Affiliate marketing has become an incredibly powerful tool for small and large brands alike! Being able to tap into an army of authentic fans who can speak authentically about your brand has driven incredible results in increasing brand awareness and ultimately driving traffic and sales/

And commissions have become a vital part of affiliate activations. Not only does offering commission motivate your partners to continue to speak about your brand but it also helps you to grow your program and attract new affiliates!

While there are so many different angles to creating a successful affiliate program, the most important place to start is setting your commission rate. Setting a commission rate low will not creep into your profits too much and will allow you to offer additional incentives for higher rates as partners perform. However, it lowers your probability of attracting new partners as they may choose to go with competitors with higher rates.

On the other hand, setting a commission rate high will definitely encourage your partners and help you attract new ones but then you are backed into a corner as far as not being able to offer higher rates as incentives and potentially going too far into your profit margin.

So as you can see it is all about balance. By following these tips you will be able to set a rate that is competitive yet sustainable!

1. Consider your average lifetime value of a customer

The lifetime value of your customer essentially is how much your average customer purchases from you. Also, take into account your new customer acquisition budget

2. Look internally at what is feasible

Look at your overall marketing budget, profit margins, plans for future products, etc. Typically, we see a commission structure between 10-30%, but that can vary depending on your business.

3. Look to competitors

See what other brands in your field are offering and how they structure their program overall.

4. Decide on your range

Based on all of these factors, decide on a reasonable range for your commission. Additionally, use this to decide how and if you will be incentivizing your partners with the higher end of the range and what that process will look like

5. Continue to re-assess on a regular basis

Not only your commission rate (market shifts, changes in internal budgets, etc) but also your partner’s rates and ensure you are auditing your group for any non-performers