Saturday, October 25, 2008

How does Pay-Per-Lead work?

Over the last 6 months we have seen an increasing number of pay-per-lead programs vying for the attention of webmasters. The advantage that a pay-per-lead program offers is that visitors to your web site do not need to make any type of purchase for you to be able to earn a commission. As prevalent as e-commerce is becoming today, and even though a large portion of the Internet populace is now comfortable with shopping online, it is still, and will probably always be, easier to give something away then to sell something.

Let's take a look at a simple example, using some real data, but with program names changed to protect the innocent (and the guilty). Program A is pay-per-lead and pays $1 for each new user you refer to their free, downloadable software. Program B is pay-per-sale and pays about a $5 commission for a similar software product that costs $25.

An affiliate decides to promote both to see which results in higher overall commissions. After two months of testing, the affiliate referred 271 new users to Program A, earning him $271. He also referred 24 new users to Program B, earning him $120. The affiliate decided to stay with program A for obvious reasons.

Pay-per-lead programs are generally designed to promote some type of free service or product. An example would be Z Media's free email newsletter subscriptions or CallWave's free software download that allows users to monitor incoming calls while they are online. Since the merchant is mainly looking for a way to widely distribute their product or service, they are willing to pay you for each user, subscriber or member you attract. Generally these payments range from $0.05 to $20 for each 'action' taken by one of your referred visitors.

Since no purchase is required by your visitors, you can expect significantly higher conversion ratios (i.e. the number of visitors you refer that go on to earn you a commission). Although pay-per-lead programs generally pay lower commissions than pay-per-sale programs, the higher conversion ratios will often translate into higher overall profits for you.

Although this example is not indicative of all pay-per-lead versus pay-per-sale comparisons, it does illustrate the fact that you can often earn more even if the program pays lower overall commissions. It also illustrates how pay-per-lead programs generally have much higher conversion ratios than pay-per-sale. In this case, the affiliate referred 11.3 new users to Program A for every sale he referred to Program B.

Pay-per-lead also lends itself to a wide variety of marketing strategies. Since you are offering your visitors or subscribers something they can receive for free, you can easily position ads for pay-per-lead offers as a valuable service to them. When done properly, you are adding value to your web site at the same time you are adding a revenue stream.

If you are interested in adding pay-per-lead programs to your web site or email newsletter (an excellent marketing avenue for them), be sure to check out the reviews of pay-per-lead programs.

Also, I highly recommend the Commission Junction program which offers an increasing number of pay-per-lead programs.

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