In this episode, we cover 3 different programs that break the mold of the traditional percentage-based affiliate program. These programs range from temporary promotional programs to help drive short-term sales, to programs that completely change the way in which your business runs.
Additional Notes
- How to Sell Expensive Things using Siren
- Distribution Pool models
- Scaled distribution pool (20 trainers)
Key Takeaways
Diverse Incentive Programs: Consider exploring alternative incentive structures, such as fixed rewards, tiered incentives, or value-based rewards, to better align with your business goals and motivate your partners effectively.
Leveraging Partnerships With Temporary Programs: Temporary programs can be used to motivate your affiliates to help you solve a non-permanent problem. The episode talks about how this approach can be used to clear out excess inventory while rewarding partners. Implementing targeted incentive programs for overstock can optimize inventory management and drive sales.
Transforming Business Models: The episode highlights how incentive programs can be pivotal in transforming business models. By designing innovative incentive structures, businesses can encourage desired partner behaviors, expand their market reach, and enhance overall business performance. Evaluate your current business model and consider how customized incentive programs could drive significant strategic shifts.
Transcript
Welcome to Partnership, where your network is the wind in your sails. I’m your host, Alex Standiford, and I’m here to redefine online partnerships for bootstrapped businesses. I believe in working with top talent to expand your sales channels and enrich the lives around you, not just the pockets of big corporations.
  Today, we’re going to talk about a few different incentive programs that aren’t your typical percentage based affiliate program. We’re going to explore examples on how these different programs can be used for purposes ranging from selling overstock to completely transforming your business model.
There’s a lot to get into here, so let’s just jump into it.
Percentage based programs, they’re everywhere. They became the de facto standard for how an affiliate program works and for good reason. There’s a place for a percentage based affiliate program in the overwhelming majority of e commerce sites. It scales with price fluctuations and motivates people to sell higher ticket items.
And it gives people plenty of reasons to sell multiple items in combination whenever it’s possible.
This is because you don’t have to pay out of pocket for anything until you have money to pay out of pocket in the first place. In other words, when your affiliates are making money, you’re making money.
But, they’re not the only commission structure that exists. They’re not even the best structure in many cases. In fact, I think of these programs as more of a starting point instead of the complete picture. For example, I think that when you’re selling expensive things online, you’re probably better off building a lead focused program and then also creating a conversion focused program.
I talk about that extensively in my video, How to Sell Expensive Things Using Siren, which I’ll link in the show notes. But even that usually just uses two percentage of sale programs. So, let’s dig into the different programs that you can use and also talk a little bit about how they can be combined together.
We’re going to start with an incentive program that you may not run all the time, but you can run temporarily when the need rises. This is an overstock program, and it pays a fixed commission each time a specific item is sold. I don’t think this is a great program to do on its own usually, but I do see a lot of value in creating a promotional program for the sole purpose of moving product.
Let’s say that you sell clothes, and you have an overstock of pants that you have not had much luck selling. You don’t want to use precious space to promote these pants, because you’d rather promote the new clothing that’s actually selling reliably. It feels risky to do that, and you’re worried that’ll hurt your sales if you give precious prime real estate to these pants, which clearly haven’t had that great of a track record of selling anyway.
In situations like this, what can you do? There’s a conflict of interest here. making more money selling the clothes that are easy to sell, or reducing your overstock and recouping the money from the other clothing.
This is a great opportunity to create an overstock program for these pants. If you have a robust set of affiliates in your network, you can create a bonus on top of your regular program to sell these specific pants.
In this case, you would send an email to your affiliates and let them know that you’re trying to sell these pants and offer them a bonus flat rate for each pair of pants sold, plus their percentage commission for all of the sales on the site. This will give your affiliates a solid reason to want to sell these pants quickly and incentivize them to spend the necessary time to think about how to sell these pants.
What I love about this approach as opposed to simply slapping on a deep discount and putting them up for an ad campaign is that it allows your affiliates to try a different angle to sell the product. An ad campaign plus a discount without actually changing anything about the product page is just doing more of the same things that has caused them to not sell in the first place.
With your affiliates looking at the product and being incentivized to sell specifically these pants, they will be motivated to identify great outfits for these pants and take on different approaches to selling them that you haven’t tried, or you literally can’t do yourself.
And for me, the best part of this is that you’re not just giving money to an ad campaign and hoping for the best. Instead, you’re directly enriching the lives of the people who are in your network. It’s a win- win. If you ask me.
Now, let’s talk a little bit about another program that I see a lot of potential in using instead of a percentage based program. This is a fixed per transaction program, where you pay someone a fixed amount of money each time they refer someone who completes a transaction.
In other words, the only difference from a percentage based program is that instead of calculating the commission from a percentage of the order total, you’re simply paying a fixed number every time, no matter how much money that customer spent in the process. If you’re selling a monthly subscription or something else where the income generated from your customers happens over time, instead of directly at the initial purchase, A fixed product program is a great fit.
For example, let’s say you’re running a monthly online gym membership and you want to run an affiliate program to get more people to sign up and join your gym. Just to keep the math simple, we’re going to say that your membership is priced at a low price of 10 a month. You know from analytics, most customers who sign up stay with you for at least 10 months.
That means that effectively, each person who signs up for your gym membership will pay you, at minimum, 100. With this information In mind, you decide to pay your employees a bonus of 25 percent of that total, paying them 20 per sign up. This gives you a simple incentive to offer and still ensures that you’re able to be profitable in the process.
If You tried to use a percentage based offer here, any percentage of the 10 initial sale is not going to be a very strong motivator since an affiliate likely can earn several times that selling other things instead. Since a fixed amount per sale is decoupled from the value of the sale itself, you can create a commission that can compete. Even though the initial cost of your product is low.
Of course, this can be risky if you have high churn, but as long as you’re confident that you can keep people subscribed and you can actually pay the commissions you’re offering, you can count on earning revenue for that share in the long term. You can minimize the risk by saying that the customer has to remain for a minimum of three to five months before you’ll pay the commission.
This helps to minimize the risk and also keeps bad actors from trying to do something fraudulent. This program is also a good choice if you’re doing in store credit with a refer a friend program. You could instead, for example, give someone a free month membership for every friend they refer to the program. Instead of paying them with cash, you pay them with a credit on their account that would be deducted each month.
This not only helps keep them active longer, it incentivizes them to bring a friend to do the membership with them, which helps with accountability and would probably improve the churn rate. On top of that, the credits you’re paying them are going to impact your income a lot less than paying an affiliate cash since you’re only out the cost to maintain their account instead of the actual commission.
Next up, let’s talk about recurring, percentage based commissions. I know, I’m sort of cheating here, since it’s still based on a percentage, but I feel that the recurring angle of this is significant enough of a departure from the original formula that it still merits a discussion here, especially since I think these programs really change what you should be expecting from your affiliates who earn this commission.
Recurring commissions are somewhat of a challenge. It’s definitely an attractive offer for an affiliate. After all, one of the key things that motivates an affiliate is the promise of passive income. So generating a recurring commission is definitely an attractive promise. The problem with recurring commission is that the affiliate’s role in selling the product doesn’t usually align with actually keeping the customer subscribed.
Usually the role an affiliate plays is to get a person to purchase your product, but they don’t usually remain involved in the process after the sale is complete. You’re usually taking it from there. The best programs tightly couple results to reward. And if you’re paying a recurring commission to someone who isn’t actively keeping those recurring payments coming, you’re not creating an effective incentive structure.
Worse yet, you might even be indirectly causing them some low key stress because you’ve put them in a position where they don’t have control over the results of their income, which in case you’re not aware, that control is one of the biggest reasons why people become affiliates in the first place.
However, there are cases where this structure makes a lot of sense, and it’s pretty much always in situations where the affiliate is also responsible for maintaining the customer after the sale is completed.
Let’s take that same gym membership example we mentioned earlier, and let’s even assume that we’re running the fixed rate program I talked about earlier. Remember, the membership is priced at 10 a month, and we generally make at least 100. We pay our affiliates 50 each time they close a sale, but every month we earn more money and ideally we would do everything we can to keep these customers on the plan.
Help reduce churn, we have a few people on our team who do personalized help and guidance for our existing customers. Their goal is to not only make sure to provide value to our customers, but also help those customers form a habit, remaining subscribed to our membership for much longer.
These people would be incentivized to reach out to customers who are đź“Ť not using the membership to its fullest potential. They would ask if they can offer any advice or any help to help these people stay on track with their goals. They would also do occasional check ins with the customers to see if they needed anything or have any questions or need any help making any adjustments.
This is a great use case for a recurring commission program. Recurring commission programs are a great way to incentivize someone to help reduce churn in your business because the people who are paid on these recurring plans are paid based on how many people remain active members. In other words, if these people keep your customers happy and active, they can expect to see a healthy commission for their efforts each month.
Let’s say that we have 4, 000 customers each paying 10 a month. Our total monthly revenue in that case would be 40, 000. From there, let’s say we offer a recurring commission bonus of 10%. In that case, we would be paying 4, 000 in commissions each month. Depending on how many people you have on your team and your structure, that can make up all of the money they make or simply be enough to be a healthy bonus that they receive on top of their salary.
Recurring percentage based commissions are cool and all, but they’re definitely not the only way to handle reducing churn with a program. Something that could compliment or even replace the recurring commission program we just talked about is a content bonus program for trainers. This is using something that I call a performance weighted pool.
Instead of directly paying someone based on how many sales recur, you can pay a share of the profits each month to all of your trainers who make the content that keep people coming back each day. But, What’s really cool about the performance weighted pool is that it doesn’t just pay an even distribution of the profits to each trainer.
Instead, it pays each trainer a percentage based on how much engagement and viewership they got from existing customers. In other words, it’s rewarding your trainers to keep customers engaged and using their membership.
Let’s break it down. Let’s say you set aside 5 percent of the revenue and committed to distributing that to all of your trainers. To be able to afford these live trainers and the content they’re providing, the price is increased to 25 a month instead. This increases our revenue to 100, 000, and with that, we’d be distributing 5, 000 each month to our trainers.
Let’s say we have 5 trainers. If we distributed this 5, 000 evenly, each of our 5 trainers would receive 1, 000 a month. Which is a nice bonus to put on top of a salary, but it doesn’t really motivate them to keep their customers engaged. Since, they’re just being given that money based on metrics that they don’t directly impact.
Sure, they will help with churn, broadly speaking, but unless they’re also affiliates, they don’t really have a way to control how big their bonus is going to be. This is where a performance weighted pool can make a big difference.
Instead, we can track the number of people who attend each live training session they do, and also track how many views they get on their videos and other guides. Using these key performance indicators, we can tally up a performance score for each trainer and compare those scores to the other trainers.
Based on how well each trainer does relative to each other is then used to determine how big of the bonus share each person receives. The person with the highest score would receive the biggest share of the 5, 000 and the person with the lowest score would receive a smaller share.
In this example, I positioned the value as if we were going to use this commission as a bonus to pay on top of these people’s salaries. That way, it’s a nice performance bonus for them instead of a potentially life ruining drop in income. The way I position this is not really intended to be a primary source of income. Instead, I think it should be viewed as a performance bonus.
You could, however, treat this entire gym membership almost like Udemy, where you have hundreds or thousands of subscribers, and you have dozens of trainers who do this on the side instead of as their primary source of income.
This approach would likely require a higher percentage to really motivate people, but let’s say you have the same numbers as before with the price for customers at 25 a month and a revenue of 100, 000. Only this time you bump the distribution to 50 percent of the total revenue. With that, we’d be distributing 50, 000 each month to our trainers.
Let’s assume we have 20 trainers who are using our program instead of just five. This completely changes how our business looks. Instead of focusing on picking a few key trainers, you’re allowing the trainers to generate the content on the site themselves, and you’re allowing them to figure out what engages their audience.
This completely changes how our business looks. Instead of focusing on a few key trainers, You’re allowing the trainers to generate the content on the site and allowing them to figure out what engages their audience. This approach would open the opportunity to set up these trainers to earn more money as the audience grows.
It’s likely that some of these trainers are active on social media, and are probably using their own platform to motivate people to come back to your gym. This means they’d be a natural fit for a percentage based affiliate program for the new signups, which could stack nicely with the shared pool program.
Obviously all of this is napkin plan numbers, but the point I’m trying to make here is that a percentage based affiliate program is not your only option when you’re looking at your business. In fact, sales isn’t even the only goal you can accomplish with an incentive program. All of these programs have a common thread.
They’d look at the desired outcome and figure out how to incentivize people to get that desired outcome. When we had an overstock of pants, we created a program that paid people to sell those pants.
When we needed to sell our inexpensive subscription, we used a fixed payout program that made the offer attractive enough to motivate our affiliates.
To help with retention, we created a program that paid someone based on how many people we have as current customers.
To help with content retention and sales, we created a performance weighted pool distribution program.
And I’m sure there’s other ways to approach solving these specific problems. Spend some time looking at your business. Is there a problem that can be improved upon or solved entirely with an incentive program?
 Thank you for joining us in this episode of Partnership, where your network is the wind in your sails. I hope you found today’s discussion insightful and inspiring. Remember, the strength of your business lies in the partnerships you build and nurture. If you enjoyed this episode, please subscribe, rate, and leave a review.
For more tips and insights, visit our website at partnership.fm. This is Alex Standiford, sailing out.
