Affiliate programs are a must for your eCommerce or SaaS business. An estimated 80% of brands now use affiliate programs to reap the benefits, and affiliate marketing takes up more than 16% of all eCommerce orders across the U.S. and Canada.
Part of setting up a successful program is knowing how to structure the commissions that you pay affiliates in your network. It takes the right balance of rewarding them to incentivize performance and ensuring your bottom line stays healthy. But how do you know what the right balance is?
There are several different methods for setting your commission rates, and you want to ensure you’re choosing the right option for your business. Depending on your products, you can even combine a few different approaches.
Commission tiers are one option that works for lots of brands, and creating a tier system may be a wise choice for your own eCommerce or SaaS affiliate program. These are pre-set (and sometimes temporary) ranges of commission rates that can help you maintain your bottom line.
- Help you give your low-converting products a boost.
- Create a persuasive incentive for affiliates, encouraging them to join your program.
- Can make affiliates work a bit harder for you, too, aiming to increase their productivity to see a bigger payout.
So, how do you get started with tiers? Here is your guide on how to set commission tiers in an affiliate program.
Higher Tiers for Low-Selling Products
You may have products that don’t sell as well, and it’s hard to get momentum behind them. You may have no idea how to boost low-converting products — but you know something needs to change. Affiliate program commission tiers can be a great way to generate more interest in those products and get them sold.
Introduce commission tiers that provide higher commissions for those lower-selling products. This gives affiliates a reason to really push those products, helping you increase purchases and get them off your shelves. This is a great reason and format for setting up your affiliate commission tiers and can give you solid results.
Tiers Based on Product Categories
You may have several types of products for sale, all with different profit margins. You may want to consider implementing commission tiers based on the different categories or set up affiliate commissions per product. For example, maybe you payout 3% of the revenue earned on jewelry and increase that payout to 6% on clothing. This kind of structure requires knowledge about which product sales are a low versus high margin.
Outline all of your product categories and figure out the applicable profit margins. Then set up your commission tier structure. Products with a tight margin, like electronics, for example, can be on the lower end of your tiers, with products with more wiggle room at the top.
Tiers Based on Number of Sales an Affiliate Makes
This next option is a pretty straightforward and simple method. It allows you to base your tiers on the performance of your affiliates. So when affiliates make more sales or reach a certain threshold, they get a higher commission rate.
Rewarding affiliates this way encourages them to perform better and work harder for that higher rate. In turn, you’ll see more sales and revenue. It’s a win-win system, it’s easy to implement, and there will be minimal confusion from affiliates on how they can increase their earnings. Your products will see more exposure, too, which is an added bonus that can only boost your bottom line.
Tiers to Target New Customers
New customers are extremely valuable to your business. Some estimates say that it costs five times more to attract a new customer than to retain an existing one. Since new customers don’t yet have that trust in place with your brand, it can be harder to capture leads and ensure they convert. Thus, you may want to consider creating commission tiers that reward affiliates for bringing in new traffic and paying customers with a new customer bounty.
Offer higher commissions when an affiliate reaches a new market or brings in a new customer. You may be spending a little bit more on that payout, but it’s worth it because new people are so valuable in ensuring your business continues to grow.
Tiers for Special Incentives
When introducing a sales incentive or special offer, you can create commission tiers that encourage affiliates to include these particular products in their marketing strategy. For example, you can provide them an increase only for the duration of the incentive to hit higher revenue targets.
This tactic is especially effective because incentives are only offered for a limited time, and affiliates will work harder to get in on the deal. This works just as when customers will sense that a sale is time-sensitive. These campaigns already help you generate interest around your products, but extending the benefit to affiliates gets additional traffic back to your site and leads to more purchases.
Incentives can also help you recruit new affiliates to your program or reactive accounts of affiliates who have been dormant for a while.
How LeadDyno Can Help
These tips will help you consider the best way forward when you’re setting up commission tiers for your new or ongoing affiliate program. They help you answer the question, “What should I pay my affiliates?” — which can be hard to figure out if you’re just starting.
Tiers are a great way to keep both affiliates and customers encouraged. They do this while helping you see more purchases on low-selling products and a boost to your bottom line with all that extra attention. Just make sure you have the right platform to monitor progress and performance. LeadDyno helps you create and manage a better affiliate program. Set up your program in mere minutes with our software, and manage affiliates and payouts with one platform. You can view information about which channels are most successful, so you know where to place your precious ad dollars.
We provide a solution for both eCommerce and SaaS businesses so you can create and grow your affiliate program. You can get set up quickly, monitor key performance data, and start increasing sales right away.