When Should You Consider a Commission Restructure?
Throughout the lifetime of your business you will be making many decisions about many different issues. As your business grows and you mature as a business owner, the objectives you develop today might appear vastly different than the objectives you had when you first started. When that happens it’s very important to consider a commission restructure.
1) Study Your Audience – It’s important that you continually study your audience to enable you to continue to put out products that resonate with them, providing solutions for their pain points. If you don’t really know who your audience is, down to their sex, income, hopes, dreams, desires and fears, you can’t create good products for them. If your products or audience has changed significantly over time, it might be time to restructure your commissions.
2) Know Your Customers’ Lifecycle – For every new customer you get, they have a particular trajectory depending upon where they came into your product funnel. Study the metrics so that you can understand the lifetime value of each customer based on where and when they became customers. Identify any changes over time that might suggest you need to re-evaluate how you get new customers.
3) Understand Your Affiliates – Who are your affiliates? Can anyone join your program or do they also have to be customers to become affiliates? There is no rule that says they need to be customers, but customers can often market your products better because they have first-hand knowledge of how good your products are. Can you afford to give a higher commission to customers over other affiliates?
4) Poll Your Affiliates – Try asking your affiliates what they’d like to see you offer them regarding the commission structure. Would they like to have a way to offer discounts to their customers without biting into their affiliate commission? Would they like a new structure entirely? What do they like or not like about your entire affiliate program’s commission structure?
5) Evaluate Your Objectives – Over the lifetime of your business, your objectives will change. Of course, everyone has the objective to make money, but your objectives have to be more specific than that. When you first started, you probably just wanted to get as many affiliates as possible. Perhaps your new objective, now that you’re successful, is to keep and attract super affiliates with a track record.
6) Create New Objectives – If you ever create new objectives for your business and products or alter your niche, it’s a good time to evaluate your commission structure. When you make new objectives such as mentioned above regarding your goals for even having an affiliate program, you’ll need to remake your affiliate program to align with the goals you have today in order to succeed.
7) Spell Out Your Goals – Once you’ve realized you have new objectives such as getting more traffic, or making more conversions from the traffic you get, spell them out with real numbers. Such as: “I want to raise conversions by 20% by the second quarter.”
8) Understand Your Break-Even Point – To calculate your break-even point, you need to understand what sort of sales volume you would need to meet your costs. If you sell more you make a profit; if you sell less you lose money. Once you focus on this, and the statistical probability of sales that your affiliates can make, you can look at your current commission structure with a clear understanding of how changes will affect you.
You understand the benefits of affiliate marketing, spreading awareness, letting other people do the marketing for you, and duplicating your efforts so that you can make more money in the long run. But, it’s also important to understand that over time it’s okay to change things up and restructure your commission program, because over time you’ll find that as your audience matures, so will your affiliates.