So I was sitting in the Honda dealership today chatting with another customer about affiliate marketing and how multi-tiers worked.

I realized how hard it was to explain to people - we talk about
2nd tier but does that mean the new affiliate referred by the
existing affiliate or the other way around?

And how do the commissions get calculated?

And what's the most a merchant needs to pay out if
some affiliate 4 levels down makes a sale - is that a good thing?

It should always be a good thing, if you've set up the system to
optimize your profits while keeping your affiliates happy.

I went to work and put together a little spreadsheet which
can help you sort this stuff out. Even if you know it, you
might be able to use this to explain it to someone else.

This tool is free to ASR subscribers - consider it your
Halloween treat.

Just login with the site account and pick it up from the bottom
of the Resources page.

Once you are logged in on the site, go here and scroll down to the bottom to grab your treat.
http://www.affiliate-software-review.com/resources

The really neat thing is that you might think of offering 50%
commission to several levels. The calculator will show you what
the worst case payout could be.

But what's neat is that in most cases the affiliate network is
wider than deeper, so sales will be made by
1st or 2nd tier affiliate levels at most, and so your offer and
what you pay out on average are not necessarily the same.

Let me know if this helps.

--- (Edited on 10/10/2006 3:27 pm [GMT-0500] by Peter) ---