Who doesn’t want their business to grow? Everyone does! However, many businesses often lack the marketing resources to reach a broad audience. This is where affiliates step in, and it’s crucial to focus on the commission models that drive affiliate marketing success resulting to revenue and traffic.
As a business owner if you are looking to increase revenue or develop a strategic marketing plan, affiliates can be your perfect partners. They promote your products and services to help achieve your business goals. whether it’s generating sales, acquiring leads, or driving website traffic. In return, they earn a commission for their efforts.
If you’ve decided to reach customers through affiliate marketers but are unsure how to compensate them for their advertising and marketing efforts, this article will guide you through the details.
There are several popular commission-based models in affiliate programs. And you can choose the one(s) that align with your business needs and budget:
- Pay-Per-Click (PPC): You pay affiliates based on the number of clicks they generate to your website.
- Pay-Per-Sale (PPS): Compensation is paid when a sale is made through the affiliate’s efforts.
- Pay-Per-Lead (PPL): Affiliates earn commissions when they generate qualified leads for your business.
- Pay-Per-Impression (PPI): Payment is based on the number of times your ad is viewed, regardless of engagement.
By selecting the right model, you can efficiently grow your business while ensuring a smart investment in your marketing efforts. However, you won’t be able to make the best selection if you don’t understand all of the ins-and-outs. This article will explain how various commission structures work and provide some practical affiliate marketing tips that you can use to improve your program. Learn how to boost your reach with affiliate marketing today!
PPC ( Pay Per Click)
What is PPC?
PPC is one of the most common forms of online advertising, typically used in search engine ads (like Google Ads or Bing Ads) or display paid ads on websites and social media platforms. Unlike SEO, which can take time to build traffic organically, PPC can bring immediate visitors to your site.
How does PPC works?
In search engine, PPC advertisers bid on specific keywords or phrases related to their product or service. When users search for those keywords, their ad may appear. Likewise, when a user types in a query that matches the keywords, or views a website that fits the advertiser’s target, the ad appears. It can be either at the top of search engine results or as a banner/display ad on a site. Then the affiliates gets commission when the user/customers clicks on their ad. However, the cost per click (CPC) /PPC can vary depending on factors like competition, keyword relevance, and ad quality.
PPS (Pay Per Sale)
What is Pay-per-sale (PPS)?
Pay Per Sale (PPS) is on of the most preferred affiliate marketing commission models type. In this model, affiliates receive a commission for each sale generated through their affiliate link. The merchants can pay the affiliate a certain fee when the visitor buys anything from the website of the merchant. Since they only pay for actual sales, advertisers don’t waste money on clicks or impressions that don’t convert. The focus is on driving actual conversions rather than just traffic. Affiliates promote products effectively because they earn money only when they make a sale.
How PPS works?
Affiliates, who could be bloggers, influencers, or websites, promote a company’s products or services through affiliate links or ads. If a customer clicks on the affiliate’s link and completes a purchase, then only the affiliate gets payment for the sale. The advertiser pays the affiliate a predetermined commission based on the sale amount. This commission can be a flat fee or a percentage of the sale.
Example: If a company has a PPS agreement with an affiliate. An affiliate promotes their product and a customer makes a $100 purchase through the affiliate’s link. In terms of that purchase the affiliate might earn a 10% commission from that sale.
Affiliate marketing programs widely use PPS, especially in e-commerce, because it aligns the interests of both advertisers and affiliates.
PPL (Pay Per Lead)
What is Pay-Per-Lead (PPL)?
Pay per Lead (PPL) is an advertising or affiliate marketing model where an advertiser pays for each lead generated rather than for clicks or sales. A lead typically refers to a potential customer who has shown interest in a product or service. Here, customer provides their contact information or takes a specific action, such as signing up for a newsletter, completing a form, or requesting a quote.
In the Pay-per-lead commission model, affiliates get commissions for generating leads (known as potential customers) for the brand. To be more specific, affiliates drive audiences to a site that takes a specific action, like filling out an investigation form or signing up for a trial.
Industries mostly uses PPL model. Here, capturing leads is more important than immediate purchases, like insurance, loans, education, or high-ticket B2B services.
How PPL works?
Affiliates run campaigns that direct users/visitors to landing pages or forms where they show interest in the product or service. Then a visitor completes an action, like filling out a form with their contact information (e.g., name, email, phone number). The advertiser or the business owner then pays the affiliate/marketer a set amount for each valid lead generated. Whether the lead turns into a paying customer or not.
Advertisers pay only when they receive a qualified lead, rather than paying for clicks or impressions that may not result in interest. Compared to Pay-Per-Click or Pay-Per-Impression models, PPL ensures that the advertiser is getting at least a lead, which has a higher chance of converting into a sale.
It’s an ideal model for businesses that rely on customer inquiries, such as B2B services, insurance companies, real estate agents, or educational programs.
Example: If a real estate company uses a PPL model, they might pay affiliates $20 for every person who fills out a form requesting more information about a property listing. But it doesn’t make sure that person ultimately buys a house.
PPI ( Pay Per Impression)
What is Pay-Per-Impression (PPI)?
PPI is also known as Cost-Per-Mille (CPM). It is an advertising model where advertisers pay for each time their ad is displayed. Customers visiting or viewing to add matters rather than clicking. In this model, an “impression” refers to a single instance of an ad being shown to a user.
You can use this model When your goal is to increase visibility and awareness of your brand, rather than immediate clicks or conversions. If you want to target a large audience or appear frequently across various websites, PPI is a cost-efficient option. Sometimes, certain products (like luxury items) benefit from repeated exposure rather than instant clicks.
In contrast to PPC, PPI is focused purely on visibility and exposure. It’s a popular choice for display advertising on websites, apps, and social media platforms like Facebook or Instagram.
How PPI works?
Every time an ad appears on a website, app, or search engine result page, it counts as an impression. The advertiser pays based on the number of impressions (or views), usually measured per 1,000 impressions (CPM).
For example, if the CPM is $10, the advertiser pays $10 for every 1,000 times their ad is displayed. Unlike Pay-Per-Click, the advertiser doesn’t pay based on how many people click or interact with the ad. Instead, they get paid just for how often the ad is displayed.
That means advertisers pay for visibility. It’s effective for campaigns that focuses on increasing brand awareness rather than immediate conversions. It is ideal for businesses that want to get their message in front of a large audience, as it doesn’t rely on users clicking through the ad. Typically, the cost per impression is lower than other models because you’re paying for exposure, not engagement.
Example : A company might run a display ad campaign and agree to pay $5 for every 1,000 impressions of their ad. If the ad is shown 10,000 times, the total cost would be $50.
Wrapping up!
Mastering the different affiliate marketing commission models is essential for businesses aiming to build a successful affiliate program and for affiliates seeking to optimize their earnings. The previously mentioned models—PPC, PPL, PPS, and PPI—are among the most widely used and effective strategies in the marketplace.
Additionally, you can check revenue-sharing commission models where advertisers share with affiliates a fixed percentage of their revenue generated from sales or transactions from their referrals over time. Similarly, Cost Per Acquisition (CPA), Multi-level marketing (MLM), Revenue Share, Tiered Commission, Hybrid Models, Flat Fee are also some other commission based models you can go for.
Looking to implement commission-based models to boost your sales and website traffic? We’re here to support you as both digital and affiliate marketing experts. Count on us to deliver exceptional results for your digital marketing success!