How Much Commission Should I Pay Affiliates? Wrong Question. (#26)

Start With Your Own Numbers

Before you pick a rate, you need to understand your own economics:

• Average order value
• Gross margin
• Customer lifetime value
• Refund and cancellation rate
• Churn (subscriptions)
• Fulfilment and support costs
• What you already pay to acquire a customer

The last one is the one I’d focus on. What are you already prepared to pay to acquire a customer through other channels?

If you’re comfortable spending $150 to acquire a customer through Google Ads, it would be strange to decide affiliates could only receive $30, simply because 10% “sounds normal.”

Affiliate commission is a customer acquisition cost. Treat it like one.

So I prefer working backwards from the maximum CPA the business can afford, rather than starting with an arbitrary percentage.

A Simple SaaS Example

Take a simple example. Your software costs $100 a month. The average customer stays 12 months. That’s $1,200 in lifetime revenue.

You obviously can’t hand an affiliate $600. That’s half your revenue, before you pay for anything else.

So you account for gross margin, support, payment processing, refunds and infrastructure. After that analysis, you decide you’re comfortable spending $250 to acquire a customer.

Now you’ve got something useful. The question becomes: how should I structure that $250? Here are four ways to pay it:

• $250 one-time CPA
• 25% recurring for 10 months
• $130 upfront plus 10% recurring for 12 months
• A lower public rate, with a higher private rate for proven partners

Those are commercial decisions. But at least now they’re based on your economics, not on somebody saying “most SaaS programs pay 30%.”

The Affiliate Side: EPC

That’s only half the equation. The other half is the affiliate, and this is where businesses regularly get it wrong.

Affiliates don’t care about your commission percentage in isolation. They care about what their traffic earns. That’s EPC: earnings per click. With the large affiliates I’ve worked with, it’s often the number they care about most.

Merchant A pays $100 per sale and converts 1% of clicks. That’s $1.00 per click.

Merchant B pays only $60 per sale, but converts at 4%. That’s $2.40 per click.

Which one gets the traffic? Merchant B. The lower commission earns the affiliate more than twice as much.

That’s why you can offer 50%, 70%, even 100% commission and still have a terrible affiliate offer. If your landing page doesn’t convert, the headline rate doesn’t matter. Experienced affiliates will test it, see the EPC, and move their traffic. And they’ve got plenty of alternatives.

Compare the Whole Offer

So yes, look at what competing programs pay. But don’t copy them blindly. Compare the whole offer:

• Terms: commission rate, attribution window
• Payout: recurring and renewals, upsells, lock period
• Performance: brand strength, conversion rate

In competitive verticals, affiliates have dozens of offers to choose from. They’ll test. They’ll compare. And they’ll send traffic wherever the economics are strongest.

I saw this with an antivirus program I managed. The CPA was $70, which was low compared to other antivirus offers on the market.

But the conversion rate was high, so the EPC was high. Affiliates earned more per click than they did on offers paying bigger commissions.

The result? Solid sales, and it became the top-performing brand in the client’s portfolio.

Not Every Affiliate Should Get the Same Rate

Another mistake is paying every affiliate exactly the same.

Your public rate needs to be competitive enough to get people interested. But private rates are one of the most useful tools an affiliate manager has. If someone can deliver serious volume, why wouldn’t you negotiate? Maybe the standard rate is $75, and a partner who can deliver 500 sales a month gets $100.

The rule is simple: the higher rate still has to work for the business.

And not every sale is worth the same. A content publisher introducing your brand to a new customer is very different from a coupon site that appears at checkout after the customer has already decided to buy. Many programs pay both the same. You don’t have to. Commission doesn’t have to be one blunt number across the whole program.

Test and Adjust

Finally, the rate you launch with isn’t the rate you’re stuck with. Your program should generate data, and you should read it.

If affiliates are signing up but nobody is sending traffic, maybe your commission isn’t competitive. Or maybe the commission is fine, and your funnel simply doesn’t convert.

The Right Question

So don’t ask, “What percentage should I pay affiliates?”

Ask: “What can I afford to pay for a genuinely new customer, and is that enough that good affiliates will choose my offer over someone else’s?”

Work backwards from your numbers. Benchmark competitors. Understand what affiliates actually earn from their traffic. Then test.

The best commission rate isn’t the highest number you can advertise. It’s the rate that pays affiliates enough to keep sending traffic, while still leaving you with a profitable customer.

Get that right, and recruitment gets much easier. Get it wrong, and no amount of outreach will rescue the program.

Want a Second Opinion on Your Commission Structure?

I’ll look at your numbers and tell you honestly whether the rate is the problem.

Affiliate Manager Expert provides founder-led affiliate program management, audits, tracking reviews, compliance reviews, and program cleanup for SaaS, software, fintech, e-commerce, and digital product brands.

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