Martin Lee Affiliate Marketing

Depending on how a merchant structures his affiliate program, the compensation model could vary.

The two most common models are the pay-per-sale (PPS) and the pay-per-lead (PPL) model. Let’s look at the different methods in more details.

Pay-Per-Sale (PPS) / Cost-Per-Sale (CPS)

In a PPS model, the merchant pays the affiliate a certain pre-determined percentage (%) of the order amount (Sale) that was created by a customer referred by the affiliate. This model is the most common compensation model that is used by retailers selling their own physical or digital products online.

Typical commission ranges from 5-15% for physical products but could be as high as 75% for digital products.

Pay-Per-Lead (PPL) / Cost-Per-Action (CPA) / Cost-Per-Lead CPL)

In a PPL model, the merchant pays the affiliate whenever the referred customer fills in a form or complete a survey. You can see this model used most frequently by companies providing insurance products or other forms of loans. They will usually have some criteria to define a ‘valid’ lead that will qualify you for the commission.

Typical commision could range from $5 to even $50 per lead.

The next two models that I’m going to discuss are the pay-per-click (PPC) and the pay-per-impression (PPI) models. I wouldn’t really call these two models exclusive to affiliate marketing as these two terms have been loosely defined and used every since internet advertising was born.

Pay-Per-Click (PPC) / Cost-Per-Click (CPC)

The PPC model is simply that. The affiliate earns a commission every time someone clicks on the link to the advertiser’s website. This model guarantees that the affiliate gets paid for his traffic no matter what the customer does at the advertiser’s website.

This means that it will not be entirely risk free for the advertiser. Depending on the kind of traffic generated by the affiliate, the advertiser might not get the desired result from them. It is also open to fraud by unethical affiliates.

The positive side of this model is that no matter how many times his advertisements are shown, the advertiser only needs to pay when a click is generated. If it’s shown ten thousand times but generate only one click, he needs to pay only for that one click. If the click through rate is low, it can enable the merchant to benefit quite a fair bit from the exposure.

Depending on the industry, each click to the affiliate could be worth from $0.05 to over $10.

Pay-Per-Impression (PPI) / Cost-Per-Thousand (CPM)

This model is the earliest to appear and basically the advertiser pays whenever his advertisements are shown. The industry standard of CPM stands for cost per 1000 impressions (The letter “M” in the abbreviation is the Roman numeral for one thousand).

On high traffic sites, the cost can spiral beyond control for the advertiser if there are no limits set on the number of impressions.

It is a good idea for advertisers to test out and compare results from both PPI and PPC models to decide which one is more cost effective for him. He can do this by seeing how many clicks he is getting for his PPI campaigns and then calculating the cost per click.

Different websites might require him to adopt different methods.

The CPM price could range from $1 to more than $100.

Pay-Per-Call (no abbreviation exists yet)

This is a new compensation model whereby the advertiser pays the affiliate a commission for phone calls received from potential prospects as response to online advertisements. This produces much more qualified prospects compared to those who only click on a link to a website.

Pay-per-call rates can range from $2 per call to $20 a call or more, with the bid price depending on the industry and the position of the advertisement.

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