How Much Commission Should You Pay Affiliates?

Bookmark and Share

Deciding how much commission to pay your affiliates is one of the most important decisions you can make as a merchant. Unfortunately there is no simple answer to the question but there are numerous factors to be considered during your decision process.

Before making any firm decisions as to how much you’re going to pay your affiliates, it’s worth firstly looking at the commission rates of other online merchants within your field to see how much they are paying. In addition, look at the types of commission structures they have in place. You can then benchmark yourself against these merchants to help make sure that your programme is competitive as well as cost effective.

Secondly, not all affiliates are the same, so don’t treat them as such. Try to offer commission rates that engage all types of affiliates. Failure to this could mean that certain affiliates give your campaigns less exposure than your competitors or don’t promote you at all. It also allows you to put in place larger commissions for those affiliates that bring you the best return. For example, if discount voucher sites bring you new customers whereas PPC affiliates drive your existing customers back, take this into account and reward appropriately to increase your ROI.

Additionally, consider adopting a tiered commission structure that rewards the best affiliates with a higher rate of commission. This type of structure offers affiliates an incentive to drive as many sales as possible to reach higher commission levels. If you work closely with your top sales driving affiliates you’re likely to see the biggest impact on sales so be prepared to offer bespoke rates/targets in order to motivate them.

Finally, when deciding how much commission you should pay affiliates consider the conversion rate of your website. Most affiliates base where they should focus their efforts on the earnings per click each merchant generates for them. This earnings per click model takes into account both the amount of commission paid AND the conversion rate of your website. If your website has a higher conversion rate than those of your competitors, you may not need to pay as much commission.

In summary there is no ‘one size fits’ all solution to how much commission you should pay affiliates, however, if you recognise your place in the market and have an understanding of what affiliates want, you’ll be best placed to make the right call.