that it involves minimal risk, with no cost to set up, you pay the affiliate only when he helps to make a sale on your store. If the margins are sufficient then, affiliate marketing virtually costs no money. It is cheaper than traditional advertisements.
Commission rates heavily depend upon the product or service that an affiliate will be promoting.
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 then set the commission rates.
GoAffPro lets you set up Default Commissions which are commission rates that apply to all the products and affiliates. This is the commission that will be applied by default. Any product that is purchased using an affiliate's referral will have this commission rate set up automatically. These are commission rates that will apply to all products except those, that are mentioned in other commission types.
An example for default commission is, that if you sell shirts and shoes on your store when you set the default commission rate to say 10%, this commission rate will be applied by default to all the shirts and shoes on your store, so when a visitor purchases any shirt or shoe on your store, the affiliate's referral that the visitor used to purchase the product 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 the $5 as a commission on it.
In product commission you can set up custom commission rates for particular products or affiliates, you have the choice of setting different commission rates for different category of products, this is useful for setting up say, higher commissions on products that are more expensive, where your margins are high and set up a lower commission on products that are cheaper and have lower margins of profit for you.
For Example, If you sell shirts and shoes on your website store, then with product commission options, you can set a higher rate of commission for shoes that are generally more expensive than shirts which can have a lower rate of commission for affiliate referrals. This will encourage affiliates to actively promote more expensive products that have a higher margin of commission rate since they provide a more financial incentive.
Here we have set up, 5% commission rate for shirts and 8% commission rates 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 commission 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 the whole collection of products.
This is useful in setting up of commissions for seasonal sales such as summer, winter collections for clothes. This is also useful for setting up a higher rate of commission on products that need to be cleared from your inventory, this is called clearance sale. Affiliates will then be incentivized to promote these products, that they can promote as having low costs and last stocks.
In an example, for collection commission, we can set up shirts such as these in our store as 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 inventory for newer arrivals for the season.
Fixed commissions are a commission from the sale of particular products that can be set to affiliates, so when a sale of the product takes place, regardless of the affiliate referral of the product, the affiliate set to the product will also earn the commission when the sale of the product is made.
For example, here we can set the shirt to affiliate A and shoe to 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. This is similar to setting up royalties for a designer.
You can check out instructions on how to use commission tab below: