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How does recurring commission work?
Recurring commission in affiliate marketing refers to a compensation model where affiliates earn a commission each time a referred customer makes a recurring payment or renews their subscription. This is typically used with subscription-based services or products, where the customer is billed periodically (e.g., monthly, quarterly, or annually).
How Recurring Commission Works:
- Affiliate Referral: The affiliate promotes a product or service with a recurring payment model (such as a subscription, membership, or SaaS product) and refers customers through their unique affiliate link.
- Customer Sign-Up: The referred customer signs up for the product or service and agrees to pay on a recurring basis (e.g., monthly or annually).
- Ongoing Commission: The affiliate earns a commission not just on the first sale but also on the subsequent payments made by the customer. This continues for as long as the customer remains subscribed or continues using the service.
Example:
- An affiliate promotes a monthly subscription to an online software service, which costs $50 per month.
- When a customer signs up, the affiliate may earn a recurring commission of 20%, which means they earn $10 every month as long as the customer keeps their subscription active.
- If the customer cancels after six months, the affiliate will only receive commissions for those six months, but if the customer stays subscribed for years, the affiliate keeps earning monthly commissions.
Key Features of Recurring Commission:
- Ongoing Earnings: Affiliates earn money as long as the customer continues to pay for the service, which means they can have a long-term stream of income from their initial referral.
- Payment Cycle: Recurring commissions are typically paid in line with the customer’s payment cycle (monthly, quarterly, annually). The affiliate is paid after the customer’s payment is processed.
- Higher Lifetime Value: Since the affiliate earns commission on each recurring payment, the longer a customer remains subscribed, the more money the affiliate earns from that customer over time.
- Subscription-Based Services: Recurring commissions are most common in businesses that offer subscription models, such as:
- SaaS (Software as a Service) products (e.g., cloud storage, email marketing tools)
- Membership sites (e.g., content or course memberships)
- Subscription boxes (e.g., monthly product delivery services)
Example of Recurring Commission in Action:
Let’s say you’re an affiliate for a fitness app subscription that costs $30/month. If you earn a 20% recurring commission, that’s $6 per month for each customer you refer.
- If one of your referred customers stays subscribed for 12 months, you earn $6 each month for 12 months, totaling $72 in commission.
- If you refer 10 customers who each stay subscribed for a year, you’ll earn $720 in recurring commissions over that time.
Advantages of Recurring Commission for Affiliates:
- Long-Term Income: Affiliates can build a steady, passive income stream as long as their referred customers remain subscribed.
- Scalability: As the affiliate grows their audience and continues referring customers, the total recurring commissions can grow exponentially over time.
- Customer Retention Focus: Since the affiliate’s income is tied to the customer’s continued use of the service, it incentivizes the affiliate to promote quality services that offer long-term value, which leads to higher customer retention.
Challenges of Recurring Commission:
- Customer Churn: If a customer cancels their subscription, the affiliate loses the recurring commission. This makes customer retention important for affiliates.
- Delayed Earnings: It can take time for affiliates to build up a substantial recurring income, especially when starting with fewer referrals.
- Competition: Many subscription services offer recurring commissions, so affiliates might face competition in promoting high-quality or well-converting services.
Summary:
Recurring commission is a payment model where affiliates earn ongoing payments based on the recurring subscriptions or purchases of the customers they refer. This allows affiliates to build a passive income stream, especially with subscription-based services, where they continue earning commissions as long as the referred customers keep making payments. The potential for long-term earnings makes recurring commission a highly attractive model in affiliate marketing.
