Affiliate Program Incentives: How to choose the right program rewards

Aleksandra Velkova on April 09, 2024

If you haven’t yet launched an affiliate program for your ecommerce business, it’s time to start thinking about it. 

When it comes to making purchasing decisions, influencers and content creators as well as branded content are becoming a huge factor in the decision making process for people. 

According to a study by Business Wire a staggering 61% of consumers rely on recommendations by digital influencers for purchasing decisions. Compared to that, only 38% of consumers trust recommendations from a brand on social media. 

Considering this data, it’s no surprise that brands are now investing heavily in affiliate marketing, with the  global affiliate marketing industry expected to grow to a market size of $27.78B by 2027.

Besides being the top source of information for consumers, another reason why you should consider launching an affiliate program is its ease of use and management. The basics of the program are easy to configure and to manage. It’s also super easy to measure its effectiveness and tweak performance especially when you’re using a comprehensive affiliate program software. 

We’ll dive into the most crucial part of configuring and launching an affiliate program - the affiliate incentives. All you need to know from understanding the different types of  incentives to things to consider when you’re choosing what to offer. 

What is an affiliate program incentive

The affiliate program incentive is your offer to the affiliates in exchange for them bringing in new customers and sales to your store. 

Typically, this refers to the commission offer, which is the main incentive you’d want to strategize about. 

There are simple commission offers, where the affiliate who brings in the sale gets paid for it, and a more “complex” structure, where the offer also includes an incentive for the affiliate’s audience, usually in the form of a discount code or some custom reward.

Types of affiliate program incentives

When thinking about the different types of incentives for affiliate programs, these can generally be divided into one-sided and two-sided incentives. 

One-sided affiliate program incentives are pretty standard - the affiliate receives a commission payment when they bring in a new customer, based on the type of the offer:

  • Flat rate per order

  • Percentage of sales

  • Tiered commission offer

Here’s an example of Skinceuticals Affiliate program

This is a simple and clear one-sided offer, where as an affiliate you earn money when people buy from the site through your affiliate links. 

The two-sided commission model includes an incentive for the referred customer as well. Typically this is in the form of a discount on the purchase, usually a fixed amount discount or a percentage off discount. 

Bonus affiliate offers - on top of the commission offer for new sales, affiliates can also earn bonus rewards like free products, discounts on their purchases, free shipping on all orders and more. 

Here’s an example of Sephora’s Beauty Affiliate Program:

How to choose the right type of incentive for your program

Understand your affiliates preferences

If you have influencers or content creators you’d like to invite to become part of your affiliate program, talk to them to understand more about what their expectations are. You can use a survey or a 101 interview session to get the bigger picture about how they work, what they expect and what type of audience they talk to. 

If you’re already running a program and think that you can do some tweaks to it, always start by auditing the performance of your current incentives: is this offer driving the results you expect? What can be better? 

Choose attractive incentives

If the affiliate program is not performing as you’d expected, you should first look into the incentives and whether they’re attractive enough to the affiliates. Think about it this way; the affiliates need to be motivated enough to promote your brand more than they would do for other brands they work for (this is another thing to think about when choosing incentives!) 

There are 3 factors to consider when choosing attractive incentives: 

  • Competitive and sustainable rates - your rates need to be highly competitive in relation to your industry and margaret if you want affiliates to be heavily invested in promoting and selling your products. However, keep in mind long-term sustainability of your affiliate program; if your rates are too high, you may attract a lot of good affiliates fast, but the payouts may eat into your profits in the long run. 

  • Industry benchmarks - while it’s good to be aware of the industry benchmarks and use them as a guideline, you should use them only as such - as guidelines. When setting rates, always start from your business goals and product pricing.

 For reference though, here are some benchmark numbers: 

  1. Beauty and Health Industry - average commission rate vary from 10 - 20%

  2. Fashion - 13 - 15%

  3. Education and e-learning - 15-30%

These are also the most profitable niches for affiliate marketers and businesses consequently.

  • The commission structure - whether you go with a flat rate, percentage of sales or a tiered commission structure will again largely depend on your business goals and financial abilities. As a guideline, here are a few factors to consider when choosing the correct incentive type: 

  1. Percentage of each sale - this is a fairly simple and easy to work with commission offer for both sides. However, it might significantly affect your profit margins, if the percentage is too high and if it’s too low, it might not be incentivizing enough for affiliates. 

  1. Flat rate per order - this is also a simple concept to work with and its beauty is that it provides predictability for affiliates to calculate their potential earnings. The downside is that it might not be super motivating like percentage based commissions, especially when selling high-priced products. 

  1. Tiered commission offers - with tiered commission structures, the more the affiliate sells, the higher the commission they can earn. This is pretty straightforward and quite beneficial for both sides, since you can control how much you want to give while making sure it’s motivating enough for your affiliates. 

Lay out clear terms and conditions

The terms and conditions section of your program is what makes the program’s functioning flawless and easy. Make sure to be super clear on the incentives and when will the affiliate receive them. 

Clarify all the details you can: the cookie days period, the number of orders placed during cookie days that are eligible for commissions, the payment method that will be used to send commissions - PayPal, gift cards, ACH etc. 

This is the program’s rule book and make sure it’s simple and clear. 

Pay the commissions on time

If you’re being late with paying out the commissions to your affiliates you are risking them losing interest to work with you. Loyalty goes both ways and while they do their part to drive sales to your store, you should ensure their rewards are paid out on time, as promised in your original offer. 

Wrapping up

Affiliate program incentives is what makes your program attractive for affiliates and ultimately what will drive success. It needs to be motivating for affiliates to support the brand and the story, to promote your products and ultimately drive sales. In this goal, you can utilize different types of incentives where you can choose to reward only the affiliate or the affiliate and the new customer. When choosing the type of commission offer and its value, making a balance between motivating affiliates and not sacrificing your profit margins a lot is key. Also, being clear on terms and conditions, payment methods and timelines is crucial to build and maintain a fruitful relationship with your affiliates.

Aleksandra Velkova

Aleksandra Velkova

Aleksandra is the Customer Success Manager at Lootly

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