What pricing model does affiliate marketing usually use?
Type of Pricing Model
- CPC (Cost Per Click)
Charge commission when end user clicks on publishers’ website to redirect advertisers’ (merchants’) website
- CPA (Cost Per Action)
Charge commission when end user through publishers’ website redirect to advertisers’ (merchants’) website and completed a *desired action.
- CPS (Cost Per Sale)
Charge commission when end user through publishers’ website redirect to advertisers’ (merchants’) website and completed a purchase
For CPC and CPA model, this is a fixed cost which we are confirmed before the campaign starts. (e.g. CPC HK$3, merchant needs to pay HK$3 on each click; CPA HK$ 50, advertisers (merchants) need to pay HK$50 on every succeed action)
For CPS model, this is a fixed commission rate which we are confirmed before the campaign starts. (e.g. CPS 10% & Order Amount: HK$1,000, advertisers (merchants) need to pay HK$100 on each transaction)
If you are going to do affiliate marketing, which pricing model is the most suitable to your website?
Factors to determine using which pricing model
Types of Merchant & Conversion Point
- E-commerce website: CPS model (This is a fair approach, as the higher the order amount, the higher commission merchant gives)
- Non-Ecommerce website: CPA model (Depends on what target they want to achieve, e.g. bank industry, beauty company, they want to get more application or compete form)
Product Category on e-commerce website
- Single product: either CPS or CPA model (If merchants’ website have one product or only a few products selling on its site, they can use CPA or CPS model, as using CPA model is easier to calculate their cost)
- Variety of products: CPS model (As mentioned, order amount of each transaction will be different, so using CPS model is more reasonable)
Product Life Cycle
- Introduction Stage: CPC model (As merchants’ website is newly launch and doesn’t have too much traffic or doesn’t have any reputation on its site, we can use CPC model to work out first to initiate our publishers promoting merchants’ website and start to bring traffic because it is hard to generate sales at the beginning stage)
- Growth Stage – Maturity Stage: CPS model (As merchants’ website is during growth stage and normally it has a stable traffic so advertisers (merchants) can rely on publishers’ side to get more exposures and even generate sales. Once connected with affiliate network, we can bring over 10, 000 publishers to promote.)