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Executive Summary
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Details #4 Know to Grow! "Affiliate Commission Rates. Commission Rates Evaluations."
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What's the scoop on affiliate commission rates? When is 10% of sales better than $.10 per click or $2 per lead?

The answers vary greatly by product and industry, but with some research, it is possible to get a clearer picture of fair payouts and commissions. The following article is part of an ongoing series focused on affiliate commission rates. Each installment will explore payment structures and commission averages for specific industries.

The following are industry averages for commission ranges for sample products and services:

Books: 5-15%
Electronics: 5-7%
Flowers: 10-15%
Jewelry: 5-15%
Credit Cards: $5-$10 per lead or $20-$100 per sale
Nutritional Supplements: 15-30%
Web Hosting: $20-$50 per sale
Music CDs: 5-10%
Office Supplies: 3-15%

/// Affiliate Payment Trends ///

As e-commerce sites are changing revenue models and merchants are cutting back on expenses, some affiliate payout rates are changed without much advanced notice. Recent high profile merchants altering affiliate payments include: About.com ($.06 to $.02 per click), eToys changing from a 10% commission to a one-time $10 bounty for new customers, and Stamps.com reducing bounty fees from $25 to $10.

/// Product Categories for Affiliate Programs ///

Commission rates can vary greatly depending on the type of product or service offered. Products and services can be divided into 3 major categories:

1. Digital products
2. Physical products
3. Services

/// Digital Products ///

Digital products exist only in cyberspace. These intangible products are gaining in popularity due to their low production costs and savings on shipping/handling. Examples of digital products are ebooks, software downloads, and electronic newsletters. SiteSell.com (ebooks about marketing) and LifeMinders.com (daily newsletter) fit well into this category.

/// Physical products ///

Physical products are items shipped via snail mail services (USPS, UPS, FedEx, etc.). These are books, CDs, computers, flowers, furniture, food, etc. Because of low margins and increasing overhead costs, commission rates tend to be lower than digital products and services. Merchants such as Borders.com (books) and Tavolo.com (food) would fall into this category.

/// Services ///

Services are intangible items such as webhosting, search engines, insurance, consulting, marketing, matchmaking, etc. OneandOnly.com (personal ads) and GoTo.com (search engine) are examples of service companies.

/// Affiliate Payment Categories ///

To help further understand affiliate programs, the various pay for performance plans are explored below: The four basic types of affiliate payments are:

1. Commission based (pay per sale)
2. Click-through (pay per click)
3. Bounty (pay per lead)
4. Hybrid

/// Commission Based ///

Commission-based (or pay-per-sale) programs are the most common. Payment is made when a referred visitor makes a purchase. Commission is most commonly paid as a percentage of the sale, but a flat-fee per sale is also utilized by merchants.

Advantages

Payouts can be high when a sale is made. E-Commerce Exchange (qc123.com) pays up to $300 for each sale of their credit card processing system. Commission-based products and services also allow for easy integration into your Web site For example, GraphicsBooks.com creates book reviews and links to the books through the Amazon.com affiliate program. Commission-based also requires little effort other than placing the links or banners. When the customer buys the product, the merchant takes care of payment processing and shipping.

Disadvantages

Depending on the product selected and price, the conversion rate can be quite low. Industry averages can vary, but speaking from personal experience, a 1% conversion rate seems to be the norm. Choosing a merchant with a site that is focused on selling a product can dramatically increase the conversion rate. Most likely, payments are only made on the initial sale. Meaning that if a customer returns directly to the merchants for another sale, there is no commission check. In addition, returned and refunded products may disqualify the affiliate from commissions.

Timeliness of commission checks can also be a disadvantage. While many merchants send checks out monthly, larger companies like Amazon.com may only send out checks quarterly to cut down on processing costs.

Typical Payments

Payment rates depend on product price and merchant markups. A soft cover book will yield a 5-15% commission rate from Amazon.com, while the ebook (with no printing or shipping costs) from AmazingFormula.com pays a whopping 60% commission. A $3,000 computer from Dell.com pays a 1% commission and a $25 DVD will yield an 8% commission from BigStar.com.

/// Click-through ///

Click-through (or pay per click) programs pay a small fee for each visitor that clicks on a banner or link that directs them to the merchant's site. This method is still popular with webmasters, but losing favor with merchants due to reports of fraudulent activity such as: "false clicks" and payouts for visitors that might not make a purchase.

Advantages

Actual sales is not required. When a visitor clicks on the link or banner, you will get paid. If you can find a high paying click-through program ($.25 or higher) to integrate into content, it can become profitable. And like bounty programs, there is no need to worry about returns since payment is guaranteed.

Disadvantages

Generally speaking, fees for this type of program are often quite low. A higher level of traffic is needed to generate significant income.

Payments

Payouts are generally between $.02-.06 per click, but there can be some variation. For example, Surffast.com pays $.01 per click, while agricultural marketplace Farms.com pays $.15 per click.

/// Bounty ///

Bounty (or pay per lead) programs pay when a visitor takes an action that does not require a sale. For example, subscribing to a newsletter or filling out an application would be considered an action that would prompt a payout. There are no returns to worry about, so payment is guaranteed. Bounty programs are quickly becoming the preferred method for webmasters. FreeShop.com is a sample site, which pays for giving away free items and newsletters.

Advantages

Asking a visitor to sign up for something free (like an insurance quote or newsletter) is an easier task then asking them to make a purchase. And while payouts may not appear high, profits can add up quickly.

Disadvantages

Because payouts tend to be lower than pay-per-sale, significant traffic is needed to bring in a substantial amount of income.

Typical Payments

Payments can vary from $.25 for a newsletter sign-up to $20 for a loan application. Generally, the more in depth the sign-up process for the visitor, the larger the payout. Applyfor.com pays $1 for a completed credit card application and $12 for a complete mortgage application.

/// Hybrid ///

Combination programs are a fairly new payment option. It is a combination of any of the above programs (commission, bounty and click-through). For example, Software Provider Demoroom.com pays $.02 per click and 6% of the sale. Peoplesound.com, a free music download site, pays $.05 per lead and 12% of the sale.

Advantages

There is more than one opportunity to generate revenue. It is possible to have the best of both worlds: a guaranteed a click through fee and a bonus if a sale or lead is made. There are also opportunities to take advantage of limited time promotions from merchants. For example, Amazon.com offers the usual 5-15% plus a sliding scale bonus for each new customer referred ($20 for 10-19 new customers, $50 for 20-49, $150 for 50-99, $350 for 100-199, etc.).

Disadvantages

Because of the "double payments", the payouts can be relatively low ($.01-$.05 cents per click and less than 10% commission).

Payments

Payments vary widely in this category, depending on the price and type of product/service. On the low end, "freebie" site Indexman.com pays $.01 per click and $.15 per lead, while, on the higher end, VacationRentalsOnline.com pays $1 per lead and $15 per sale.

Looking for your fair share? Do your homework by studying each affiliate program and comparing rates of similar programs. It is much easier to find your way when you know which direction you are heading.
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