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October 18th, 2005, 12:10 PM #1In a tiered structure, how are commissions calculated normally?
Lets say that a merchant has the following tiered commission structure: 0-1000: 10% comm., 1001-5000: 15% comm., 5001-10000: 20% comm., and 10001 and up: 25% comm.
Lets say an affiliate had $7,000 in sales. Now how is the commission calculated? There can be two methods:
1. The commission is calculated as 10% for the first 1000 ($100), 15% for the next 4000 ($600), and 20% for the next 2000 ($400). So total commission = $1100
2. Since 7000 falls in the 5001-10000 tier, the affiliate gets 20% of entire 7000. So total commission = $1400.
So which method is generally followed by the merchants and the networks?
October 18th, 2005, 12:36 PM #2
I would believe it's the latter, as the whole point is in the remuneration of better activity.
I'd be interested in what others have to say too.
Geno Prussakov AM Navigator LLC Twitter.com/ePrussakov We Manage: These affiliate programs My Services: Affiliate program management, audit, consulting, speaking
October 18th, 2005, 01:38 PM #3
I think it all depends on the merchant. If a merchant comes from an accounting background, they'll do it the first way :-( We recommend the latter to our merchants out of fairness to the affiliate.Susan Arts
Senior Vice President, Marketing
October 18th, 2005, 03:12 PM #4
You need to read the Terms of Service -- both ways are used. While the second method pays more up front to the Associate it restricts the flexibility of merchants. If you expect to be a making big sales you are more likely to get special terms from a merchant running the first method.
October 18th, 2005, 04:19 PM #5
- Join Date
- January 18th, 2005
Usually merchants opt for giving affiliates the full specified percentage when they pass the threshold.
I have rarely heard of breaking it up. It is a reporting nightmare and doesn't add much incentive.
October 18th, 2005, 04:22 PM #6
- Join Date
- July 26th, 2005
I have only worked with the second way you specified, but different merchants do things differently.
October 19th, 2005, 01:13 PM #7
I too have been seeing both the methods being used and thats why was wondering what might make more sense.
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