Back to Basics: Affiliate Program Terms (continued, part 2)
Pay-per-lead: A program where you receive a commission for each sales lead for a product or service that you refer to a merchant's web site. Pay-per-lead generally offers mid-range commissions and mid-range to high conversion rations (since visitor purchases are not required). Like pay-per-sale, also referred to as a Cost-per-Action or CPA for short.
Pay-per-click: A program where you receive a commission for each valid click (visitor) you refer to a merchant's web site. Pay-per-click generally offers low commissions (range of $0.01 to $0.25 per click), and a very high conversion ratio since visitors need only click on a link to earn you a commission.
Pay-per-impression: A program where you receive a commission each time a merchant's ad or link is displayed on your site. Pay-per-impression generally offers the lowest commissions, but a nearly 100% conversion ratio since a visitor merely has to view the ad to earn you a commission, often resulting in the highest earnings potential. Pay-per-impression programs are generally measured in CPMs (see below) and form the standard of banner advertising for larger sites.
Conversion ratio: The ratio of visitors from your site that are 'converted' to a sale, lead or click, and go on to earn the you a commission. A conversion ratio of 5% would mean that for every 100 visitors to your site, 5 would click-through, make a purchase and earn you a commission. Many factors will influence the conversion ratio including: how targeted the affiliate program's products are to your visitor's interests, the price and value of the products or services being promoted, the merchant's ability to successfully track all referred sales, and the professionalism and comfort-level the merchant's site provides to potential customers.
Click-Through Ratio: The percentage of visitors who click-through on a link to visit the merchant's web site. Higher click-through's are preferable although not always a measure of success. Pay-per-click program earnings are highly dependent on click-through rations. Click-through ratios can be improved through a variety of means including: making links more visible to visitors, adding personal comments or testimonials about the benefits of a product, or even reducing the number of possible links that a visitor can follow.
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