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An_Explanation_of_Affiliate_Marketing_Compensation_Plans
| An Explanation of Affiliate Marketing Compensation Plans
While the vast majority of affiliate programs have compensation
plans as straightforward as a flat commission on all referred
sales, the occasional affiliate marketing program will seem like
a twisting maze of conditions and requirements than leaves you
scratching your head and wondering what terms like forced
matrix, stairstep breakaway, and override commission really
mean. Sometimes it's tempting to ignore the details of these
complex compensation plans and trust that promoting your
affiliate link as much as you can will make you rich. The truth
is, though, that while it isn't impossible to earn a decent
living without a complete understanding of how the money is
coming in, a thorough understanding of the mechanics of your
compensation plan will reveal where to direct your effort to
realize the most profit for the time you invest in your online
business.
Unilevel A unilevel plan is one of the easiest compensation
plans to understand. When you introduce a new affiliate to the
program, they become your direct referral, or sub-affiliate.
There is no limit to the number of sub-affiliates you can have.
In addition to the commission you earn on your personal sales,
some programs will pay you a (usually smaller) commission on the
sales of your direct referrals, often called a second-level or
second-tier commission. If your direct referrals also introduce
new affiliates to the program and you earn a commission on their
sales, a third-tier commission is being paid. Theoretically,
there is no limit to the number of levels a compensation program
could pay you on, but in practice most online affiliate programs
only pay a commission on one or two tiers. This is largely to
separate affiliate programs from the often-maligned multi-level
marketing.
Forced Matrix One of the biggest problems with unilevel plans is
that anyone who becomes successful recruiting direct referrals
will quickly have too many to communicate with regularly. Since
regular interaction with your upline is a key to success for
many affiliates, some program managers choose to implement a
forced matrix program. In a forced matrix plan there is a set
number of direct referrals you may have. If you continue to
recruit new affiliates after you have reached that limit, they
will "spillover" to become sub-affiliates of your direct
referrals. Since you are restricted in how many direct referrals
you may have, forced matrix programs generally pay on more tiers
than unilevel plans.
One of the goals of a forced matrix is to create an environment
in which every new affiliate has a mentor immediately above them
with the time to offer training and guidance. This is partially
successful, but can be disorienting for new affiliates who are
recruited in to the program by someone who has earned their
trust only to be handed over to another program member who may
or may not maintain that same rapport. A forced matrix plan also
produces freeloaders who wait for spillover affiliates and fail
to do any recruiting of their own.
Payline/Powerline Whether it's called a powerline, payline, or
something entirely different, this plan is often made to sound
far more complicated than it really is. Imagine a forced matrix
where you are limited to only one direct referral. If you
recruit a second sub-affiliate, she spills over beneath the
first. A diagram of your downline will resemble a straight line.
If there is a limit on how many levels down you earn a
commission, you quickly run out of motivation to recruit new
affiliates. The solution is usually to pay you a commission on
all sales made by anyone in your downline for an infinite number
of levels.
Breakaway If you are participating in a payline program that
pays a 10% commission, some quick calculations will quickly
reveal that once the 10th affiliate is referred to the program
and makes a sale, the company is paying out the entire price of
the product or service in affiliate commissions. Since that
business model will quickly destroy any company, payline
programs that pay on infinite levels must have some sort of
breakaway, sometimes called stairstep breakaway. When one of
your sub-affiliates meets a certain criteria (usually personally
recruiting some number of new affiliates) they break away from
your line and start their own payline. When this happens, you no
longer receive a commission on the activity of their direct
referrals.
Override Commission If that were the end of the story, there
wouldn't be much incentive to mentor your sub-affiliates and
teach them how to recruit people to the program. Therefore,
breakaway plans almost always have an override commission.
Whenever one of your referrals breaks away, you still receive a
small commission on their activity. Usually breaking away also
signifies a graduation on the part of your sub-affiliate to a
point where they will require less guidance from you.
If none of these concepts sound like a perfect match for a
compensation plan you know about, it's because most affiliate
program managers customize these elements to create a unique
compensation plan. Examining a compensation plan will provide
clues about the objectives of the program manager and what
direction they plan to take the affiliate program in the future.
About the author:
Clay Mabbitt writes articles about online income opportunities.
He is the founder of a community of Internet entrepreneurs
sharing knowledge and experience at
http://www.affiliatescreen.com
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