3 main types of affiliate program

SUMMARY: There are 3 main types of affiliate program: pay per sale, pay per lead and pay per click programs. Furthermore, programs can be flat fee, or commission-based. They can be single tier, two tier (rewarding those who bring in new affiliates) and multi-tier. Each type of program has its advantages and disadvantages, and each is relevant to different sites and situations.

Commission-based Affiliate Programs

Commission-based programs are by far the most common type of affiliate program. They are nearly always pay per sale programs, i.e. they pay a predetermined % commission on the revenue generated by the sale of products or services to a visitor who came from your site.

Some programs offer incentives to more productive webmasters in the form of an increased commission share on a sliding scale, or by offering their best-performing webmasters cash bonuses or prizes. Many programs operate on a flat commission rate, irrespective of the volume of sales. A few curious programs "penalize success" by capping or reducing commissions once affiliates go over a certain monthly revenue level (e.g. an affiliate program may pay out a maximum of $500 monthly commission per affiliate). Always read the fine print of the Affiliate Agreement carefully to avoid affiliate programs that tie your hands in this way.

Flat-fee Affiliate Programs (per-lead and per-sale)

Although somewhat less popular than commission-based programs, many affiliate programs operate on a flat-fee basis. Essentially, a flat-fee referral program will pay you a predetermined amount for every visitor who carries out at least one purchase or other transaction at the merchant's site, irrespective of the ticket value of that transaction.

Flat-fee programs can be as simple as "US$10 per new customer" or "US$5 per order", or they can have more complex fee structures depending on what mix of products or services was sold and how many leads or sales the affiliate closed that month.

Some flat-fee programs operate on a per-sale basis. In other words, visitors have to actually purchase and pay for a product or service in order for you to qualify for the referral commission. Other flat-fee programs, such as those for loans and mortgages, insurance policies and so on, generally operate on a per-lead basis. Each qualifying lead earns you the referral fee. The criteria for qualification can range anywhere from "visitor supplies their name and address" to "visitor completes a multi-page survey and responds to an initial follow-up telephone inquiry." The exact criteria vary with each affiliate program.

Click here to find out the advantages and disadvantages of flat-fee affiliate programs

Pay per click programs

Pay-per-Click affiliate programs (also known as click-through programs) pay a small amount for every visitor sent to the target site. Typical payments range from $0.01 to $0.20 or more per visitor.

Some pay-per-click programs pay on a second-page-click basis: you will only get paid if a visitor from your site clicks on one of the links on the page they get to after reaching the affiliate site. Always read the details of each program carefully to find out whether you're going to be paid on a first-page or second-page-click basis as this will have a huge impact on your potential earnings. Typically, requiring a second-page click can cut earnings by 75%-90% compared to a straight clickthough program

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Single-tier Affiliate Programs

Single-tier affiliate programs offer the most straightforward tiered structure. Essentially, they are a flat program that rewards only direct transactions i.e. transactions that the affiliate has generated. There is no reward on offer for signing up other affiliates. Single-tier affiliate programs are suitable for any site; your earnings will depend entirely on how well you are able to "pre-sell" the product or service on offer, how many visitors you can send to the target merchant, and how well they are able to work to monetize your traffic.

Two-tier Affiliate Programs

Two-tier affiliate programs reward affiliates in two ways: they reward transactions generated by affiliates, but they also have a system in place to reward affiliates for bringing new affiliates into the program. This is the "second tier" part of two-tier affiliate programs.

Second-tier payments can be made on a commission or flat-fee basis. For example, an affiliate program might pay affiliates 20% commission on the transactions they generate, plus 5% of the total earnings of the affiliates that sign up directly under them (that's 5% of 20%, of course). Alternatively, they may pay a flat affiliate referral fee, for example "US$10 bonus for each new affiliate you refer that produces at least US$25 in sales."

Two-tier affiliate programs are good for affiliates who believe they can recruit other productive affiliates. However, you should be wary of any affiliate program that places more emphasis on the earnings to be made by recruiting other affiliates than on the earnings from sales - after all, ultimately someone has to close those sales! You should also be suspicious of programs structured with a very low first-tier payout but a very high second-tier commission - again, that type of structure emphasises the recruiting of affiliates over the sale of products.

Two-tier programs are less attractive for affiliates who don't like the idea of essentially recruiting their own competition, or who are exceptionally good at pre-selling customers. In this case, a single-tier affiliate program would be more appropriate.

Multi-tier Affiliate Programs

Multi-tier affiliate programs reward affiliates who sign up other affiliates several levels "deep". In other words, you sign up Bob and Bob signs up Sarah and Sarah signs up John, and you get a percentage of Bob's earnings, Sarah's earnings and John's earnings. The distinction between multi-tier affiliate programs and pyramid schemes is wafer-thin, and one which this site declines to pursue further. You will not find any coverage of multi-tier affiliate programs on SiteCash.com.

Key info to take away

Affiliate programs can fall into any of the above categories. For example, some programs are single-tier per-click affiliate programs, some are two-tier per-lead programs. Some affiliate programs are hybrids, combining several different types of reward system into a single affiliate program. For example, a program may pay a small amount for every qualified lead, plus a larger commission or per-sale fee for those leads that become customers within a specified period of time.

More about → 3 main types of affiliate program

Introduction to Outsourcing

As you become more successful as an affiliate, you will find that a lot of work comes with maintaining your sites and setting up new ones! Don’t let your own success be your success killer! In this lesson we give you an Introduction to Outsourcing.

What is Outsourcing?

Outsourcing is about you; it’s about hiring other people to replace yourself in your business, giving you more time to focus on maximizing your sales, expanding your business and implementing new ideas, and spending less time worrying about annoying or time-consuming specifics like writing articles, or writing HTML for your sales pages.

It’s about what you don’t know

You don’t need to be an expert at everything, and you shouldn’t need to be! You don’t need to be an expert PHP programmer, a brilliant graphic designer or a social networking guru to become a successful affiliate and there’s no reason for you to need to learn those things in the long-term if you don’t have to (unless those things interest you, of course). You’d be better off hiring someone with the necessary skills who can do those things for you, rather than spending your precious time trying to learn something you don’t need/want. Why should you spend twenty hours trying to learn HTML and PHP and still only end up with a basic understanding of it, when you could hire someone with more than twice the skill and instead spend that twenty hours focusing on optimizing your PPC campaigns instead?

It’s about what you do know

Every affiliate has a list of necessary tasks they need to perform to keep their site(s) going; no matter how far ahead you get, you’re always going to need to create content, perform SEO, link building, social networking, site maintenance; the list doesn’t end. Unfortunately, as you become more successful these tasks will only end up requiring more time so, when it comes down to it, either you can dedicate your time to completing all these tasks, or you can hire other people to do it.

There’s a limited number of hours in a day and you’re better off dedicating your time figuring out how to maximize sales and working on your new ideas, rather than using that time to write SEO-optimized articles or trying to figure out why the CSS on a sales page has broken.

Outsourcing is cheap

Outsourcing can be (very) cheap. This is, perhaps, one of the most important points about outsourcing, and it cannot be emphasized enough. Consider how much your time is worth per hour; what if, instead of you spending one hour writing a blog post, five people could each write a blog post in that hour, for the same cost? That sounds pretty good, doesn’t it?

The Philippines is a perfect example of this. For a fulltime employee from the Philippines who can do all your necessary tasks, from link building, to SEO, to social networking you can expect to pay, on average, US$500 per month. Not per fortnight, not per week – that is US$500 per month, for a 40-hours-per-week employee to do pretty much everything you’re doing now. If you’re in a position to need an employee to take over your day-to-day tasks then there’s a good chance you’ll have absolutely no issue covering this cost from your site income.

What Outsourcing is not

Outsourcing is not Elance!

This is an important distinction to make; outsourcing and hiring freelancers is not the same thing.

Elance and other freelance hire sites are no good for outsourcing; every job you need done by a freelancer (or outsourcing firm) requires you to go through a whole application process and general rigmarole. Your time isn’t freed at all – it’s simply changed from being taken up by the tasks you need performed, to the task of hiring.

Don’t get us wrong – Elance and other freelance hire sites are great! When you need something done quickly, and you don’t have much time and/or money, these sites are very useful for getting things done. However, for general long-term operation of your business, they’re not so great, so don’t make the mistake of trying to use them in that way.

The other problem with freelance sites is that they’re not there for you, they’re there for them. You can’t train them in specific ways to adapt to your business and thought processes like you can with employees.

Outsourcing is not India!

If you ask an affiliate about outsourcing, many of them think of India. Consequently many affiliates have a misconception that outsourcing means dealing with call centre employees with Indian accents, dealing with communication and productivity problem; in general affiliates just won’t have a good opinion of outsourcing.

However the truth is vastly different. India is most definitely not the only place you can outsource to. In fact, it’s possible to outsource to most places in the world – however you’ll often find you get the best results from Eastern Europe and Southeast Asia. In fact one of the best countries, if not the best country, for outsourcing is The Philippines.

Outsourcing is not exploitation

Many affiliates who think about outsourcing, and hear about how cheap it can be, often question whether or not it is about taking advantage of someone.

There is no suitable single answer to this; however, one short answer is that the cost-of-living in many Eastern European and Southeast Asian countries is cheaper (a lot cheaper!) than in, for example, The United States; in the Philippines, for example, a pay of $500 per month is considered an above average wage, and is more than enough to provide your employee with the necessary living basics.

More about → Introduction to Outsourcing