An good question came from a beginning affiliate program manager:
I have been in the affiliate marketing industry for 5 years and I know your expertise in the industry very well.
I wanted to ask you about the industry standard for affiliate manager compensation. I have been approached by a small website to manage their affiliate program. Their sales are about $2000-3000 per day. I would only like to charge them commission for my services. What is the industry standard for running an affiliate program based on commissions only?
I replied to them privately, but also got their consent for answering this question in my blog. So here we go:
In-house Affiliate Managers
Structure: Salary + benefits + bonuses
Earnings range: Per Affiliate Summit’s AffStat 2007 Report (yes, a little dated, but still), the vast majority of respondents (48%) stated that their annual salary is $40,000 to $50,000 or under [source]. Taking the economical crisis (and consequent inflation) into account, this roughly corresponds to affiliate manager’s national average salary as reported by SimplyHired.com who stated that as of July 2011 it was $66,000 per year — averaging $77,000 in the State of New York, $75,000 in California, $69,000 in Illinois, and $61,000 in Texas [source].
Outsourced Affiliate Program Managers
Structure A: Monthly retainer + performance bonus [more here] where the latter may be tied either to the affiliate-referred sales volume or to gross affiliate payouts (incremental, if we’re talking an existing affiliate program).
Structure B: Flat monthly fee.
Structure C: Commission only.
Earnings Range: Again, per the above-quoted source back in 2007 the majority of OPMs (35%) were earning $8,000 or more a month, or $96,000 to $120,000 or more annually. Another large segment (35%) reported making between $4,000 and $8,000 a month (22% – $4,000-$6,000, and 13% – $6,000 -$8,000); while the rest were making under $4,000 a month.
The big question is, of course, how much should you charge in those performance bonuses (or as our above-quoted colleague asked: how much should I charge them in commissions)?
The answer is always: it depends. The two main situational variables here are: (i) the brand (the size and recognizably of which will directly impact your conversion rate), and (ii) the vertical (a bargain electronics store will have a substantially slimmer profit margin than a sterling silver jewelry manufacturer, for example). In the course of the past decade I’ve managed over 70 affiliate programs as an OPM, and had those performance bonuses range from 2% to 35% (of the order value) with online retailers, and a few times exceeding 50% with service providers (with whom it is more common to tie the manager’s commission to the affiliate payout).
Do your due diligence on the profit margins in the vertical you’re considering, factor in the merchant’s competitive payouts to affiliates, and any additional expenses (e.g.: payments to an affiliate network on which the program will be run) they will incur; and only then make your offer. Stay flexible, and work with the merchant on this one. After all, it has to work for all parties involved.