Affiliate marketing is also known as performance marketing; This definition is typical of how sales employees or affiliates are rewarded or compensated. These sales people are paid a commission based on any sale they close; they also receive performance incentives for exceeding targets.
Affiliates are not employees of the advertiser whose products or services they promote. However, the compensation model used in the affiliate program is very similar to the one used in the advertiser’s main sales department.
The various compensation methods include:
o The Decreased Method: this method uses more CPC (Cost per Click) and CPM (Cost per Mille). This method is heavily applied in display advertising and paid search. Only less than one percent of conventional affiliate marketing uses this method
Cost per thousand (CPM) is a reduced compensation method that requires the affiliate or publisher to advertise the product or service on their website for their visitors to see; to earn commission. In the case of Pay Per Click (PPC), an additional step is needed to advertise the product on the site to earn revenue; the visitor must click on the ad to go to the advertiser’s website.
Cost per click was very popular during the early days of the affiliate program. However, this compensation method has fallen out of use as a result of click fraud issues. Google AdSense, known as contextual advertising, is not considered in the statistics related to the decrease in the use of CPC (Cost Per Click). This is because it has not yet been determined whether contextual advertising is part of affiliate marketing.
o The Predominant Method: This compensation method is used by 80 percent of today’s affiliate programs. This includes cost per sale (CPS) and cost per action (CPA). Using the CPS compensation method, the referred visitor must act beyond visiting the advertiser’s website before the affiliate can be compensated. Therefore, it is in the affiliate’s best interest to send highly targeted traffic to the advertiser’s website.
There are other compensation approaches in affiliate marketing; You can learn more about these compensation methods.
