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DM Confidential is a leader in the Affiliate marketplace. The DM Confidential Newsletter and web site is focused on the online marketing industry. To read more from DM Confidential visit: www.dmconfidential.com

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Two sides of a performance marketer’s salary

Written on
Sep 15, 2009 
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DM Confidential  |
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Two sides of a performance marketer’s salary

ppc_small.jpgDM CONFIDENTIAL – Human nature is a funny thing. It makes us act in a lot of ways we might not have predicted, yet in ways we can easily rationalize after the fact.

For instance, whether we admit to it or not, many of us are quite competitive. We might know that we can’t beat Roger Federer, but we can’t help comparing ourselves to others. We like having a frame of reference, almost regardless of the subject. Some areas tend to draw more emotional involvement than others, these are ones where we tend to care more about how we compare.

And none seem to bring out the competitive spirit, than the question of worth and value like that of compensation. Hard as we may try, most people can’t help but want to know how they rank compared to their peers. That information can become a Pandora’s Box though, especially when people find out that others make more, especially when they feel they bring less.

The performance marketing world, especially that of the cpa network, has some highly paid employees. The nature of our businesses mean that many of those working for cpa networks can attribute their efforts directly to the bottom line. Typically, the more you can impact the earnings, the more money you can make. Excluding owners, the employees who tend to make the most either deal with the advertisers, or they deal with the publishers.

What makes these positions rather interesting is the level of transparency involved. One affiliate manager might not know exactly another’s salary, but they can figure out in the ballpark what their total compensation might look like. Most people receive a base salary plus incentives based on gross profit. The availability of stats means that they can make some assumptions about how they might compare to their fellow employees. By and large, there is some fairness to the system. There are always those who have the better accounts by luck or by some other gift and whose earnings bring about some feelings of unfairness. Usually, though, the cream rises to the top and the cream rakes in the dough.

Something funny happens, though, when top earners start thinking about their earnings; they often decide that they don’t make enough. This usually happens when they compare what they make to what they feel they make the company. Let’s look at a couple purely hypothetical examples.

In one scenario, it’s an account manager dealing with publishers. Their publishers earn the company one million dollars per month at a 20% gross margin. Doing the math, they earn the company 200k per month, annualized to almost $2.5 million. Typical compensation on the high side would mean an almost six figure base plus 7% of gross margin. (That’s on the high side. The more normal range is 3% to 5%.) Assuming a base of 84k, they would make $84k + ((.07 * 200,000)*12), or $252k per year. Let’s assume they had a really big book of business, one doing five times that amount, it would increase their yearly take home to just north of $900k. The company makes more than $10mm in profit, and they make almost one. That assumes an uncapped commission structure and/or are on the lower end. They could have made their company 5mm + in gross margin, but taken home $150k.

The $5mm to $150k gets especially divisive when those making the money see it going out the door. Those that own the company, have every right to use the profits how they see fit, but when done without discretion, it leads to some potential irrational thinking on the part of the employee. It’s not the only driver of the You’re Not Paying Me Enough Syndrome, but it sets it off pretty quickly.

As it’s human nature, you can pretty easily imagine what would set it off – lack of recognition, no pay increase despite performance increase, lack of communication, etc. The question is what should be done? Would increasing what one makes do the trick or would it simply set the expectation of continual increases? Or, have the two sides reached some sort of impasse.

As with every dispute, every side will feel empowered. The owners/management would hesitate to start giving away the farm for multiple reasons. One is that they put the infrastructure in place and they must pay for that infrastructure on an ongoing basis. Another is the precedent it sets for others, a flood gate of increased expenses. Yet another has to do with times like these where there is legal scrutiny.

The company needs a war chest to pay for unseen expenses and to fund future growth. When people at least feel part of the team, they understand some of the points that aren’t about them. For those who still feel themselves better served by departing because they aren’t getting their fair share, it comes down to risk. It’s a big financial risk, not just in lost income, but given that it might not work.

You might not be able to get the pieces together – offer, traffic, money for payouts, technology set up, graphics, etc., all with enough left after to pay you the same. Those ready and looking for that different type of headache, will do it regardless of what they make at a current job. That’s why the answer isn’t just to part ways and have both sides suboptimal.

The best solution is for both to be proactive and prepared. As an employee, be ready to discuss and have your facts but know too what it means to leave. As the employer, watch out for those contributing a disproportionate amount and realize how they could feel.

Courtesy of DM Confidential editor





Reader Comments.

I reasd this on DM kast week. — can you get them to provide more unique content

Posted by tom storm | 4:14 pm on September 15, 2009.

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