Affiliate marketing is divided into different affiliate payment types and models.
Each presents a different direction with generating money from your promotions.
New affiliate marketers generally focus on a commission model like Amazon Associates.
We recommend this when beginning because it allows you to explore affiliate marketing. It’s better to focus on the fundamentals than become too wrapped up in ideas.
But:
This dedication to a single model has risks and drawbacks.
The effort you’ll place into your affiliate campaign needs an ample reward.
Sometimes there are better payouts when promoting different ad types.
Imagine your shock to find you could have made a significant amount more for each referral. This is the point of this article. So you’re more likely to choose an ad type that’s effective in your campaigns and pays well.
Understanding Affiliate Marketing Payment Models (Without Getting Confused)
The various affiliate payout models come with their own, unique challenges when injecting offers into your website and campaigns. There’s no “best” model — instead, each should be entertained.
Many fail to explore the different options because they seem confusing.
Let’s keep it simple.
Here’s what you should know:
Cost Per Sale
In this affiliate model, your main income comes from when you produce a sale for the product or service you’re promoting.
Income is generally higher depending on the product you’re selling and its commission amount but you’re limited in your revenue if the product doesn’t match your marketing or if your visitors have no interest in buying said product.
Cost Per Click
Google Adsense, Chitika, and Kontera are great examples of CPC networks that you often find employed on affiliate blogs and websites.
In this model, earnings come from when visitors click the ads displayed on the website regardless of whether a sale is generated. Earnings, with these networks, are generally lower depending on how much advertisers are bidding for keywords on the ad network but they create a great entry-level source of income in affiliate marketing.
Cost Per Lead
This form of affiliate revenue comes from the ability of your business sending others legitimate leads (potential customers).
Big businesses that can offer a CPL model often pay high prices for their leads.
Businesses using this model include:
- Law offices
- Doctors
- Accounting services
You’ve probably heard a radio ad sometime for a lawyer referral service — this is an example of a company working this affiliate payment type.
This model does not fit on every type of website but can be incredibly profitable when mixed with the right type of content and niche selection in your affiliate business.
Cost Per Action
The model behind CPA affiliate programs is that advertisers pay for each action an individual takes after you’ve sent them to a landing page such as filling in their zip code, applying for a credit card, filling out survey information, and more.
A CPA model for your affiliate business can be a great tool for increasing revenue because it’s low resistance in conversions; people are very likely to fill out basic information, such as their zip code, that could pay you upward of $1 – $2 per action.
These are just the basic models that you’ll find when operating your affiliate marketing business.
But:
The payout breakdown goes even further when you begin to explore your options…
…and when you sync them to your niche.
How so?
Different Affiliate Programs, Different Payment Models
Well, here are some of the other options that coincide with each affiliate model:
Flat-Rate Programs
These pay on a flat-rate for each action, lead, sale, click you generate for a company.
An example would be selling a Clickbank product or something on Amazon Associates for a flat commission (or percentage). If you sold a $100 affiliate product that gave 50% commissions than your take away is $50 – simple.
Performance-Based Programs
The better you perform for the network, the better you’ll earn.
The challenge (outside of businesses still using this type) is scaling.
It’s fairly easy to get a dozen commissions and linger the baseline commission. But, if you’re able to scale the campaigns and increase conversions you can bump up. A small increase of 1% for your total commissions can send you hundreds (if not thousands) more each month.
Single-Tiered Programs
This type of payout is one-to-one which means that you are an affiliate that earns from direct sales to the company.
Two-Tiered Programs
In this model, you can begin to recruit affiliates under your own affiliate account and earn a percentage of their income for each affiliate sale they produce.
With enough two-tiered affiliates, you can essentially set back from your promotions and allow your own affiliates to do the majority of work.
Multi-Tiered Programs
A multi-tiered program is often referenced as Multi-Level Marketing.
This type of program allows your affiliates to recruit affiliates – there are multiple tiers that can go onward depending on the program.
However, this model has been abused in the past.
It’s still a viable option to promote but not one we wholly recommend because of the stigma.
Revenue Share
Although it’s uncommon to land one of these deals, your ability to perform in your affiliate business may open the opportunity to gain revenue share with said business.
It’s very much personal.
You could contact the business you promote and set up a system where you earn an overall part of the revenue of the company vs. only making money from the sales you generate.
You’re becoming a business partner in many ways.
Why Diversity Matters in Affiliate Marketing
Here’s a scenario:
You go through hundreds of hours creating the perfect affiliate business model, launching the website, creating incredible content, drawing a community, and generate sales…
A few months pass and your commissions dry up.
You frantically scramble trying to figure out what happened.
Could it have been…
- A Google punishment?
- Being banned from the affiliate program?
- Their business going bunk?
… it could have been all three (it tends to happen too often, actually).
What’s the problem here?
A lack of diversity in income sources for the affiliate business.
It’s the same as the whole “don’t keep your eggs in one basket” idiom.
It’s like this video but swap “affiliate models” in place of “investing” and “stocks”…
Relying on a single program or affiliate payment type puts your affiliate marketing efforts too close to comfort. It’s not something you’ll want to do once you get the hang of things.
Diversity with the affiliate marketing payment models provide these benefits — you:
- Aren’t susceptible to business-crushing events like banning or programs ending
- Increase your chance of generating an income because you use a price point strategy
- Have an opportunity to begin testing and optimization which rolls into existing campaigns
- Unlock your creativity and challenge yourself which may uncover new skills and ideas
More importantly:
Your efforts shift along with your interests and the way markets change.
Promoting lackluster offers — those that haven’t aged well and are no longer popular — is the beginning of the end for many affiliate marketers that attempt to go fully passive with their revenue stream.
Going fully passive tends to make the marketer lazy and out-of-the-loop.
Experimenting with different affiliate models keeps you on top of industry changes and shifts in customer trends.
It forces you to adapt to the shifts in the market — keeping your efforts making money.
The Need for a Change in Your Model Selection
You’re likely already using a combination of models:
- Amazon Associates
- Adsense
- Clickbank
- ShareASale
- Sponsored posts
These types are limited when the majority of your offers come from one source.
Marketers tend to lean heavily on one program or network. They neglect others because “it works” when in reality they could make more if they swapped and experimented with different affiliate payment types.
Plus:
Programs go through radical changes in their terms of service and payout percentages.
Just look at how bloggers reacted when Amazon changed their affiliate system.
It tends to happen often (sometimes yearly) as the company or business shifts focus.
Failing to adapt to these changes:
- Could disqualify you from participating in the affiliate program
- Force you to completely rework your efforts or start fresh
A big culprit of waining affiliate commissions is the result of marketers pidgeon-holing themselves to a promotion as the basis of their efforts. Some affiliates build sites around an intended promotion but when the program goes belly-up their site no longer has a purpose.
If you pick up anything — it should be this: always look for new verticals and direct your efforts to build something that has branding so you can pivot when times get tough.
Hybrid Business Model: Maximizing Commissions via Multiple Affiliate Payment Types
The two items mentioned, diversity and payouts, go hand-in-hand with creating a robust affiliate business.
As noted, one of the major drawbacks of using a single affiliate marketing payout method is that you’re putting your business at risk of failure if the program tanks. A combination of these programs creates a hybrid approach to your affiliate business that removes the glass floor that could break at any moment.
Here is an example of approaching your affiliate business with a hybrid mindset:
- Source multiple products, services, and affiliate programs/networks within your niche.
- Contact your affiliate manager for additional options that aren’t readily available to the general affiliate program members.
- Begin implementing a variety of affiliate offers based on the different models in the general areas where users interact with your website and business.
- Test and optimize each campaign and run split tests to discover which affiliate model works best on each of your web pages.
This will allow you to make money from your website through the traditional affiliate avenue.
Then:
An information product would allow you to recruit affiliates through your own affiliate program. The program will send visitors to your site to purchase this product but also expose them to other affiliate offers.
It’s scaling 101.
Through this approach to affiliate marketing, you’re creating a stronger foundation that will limit the impact of negative events such as being banned from a network or a product falling out of favor.
Interested in Expanding Your Affiliate Payment Types?
I’m sure you’re interested in some of the programs that offer each of these types of affiliate payouts.
The following are a few suggested networks and affiliate program resources that will help you diversify your affiliate payment methods:
- Great for all types: Our ‘best of’ affiliate networks
- Great for Cost Per Sale: ShareASale
- Great for Cost Per Action: RevShare
- Great for a mix of CPA/CPS: Clickbank
You could also browse some of our other blog posts such as the best business affiliate programs which cover quite a few that’ll get the diversity going. Else, dig into our beginners guide to affiliate marketing series that’ll take you from finding a niche to growing the business.
All-in-all, your success with affiliate marketing comes down to your ability to stay flexible and implement new strategies. The industry (and its affiliate payment types) are always changing and so failure to evolve and test new offers will leave you empty-handed.
Do it all make sense now?
Hey! You! Do us a big favor and share this article with people you know that are getting into affiliate marketing. Help them avoid those common pitfalls due to a lack of diversity. Thanks!
