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As online marketing becomes increasingly competitive, it is paramount that affiliates constantly seek out new ways to maximize their profit margins. One way to increase the bottom line is to promote programs that offer recurring commissions.
What are recurring commissions?
Recurring commissions allow affiliates to earn revenue beyond the initial sale. Instead of merely earning a percentage on the initial sale, recurring commissions allow the affiliate to profit from subsequent billing. For instance, if a customer signs up for a Web site subscription for 30 days, the affiliate will earn a commission on the initial sale along with a percentage of any subsequent rebills.
Publishers determine the length and frequency of the billing periods. The recurring income can range from 10-75% and is usually dependent on the price of the product and the publisher’s affiliate commission.
Recurring commissions allow affiliates earn residual and passive income from their marketing efforts. Marketers with a solid base of recurring commissions can reap the rewards of these passive sale, month after month, with virtually limitless profit potential.
One way to think about the lucrative nature of residual income is to look at the system of television syndication. When a program such as “Seinfeld” airs on network television, the creators profit from the deal with the network. However, the real profits occur when such programs go into syndication. The creators are then paid residuals each time the program airs in re-runs. This is where the lion’s share of profits is made in the world of television, and can also be a model for the explosive profit potential of recurring commission-based affiliate programs.
What are the advantages to the affiliate?
As PPC costs rise amid an increasingly competitive marketplace, recurring commissions offer a tremendous opportunity for affiliates to increase their earnings per click.
For example, if an affiliate converts a sale for $30 with 50% commission rate, they would gross a $15 profit before PPC costs.
If we assume $5 in PPC costs, the affiliate is then left with a $10 net profit. Under a non-recurring commission structure, the story would end there.
However, if the affiliate is promoting a program that offers recurring commissions, the affiliate could potentially net additional profits each time subsequent sales are made. Due to the fact that these commissions will accrue without the affiliate incurring additional marketing costs, the net profit goes directly to the bottom line.
Therefore, instead of the initial sale being worth a $10 profit, the conversion has the potential to generate hundreds of dollars over the lifetime of the customer’s subscription.
Keys to earning consistent recurring commissions
In order for the affiliate to reap the bounty of recurring commissions, the customer must find continuous value in the product. Many programs convert, but far fewer are able to retain their customers on a long-term basis. It is important that the affiliate focus their efforts on high quality, high value programs that offer ongoing value to the customer.
In the current market environment, every penny counts. Affiliates can increase their net profits by promoting retention-based programs that offer recurring commissions. These residual and passive income streams can be extremely lucrative, with virtually limitless profit potential.