What Is a “Good” Affiliate Commission?

So how much commission should you pay affiliates?

It’s one of the top questions I get from my clients. The answer can vary across niches and product types, but the methodology for finding the correct amount doesn’t change. 

Keep reading to back into the right commission to pay affiliates for your offer and what the average commission levels are I see. 

What Are Commissions Designed To Do?

Let’s take affiliates out of the equation for a moment and explore why “commission” exists. It’s a sales motivator. From the Gary Glenn Ross’s and “coffee is for closers,” A. Always. B. Be. C. Closing. - mad-men style salesman: commission = incentive to sell a product. To go above any beyond the clock-punching and provide motivation to make bank. 

Or more simply put, commission is a behavior motivator. In our case, the behavior we want to drive is more sales. 

You want affiliates to send you more customers.

Can we agree on that? 

Because if we do - then we have to agree that the commission (incentive) has to be motivating enough to cause someone to take action that they otherwise might not have. 

To go above and beyond the clock-punching or distractions in their day. 

To send traffic to your offer and not your competitors. 

This is the “driving behavior” piece and the money, or potential for it, has to be good enough. 

But before we dive into the cold hard cash, we need to understand that commission is not the only thing that you need to get an affiliate to take action. 

Commission and Conversions: Two Sides of the Scale Coin

Commission and conversions are two sides of the same coin. If you have below-average conversions you’ll need to pay higher than average commissions. 

And the offers that have higher than average conversions AND higher than average commissions are the ones that scale big. 

Or you might struggle to get traction even if you have +100% commissions if your price points aren’t high or your conversions are blehhhh.

How Much Commission Can You Pay?

So this post is tackling how much should you pay. 

But back it on up. Keep it coming… and ask... How much can you pay? 

“Should” is a good question when you’re looking to be competitive with other offers in your space. 

But “can” is looking internally at your offer, business, your economics, and maybe your emotional relationship to money or your product. 

Take a minute and think about how much you could pay commission on. Think about things like: 

• What’s your profit margin on the product(s)/offer?
• What is the average order value for the offer? 
• What is your customer lifetime value? 
• What is your average refund rate? 

After answering those questions, how much could you pay an affiliate where you make $0 for every sale?

That amount is how much you can pay an affiliate. Well, technically, you can pay however high of a price you want but if you’re reading this post I’m going to take a wild guess and assume you want to make some profit on your sales. 

You probably want to make more than $0 for every customer that buys your product. But the reality is that your competition might be just fine making $0 for every customer they acquire, or even going negative to acquire the customer if they know they can make a profit later. 

Because here’s a little secret. Affiliate sales aren't cheap. Unless you have a viral or a household product like InstantPot, you’ll need to pay to play. 

If you’re lost on how much you can pay, use this commission calculator. Use your Average Order Value (Initial Cart + Immediate Upsells) for price and start messing with the numbers to see what affiliates could make on your products. 

What number did you land on? 

Try to be objective and ask yourself - is that a good affiliate commission? Put yourself in the affiliate’s shoes who has a variety of offers to choose from. 

Which might be hard if you’re new to this but let me give you some averages and benchmarks for you to compare against. For simplicity, I’m using the initial product price a customer is purchasing, and the average commission they'd make for the whole flow (including upsells). 

Average Affiliate Commissions

• For physical products under $100, 40-60% is the norm due to more operating costs and overhead. The average commission to an affiliate with these funnels is usually in the $50-$120 range.
• For digital products under $100, 75% commission is average. Average commissions range between $45-$80.
• As price increases, profit margins can increase but so can overhead. For higher ticket offers over $500 (I often work with $1000-$3000 offers), 40-50% commission is common. This might drop to 20-30% for even higher ticket (+$10k) offers due to increased costs on delivering the product. 

So where do you stack up? If you’re way under - that’s okay. Go back to the bullet questions above and try to identify where the breakdown is.

It’s very common for new offers to have "issues" like lower conversions, upsell flows that aren’t optimized, or price points that don’t back out for the affiliates. Keep testing and optimizing to improve profit margin, conversions, and customer lifetime value. 

So what did we learn? 

To summarize:

• What you should pay an affiliate is not always what you can pay an affiliate. Fixing a disconnect there, or resetting your personal limiting beliefs on what an affiliate deserves, can set you up for success. 
• Commission and Conversions need to compliment one another and need to be on par or better than the competing offers for scale to happen. If you’re “funnel hacking” competition, don’t just look at the conversion pieces like copy and layout - look at price points and how much they’re giving affiliates too. 
• Data is your ally. Without testing and real traffic, this is all theoretical.
• Get that affiliate offer live and hustle to get people promoting it!

If you’ve followed the steps above you’ll be paying a good affiliate commission, and you’ll be able to increase it over time by making improvements to the offer and your business.

What commissions are you finding success with? I'd love to hear from both affiliates and sellers in the comments below!

This article was originally published on my blog. You can see it here and sign up for my email list: https://thomasjmcmahon.com/blog/what-is-good-affiliate-commission/