Compensation Methods For Online Marketing
The industry has understood the power of online marketing and companies use various ways of compensations for them.
Compensation methods may be categorised into two types:
- 1. Executive Compensation
- 2. Deferred Compensation
Compensation methods are used for the different types of online marketing, including affiliate marketing, search engine marketing (including vertical comparison shopping search engines and local search engines) and display advertising.
Various Compensation methods that market tends to follow these days
1. Sharing of revenue: In this method, the advertiser gives the publisher some percentage of the sale created by a customer. This method is also known as revenue sharing.
2.Pay per action: Advertiser pays publisher a commission for every visitor referred by the publisher to the advertiser (web site) and performs a desired action, such as filling out a form, creating an account or signing up for a newsletter. This compensation model is very popular with online services from internet service providers, cell phone providers, banks (loans, mortgages, credit cards) and subscription services.
3. Cost per click: In this the advertiser pays the publisher each time any client clicks on that particular link. However this method is not very popular for the promotions of brand names.
4. Fixed price: In this the advertiser pays a fixed amount of money to the publisher over a specified time period. It does not matter whether the client has viewed the ad or not.
These were some of the predominant Compensation methods.
Some other pricing modes in display advertising which is a part of online marketing:-
- According to impression: Publisher earns a commission for every 1000 impressions of text, banner image or rich media.
- Cost sharing: two or more advertisers share the same ad space for the duration of a single impression (or page view) in order to save CPM costs. Publishers offer a discount to compensate for the reduced exposure received by the advertisers that opt to share online ad space in this way.
Other performance-based compensation
CPA (Cost per Action or Cost per Acquisition) or PPP (Pay per Performance) advertising means the advertiser pays for the number of users who perform a desired activity, such as completing a purchase or filling out a registration form. Performance-based compensation can also incorporate revenue sharing, where publishers earn a percentage of the advertiser’s profits made as a result of the ad. Performance-based compensation shifts the risk of failed advertising onto publishers.
How to select the compensation methods?
- The selected compensation method must be good enough for both sides
- The flexibility of the method is another important factor and it should be easily altered according to the needs in the future.
- Easily understandable and easy to implement and manage.
- The method should not only act as reward or compensation mechanism for the resources utilized but should help in creating positive thoughts within the agency’s practices and environment.
All the above mentioned methods are not so popular in some areas of online marketing but these methods may prove as an asset in some nascent industries.
The phrase is not wrong if anyone would use it for the right purpose for online marketing is an extended sales force for an entrepreneur to make his business more efficient and these methods will help in maximising his profits.
The following Wikipedia article gives further details on compensation methods for online marketing – http://en.wikipedia.org/wiki/Compensation_methods