Summary: In this article you’ll learn about the benefits and drawbacks of offering affiliate recurring commissions on your membership site. You’ll also learn how to set up recurring commissions with SliceWP for a Paid Memberships Pro powered site.
Settling for a particular commission strategy for your affiliate program is a daunting task and can lead you to a sort of choice paralysis.
You can take many routes, some good, some not so, but ultimately there’s no right way of doing it. You’ll need to put pen to paper and analyze what makes the most sense for you.
For a membership site, one particular strategy is offering recurring commissions to your affiliates.
In the SaaS (site as a service) world, this strategy has become popular. And it’s understandable why. Affiliates are drawn to the idea of referring once and getting paid on a regular basis for that initial referral.
But as with anything, this is a double-edged sword: for affiliates it can be a great incentive, for you it might be a financial burden.
One-time versus recurring commissions
While there are hot discussions on which of these two strategies is better, both have benefits and drawbacks.
And before we go any further, I want to say something that should go without saying. Offering a great product or service to your customers is crucial for a successful affiliate program.
If people don’t see value in what you provide, no affiliate will promote you in the long run.
Also, if affiliates are constantly being rejected commission because of refunds, they’ll likely abandon promoting you.
Now back to commissions.
In general, one-time commissions will tend to be higher than recurring ones. This is especially true if you charge periodically (weekly/monthly/annually renewals) to provide access to your membership site.
Affiliates know the value of the referrals they send your way and that these referred customers will generate continuous revenue for you.
Offering a one-time 20% commission won’t be much of an incentive for affiliates to promote your membership site, especially when they know you have a great service and that you’ll be keeping these members for months, or even years, to come.
At this point, you have two options:
- Offer a larger one-time commission, which can be extremely beneficial for affiliates, but can be financially unfavorable for you.
- Offer smaller recurring commissions, which can be beneficial for both sides (more below).
For once, for affiliates striving to build passive income, recurring commissions are a great fit, as they’ll receive period payments for members they’ve referred just once.
And for you, as a business owner, you won’t have the financial burden of a high one-time commission payout, but rather you’ll be able to distribute and minimize the impact with several smaller payments.
Also, an additional benefit of the recurring option is that you’ll be paying commissions only when renewal orders come in. Compare this with one-time commissions where you pay a larger sum without knowing if members will continue their memberships or cancel after a short period.
All in all, the recurring commissions strategy is favorable for membership sites.
So, let’s see how you can set them up for your Paid Memberships Pro powered site. Alongside the set up process, we’ll also go through a few particular strategies you can apply with recurring commissions to make your offer appealing for affiliates while keeping your profits as high as possible.
Setting up recurring commissions for your Paid Memberships Pro website
If you don’t already know what Paid Memberships Pro is, it is a powerful WordPress plugin that can help you create a full-fledged membership site in no time. You’ll be able to subscribe members, accept recurring payments and restrict your content without writing any code.
If you’re already familiar with the plugin, you know it’s pretty great.
Just a quick reassurance: everything presented further will be done with a mouse/touchpad and a keyboard, no code.
With everything up and running, let’s jump in and set the one-time commission rate.
Step 1: Setting the commission rate for the subscription’s first order
With SliceWP you can set a custom commission rate for the first order of a membership’s subscription and a custom rate for commissions linked to recurring orders of the same subscription.
By allowing the two rates to be set individually, you’ll have more options to customize your commission strategy.
For example, you’re able to combine the best of both worlds and offer a higher initial commission, while dampening the financial burden over time with smaller commissions.
Let’s say your site offers monthly memberships. To set the commission rate for the initial order of a subscription:
- Navigate to your WordPress admin dashboard > SliceWP > Settings > Integrations (tab).
- Enable the Paid Memberships Pro option and then switch to the General tab (it should be the first one).
- Scroll down until you find the Commissions Settings section and set the value for the Subscription Rate.
As you can notice, there are two rate types: percentage and fixed amount.
For the fixed amount amount, it’s pretty self-explanatory. The commission rewarded to the affiliate will be the exact amount you set, regardless of what membership level the referred member subscribes to.
In the percentage case, the commission will be calculated based on the membership level’s price and the commission rate value.
As a quick example, let’s say you price your monthly membership level to $50/month, and you have a commission subscription rate of 20%. In this case, the initial commission rewarded to the affiliate, for a referred member, will be $10.
Step 2: Setting up the recurring commission rate
Now that we have the initial commission set up, it’s time for the recurring commission rate. To set it up:
- Navigate to your WordPress admin dashboard > SliceWP > Settings > General (tab) > Recurring Commissions (section).
- Enable the Enable Sitewide option, if you wish to have recurring commissions generated for all of your membership levels and for all of your affiliates. If you want to offer recurring commissions only for certain membership levels (more on this later), leave this option disabled.
- Set the value for the Recurring rate.
Similar to the initial commission rate option, you can opt for either a fixed amount or for percentage based commissions.
These options are useful for an aggressive strategy, meant to attract affiliates, where, let’s say, you’d offer an initial fixed amount higher than the price of the membership level’s price and then a percentage based recurring commission.
For the example above, with a membership level priced at $50/month, you could opt for a $75 initial commission, and a 20% recurring commission. I know these numbers might scare you as a business owner, but try to put yourself in the affiliates’ shoes. It’s pretty enticing.
Admittedly, the above rates may be too high for most business owners. And if you feel the same, know that there are certain strategies you can apply to keep the offer appealing for affiliates without cutting too much into your margins.
Limiting recurring commissions
The thought of offering commissions until a subscription ends, which can be years, can be a frightening prospect.
If your membership site will be long-lived, you could end up rewarding affiliates quite a lot of commissions for one single referral.
This, inherently, is not bad. However, at the end of the day, you could use the extra money to grow other parts of your business.
It’s hard to tell years out what a good affiliate commission rate will be. It’s hard to even know what the price and structure of your membership is going to be. Prices go up. Prices go down. Memberships get merged together, split apart, or retired.
Committing to a specific affiliate commission for more than a few years can lead to difficult business situations. There have been cases where companies suddenly cut recurring commissions, leaving their affiliates dead in the water. As you can imagine, if you end up in a similar position, those affiliates will be reluctant to work with you again.
So, to counter a scenario like this, you can opt to reward commissions for a certain number of orders. For example, in the case above with a monthly membership, you can limit the recurrence to a fixed number, let’s say 5 or 11. Add the initial commission to this number and that would make half a year, respectively a full year, of monthly commissions, which is still attractive.
This way, your affiliates will have a clear view of their revenue potential, you’ll be more protected from offering too much and the chances to cut these commissions in the long run will be lower.
So, let’s set a limit for the number of commission recurrences. To do this:
- Navigate to your WordPress admin dashboard > SliceWP > Settings > General (tab) > Recurring Commissions (section).
- Set the Recurrence option to Limited.
- Set the Recurrence Limit value to the number of commissions you want to offer affiliates after the initial commission.
Tiered commissions structure
From a business perspective, not all membership levels are the same.
The chances are that your priciest level also has the highest margins. In this case, it would make much more sense to convince members to subscribe to it, compared to lower-priced levels, as it would bring in more profit.
Here’s where a tiered commissions structure can help. Let’s take a quick look at the following example that has different commission rates for each membership level:
- Bottom Tier ($30/month): $10 initial commission and 5% recurring
- Middle Tier ($50/month): $15 initial commission and 10% recurring
- Top Tier ($70/month): $20 initial commission and 15% recurring
The Top Tier level is far more attractive for an affiliate to promote. Chances are their efforts will go solely to promoting the benefits of the Top Tier level, neglecting the other two.
However, at first glance, this strategy may not look too attractive to you, as a business owner. It’s clear that the more referred members you have for the Top Tier level, the higher your affiliate payouts will be.
However, there are two benefits not immediately apparent:
- More members on the top tier level is actually a good thing. Our hypothesis was that your highest priced level also has the highest margins. This should be the case for you. Considering that affiliate commissions should be factored into your pricing, as they are part of your costs, your profits will not suffer. On the contrary, the more referred users join your Top Tier level, the better.
- Lower affiliate payouts for lower levels. Because lower levels also have lower commissions, the profits from them will be higher, compared to offering the same commission rate for all levels.
So, to set up the tiered structure described above, you’ll have to edit each individual level and set the subscription initial commission rate and also the recurring commission rate.
- Navigate to your WordPress admin dashboard > Memberships > Settings > Levels > Click to edit the appropriate level.
- In the level’s edit screen, scroll down until you reach the Subscription Commission Settings section.
- Here, set the Commission Rate Type to Fixed amount.
- Then, for the Commission Rate option, set the value to 20. With these two options set, the initial subscription commission will be $20.
- After adding the subscription rate, set the Recurring Commissions option to Custom.
- Then, set the Recurring Rate Type option to Percentage.
- And lastly, set the Recurring Rate to 15. With these settings, the recurring commissions will be 15% of the level’s amount.
As you can notice, there are quite a few strategies you can apply for your affiliate commission rates. And, at the end of the day, there’s no clear right way of doing it. It’s all very nuanced and depends on your business and the market you are in.
The two key takeaways I believe are really important for you to remember are:
- Offer a high enough commission so your affiliates find your offer enticing.
- Take advantage of the power of recurring commissions to lower your financial risk.