Lowering Affiliate Commissions in the face of the recession?

Here’s a scenario which, I feel, would soon be very common:

The commission rate of one of the affiliate programs I manage has, from the very beginning, always been at Z% but due to the economic climate and the fact that management wants to be able to provide better, more competitive customer-facing offers by freeing up margins on some of their lower-margin product categories, they set into motion a plan to implement item-based commission tiers.

To give you an idea:

Product Category 1 would pay X% Commission
Product Category 2 would pay Y% Commission
Product Category 3 would pay Z% Commission

Note that X% and Y% is lower than the merchant’s current commission rate and it was management’s directive to also lower the program’s default commission rate.

Lessening, if not avoiding publisher attrition when it’s absolutely necessary to lower your program’s commission rate

No matter what you do or how you message the change to your publishers, lowering commission rates will leave a bitter aftertaste in most affiliates’ mouths.

There will, most definitely, be some pushbacks from your publishers so, how do you, as a merchant, make this change more palatable for them? Here are a few tips:

• Try to increase or maintain the commission rate on your higher margin products or your perennial top-sellers. This way, the transition to item-based commissions would not be perceived as a drastic commission cut and might even be perceived as an opportunity.
• Make aggressive (preferably the best your margins would allow) customer-facing coupons available for your publishers for a time after you switch over to the item-based commission model. This way, you sell the fact that conversion rates should go up with the better discounts your freed up margins could afford
• Your freed up margins should also allow you to run more attractive incentive programs and bonus campaigns

I personally did all three. The result: The program I implemented item-based commissions on exhibited a significant increase in revenue while lowering overall commission spend.

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