There are several compensation methods an affiliate marketing business can choose to employ. Currently, the cost per share (CPS) or revenue sharing method is being used by about 80 percent of affiliate marketing businesses. Next to CPS, the cost per action scheme is most popular with 19% of affiliating entities using it. The rest utilize other methods such as cost per click (CPC) or cost per mille (CPM).
Diminished Compensation Methods
Although less than one percent of the affiliate marketing industry implements cost per click, it is the most commonly used approach in the sectors of paid search and display advertising.
Cost per mille is considered the easiest and most profitable of the cost per click techniques because a visitor who visits an advertising made available by a publisher in his website is enough to earn that publisher his responsibilities. Pay per click is the evolved form of cost per mille. In pay per click, one extra step is added to the cost per mille system. That extra step is that visitors must first click the ads on a publisher's site before he earns any commissions. Having people visit his site alone will earn him nothing.
Cost per click methods were comprehensively being used in the early periods of the expansion of affiliate marketing business. But such use has greatly diminished over the decades as more and more fraudulent clicking activities were reported. Such issues are just the same of the issues troubling the search engines of today. Contextual advertising programs like Google AdSense are not taken into account in the statistical relating to diminished use of cost per click, as it is undecided if contextual advertising can be considered as affiliate marketing.
Performance Marketing
Cost per mille completely exposes the advertiser to risk and total loss because a publisher will tend to focus his full attention only at getting people visit his site and no longer cares when their visit at the site becomes enough to make them consider making a purchase or convert them into customers. This is because the publisher has already earned his commission after the visitor has gone to his site.
Cost per action or cost per sale methods are considered the ultimate reengineered from of cost per mille in the sense that more actions are required to be completed by visitors before they earn the publisher contracts. The most common prerequisite for decisions is the publisher website must be able to convert the visitor into a customer. The publisher then is forced to focus on conversion rather than just getting people visit his site. The risk and loss therefore is being shared by both the affiliate and the advertiser.
Performance marketing enterprise has become an alternate name for an affiliate marketing business because of the sales employees or associates are normally being compensated. Such employees often receive performance bonuses whenever they exceed their quotations to motivate them to give their all. The bonus is additional compensation, added to the fixed per sale commission they receive. Affiliates are often paid in similar ways to that of a fully commission based internal sales department although associates are not in any way directly employed by the affiliate marketing business they advertise products and services for.
Affiliates can never be totally described as an extension of the affiliate marketing business' sales work force because they provide very little or absolutely no influence to the visitors that they convert or try to convert into clients because they direct traffic directly to the advertisers sales website. The in-house sales team, on the other hand, exercises control and influence over the prospects until the deal is closed or the relative product or service purchased.
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