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Understanding different payout models in performance marketing Share via

By: Mohamed Nour

If you’re an advertiser questioning how to get your affiliates to promote your products and items keenly, you may probably start by exploring how you’re paying them. The affiliate payout models any advertiser selects will influence affiliates’ enthusiasm and incentives, and there is no lack of options to choose from.

Commissions are the cash-cow that advertisers can use to attract and keep the best affiliate partners. Therefore, advertisers will need to ensure that these cash cows are attractive enough to create interest while still protecting the marketing budget and allowing them to turn profit.

There are many affiliates payout models that advertisers can select from to achieve this stability, and there are still cases where advertisers may want to get together some payout models to satisfy both advertiser and affiliates’ needs. There are instances where advertisers are unable to decide the best payout choice as they lack an understanding of all the details. This blog will clarify how most popular payouts structures work and provide practical performance marketing tips that advertisers can use to improve their program.

Pay Per Sale (PPS)

PPS is the most used payout model. Some studies state that over 80% of affiliate programs online use the PPS payout model because it is one of the most accessible payout models around.

As the name suggests, advertisers pay a commission for each sale produced by an affiliate using coupons, which advertisers can calculate as either a percentage or a flat dollar amount. Moreover, advertisers will have to choose whether they will be offering that PPS commission as a one-time payment or an ongoing one.

Advertisers and affiliates prefer PPS for an affiliate payout model because it’s simple. Beyond simplicity, this payout model offers a few benefits to the advertisers that apply it. There are four leading benefits of PPS:

  • Long-term success: PPS is focused on bringing in paying customers, which has a greater chance of generating repeat sales than low-quality leads with only interest in the brand.
  • Scalable and flexible: Whether the brand is well known or in the brand awareness stage, PPS will have a role to play a part that can scale as the business grows.
  • Increase sales: As a result of analyzing numbers, advertisers will start to see where they can make slight improvements to boost sales, increase revenues, and lower costs.
  • Excellent ROI: There’s little cost upfront, and since advertisers only pay when a sale is made (and revenue is generated), ROI on PPS should be excellent.

PPS compensation is suitable for nearly every affiliate marketing program, given that, ultimately, every brand seeks to generate more sales. However, there are a few details advertisers have to look after to get the most success out of their performance marketing.

Points to consider

Before you go all-in with a PPS payout model, make sure that you’ve considered the following points:

  • Start by calculating how much you’re willing to spend and creating a set budget.
  • Performance is everything. So you’ll need to prepare your affiliates with info and updates that they need to refer new sales consistently.
  • An affiliate coupon tracking system is vital to PPS compensation, so be sure you have an accurate system in place to record those numbers.

Watching out for these potential pitfalls and employing best practices will provide your brand with an advantage, should you choose to go with a PPS commission scale for your affiliates.

Pay Per Lead (PPL) and Pay Per Click (PPC)

PPS might be the best affiliate payout model, but it is not the only one. Other payout schemes of note include PPL and PPC.

When advertisers pay per lead, they will be giving out compensation to the affiliates for every conversion action they receive. These might be downloads of a trial software program, newsletter signups, etc. — the advertiser may determine the parameters according to their requirements.

On the other hand, the PPC model works just as it appears. Advertisers compensate affiliates for every click of their referral link that sends a unique visitor to the website – and that’s it.

The problem with these two payout models is that they aren’t as prevalent on their own because there’s a greater likelihood that they’ll only bring to advertisers’ low-quality traffic that won’t result in sales or long-term users.

Therefore, when using PPL or PPC models, you’ll want to be sure that you’ve taken the precautions required to prevent any overflow of fraud and fake traffic.

Conclusion

The advertisers’ performance marketing strategy should center on attracting high-value partners and keeping them happy. Money is the most effective way to achieve that goal, and understanding the most common rewards and affiliate compensation model is a definite first step.

Besides understanding these affiliate payout models, the advertiser must also implement them properly.

That’s where affiliate management platform like Boostiny comes into play. Boostiny makes it easy for advertisers to craft the best PPS commission structure and issue payouts to their affiliates. Check it out to see how it can help you put all the pieces of your affiliate program into place today.

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