If you conduct affiliate marketing as an advertiser and attract partners to promote your offers, then you will inevitably have to make affiliate payments. How to correctly calculate the payouts in your affiliate program, so that later it would not be excruciatingly painful? Let’s talk about this today.
How to make a budget calculation
If you are an advertiser and owner of an affiliate program, then it is unlikely that you created your affiliate program out of altruistic motives. You want to make money on it, right? Not even like that. You attract partners to earn on your affiliate program with their help.
It may seem to an inexperienced advertiser that since affiliates spend their money on organizing advertising campaigns and generating sales, there will be no particular problems with affiliate payouts. After all, they are carried out only at the expense of sales made by partners?
Alas, it is not. Let’s say you trade physical goods. This means that it is you who bears the cost of their delivery to the final consumer. Returns, by the way, are also paid by you.
Even if you provide digital services, for example, you have an online platform with some kind of service where you attract participants, don’t you bear the costs of maintaining it, maintaining it as normal, expanding and improving it?
Plus, you have other expenses as well. Some of them are permanent and predictable – like renting servers or paying for hosting, and some are “floating”. For example, this month you planned to spend $1,000 on advertising your affiliate program, and next month you want to spend $2,000 on attracting partners.
In addition, you will inevitably have to make affiliate payments, because affiliate marketing does not work differently.
The scheme is the same for UK, USA, EU countries and beyond – everywhere.
So, the first thing an advertiser will need is to make a budget calculation, which will include both fixed and one-time costs, contingencies and planned income from affiliate marketing.
What items should be included in the budget calculation?
All of the above and more.
Suppose you are the owner of an affiliate program, you do not work alone, but have organized a full-fledged company with a staff.
Each of the employees receives a monthly salary (by the way, you also pay most of the taxes for your staff).
Should these costs be included in the budget? Definitely!
And if your employees do not work remotely, but sit in the office, then you still pay monthly rent for the premises, right?
Further. Let’s assume that your affiliate program is located on a third-party online platform.
For example, for placing your affiliate program on the Alanbase online platform, you will pay $500 monthly at our minimum rate (this is far from the highest price for an online platform with the functionality that Alanbase has!).
We also take into account these monthly expenses when calculating the budget.
The cost of your affiliate marketing advertising campaigns is another item that you cannot do without when calculating the budget. Partners do not fall on you from the sky, they need to be attracted and attracted regularly. Another thing is that the advertising budget, as mentioned above, is a floating value. But one way or another, you spend money on it.
Now we will smoothly move on to affiliate payments, without which affiliate marketing does not work.
What an advertiser should take into account when calculating the amount of affiliate payouts
When calculating affiliate payouts, an advertiser first of all needs to take into account their commercial interest. Make the calculation in such a way as not to go into a minus.
A little earlier, we reminded you that even when your partners seem to be paying the bulk of the advertising money, you still bear your own costs for the delivery of physical products or for the maintenance of digital ones.
The second equally important parameter is to know what affiliate payments your affiliate marketing competitors make to their partners. You can focus on this figure, and make affiliate payments to your webmasters 5% -7% higher if your financial capabilities allow it. This approach does not mean that you will receive less profit in affiliate marketing, because you will increase the size of affiliate payments. Rather, on the contrary.
If you are the same 5% more interesting for potential partners, you will be able to attract more webmasters to your online platform. And due to the volume, you will get more profit in the end, with which you will make affiliate payments without any problems.
In any case, you still have to calculate the economy of your affiliate program. And it is better to do it constantly, not to let the process take its course, if you have come to affiliate marketing seriously and for a long time.
We wish you good profit and high conversions!
And if you need an online platform with powerful statistics tools and other good tools where you can deploy your affiliate program very quickly, we remind you that we created Alanbase specifically for this purpose.