The
Power of Two-tier Commissions (continued,
part 2)
There
are disadvantages of the two-tier commission system however. First,
and most prominent, is that vendors (and affiliates) end up sponsoring
many new affiliates who have no intention of actually trying to
sell anything. Rather, these affiliates are simply hoping to be
able to recruit their own network of web sites below them who will
hopefully make some sales. This can lead to unrealistic predictions
of success by both affiliates, and the vendors. For example, you
may have seen claims such as, "If you can sign up just 20 new
affiliates, and they each sign up 20 people, and if each affiliate
makes just 2 sales per month, you could easily be earning over $10,000
a month. All with only a few hours work!" Claims such as these
unfortunately do not ring true for most (any?) of us.
A
second problem for affiliates (but an advantage for vendors) is
that a two-tier program does indeed spread the word quickly. Before
you know it, you may be one of thousands of web sites promoting
a particular program. Although you could claim there are minor benefits
in this for you, since this growth will work to increase brand awareness
and comfort with a vendor (both of which are generally required
before a visitor makes a purchase), for the most part what this
means is you will be facing increasingly fierce competition online.
As
described above, Virtualis has already experienced this effect.
Although I still highly recommend the program, online competition
has grown to be tremendous. As you may recall from the last newsletter,
one of ClickQuick's visitors was having the best success by promoting
the Virtualis program offline through business and personal contacts.
Making money online is still surely possible, but you can no longer
expect that running a simple banner ad on your web site will do
the trick. More creative methods of promotion may be necessary (see
the article 'Improving Affiliate Program Performance'
for some ideas).
However,
in the end, the benefits of a two-tier commission structure outweigh
the costs. After all, who wouldn't like to develop a network of
web sites selling products, receiving commissions on each sale they
make. That is just too great of a draw to pass up for most web site
owners. And it also seems that a two-tier commission structure is
gaining more popularity with affiliate vendors. For example, the
excellent One
and Only Internet personals program recently switched from paying
20% commissions to all affiliates to paying 15% commissions directly,
and 5% commissions on the second tier to those who referred new
affiliates.
If you are interested
in adding a two-tier commission program to your web site, I have
compiled reviews of some of the best in the Pay-per-Lead
category of the Affiliate Programs
section. Be sure to check them out, you may find one or more that
interest you. Also note several programs which pay out on additional
levels. Examples of these include FCI, Solution 2000, and the
oft-ridiculed Spree program.
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