Most business owners setting up their first affiliate program pick a commission rate by guessing, copying a competitor, or just going with whatever feels fair. All three of those approaches will cost you either affiliates or profit. Here’s how to actually get it right.
The short answer: it depends on what you’re selling
Here’s the frustrating truth: there’s no single “right” number. But there are clear benchmarks, and once you understand them, the decision becomes a lot simpler.
For digital products, think online courses, ebooks, software, and memberships, a good commission rate typically falls between 30% and 50%. Sometimes higher. When I ran the affiliate program for Stu McLaren’s Tribe course, we were in that range, and it was one of the most competitive programs in the online business space. We had no trouble attracting top affiliates because the payout made sense for them.
For physical products, margins are tighter, so commission rates are lower. Somewhere between 5% and 15% is typical. Adidas, Shutterfly, companies like that, where I’ve managed affiliate programs, weren’t paying 40%. They were competitive in the physical product range, and that’s what attracted the right partners for their category.
For services, SaaS, or subscription products, recurring commissions in the 20% to 30% range are common. Some programs pay a flat fee per sale instead, which can work, but recurring tends to attract higher-quality, longer-term affiliates because they keep earning as long as the customer stays.
Here’s a quick reference breakdown:
- Digital products (courses, ebooks, templates): 30-50%
- Software/SaaS: 20-40%, sometimes recurring
- Physical products: 5-15%
- Services: 10-30%, flat fee or percentage
- Memberships/subscriptions: 20-30% recurring
But the rate alone doesn’t tell the full story. That’s why EPC matters more.
The metric that actually drives affiliate decisions: EPC
EPC stands for Earnings Per Click. It’s the average amount an affiliate earns for every click they send to your offer. And it’s the number serious affiliates look at before they decide whether to promote you.
Here’s how it works. Say you pay a 30% commission on a $1,000 product, and that product converts at 2%. For every 100 clicks an affiliate sends, they generate 2 sales, earn $600, which works out to $6 per click. That’s an EPC of $6.
Now compare that to a competitor paying 50% commission on a $200 product that converts at 5%. For every 100 clicks: 5 sales, $500 in commissions, $5 EPC.
Even though the competitor’s commission rate is higher and their product is cheaper, your program wins on EPC. That’s what will attract better affiliates, because at the end of the day, affiliates are running a business. They want the most money per unit of effort.
I’ve seen affiliates skip a 50% commission program to promote a 25% commission program because the EPC was higher. Rate is just one input. Understanding EPC and why it’s the only metric that really matters is what separates program owners who consistently attract top affiliates from those who wonder why nobody promotes them.
How to calculate the right commission for your program
Here’s the process I walk every client through on day one. It comes down to four numbers.
Step 1: Start with your product price. Lower-priced products generally need higher percentage commissions to attract affiliates. A 10% commission on a $20 product is $2 per sale. Nobody’s sending their list for $2 per sale.
Step 2: Subtract your variable costs. These are the costs that go up with every sale, things like payment processing (usually 2-3%), customer support, fulfillment, and anything else that scales with volume. Whatever those add up to, deduct them from the price first.
Step 3: Decide your profit per unit. How much do you want to keep after covering costs and paying your affiliate? Be realistic. If you set your profit goal too high, you won’t have anything left to pay a competitive commission.
Step 4: Check the market rate. Here’s where a lot of people stop short. You can’t just calculate what’s sustainable for you, you also have to know what your market expects. If every digital course in your niche pays 40-50%, offering 20% won’t cut it unless you have a compelling reason, like dramatically higher conversions or a much higher price point.
Real example from the book: We had a client selling a $995 product. After variable costs of roughly $200 and a desired profit of $300 per sale, that left about $495 to work with. The competitive commission rate in their category was around 40%, which worked out to $398 per sale. That was within the window, and they could make it work. They had to accept a slightly thinner margin than they wanted, but it kept them competitive, and the affiliate volume more than made up for it.
If you want a step-by-step framework for setting up your program from scratch, here’s how I’d run the first 30 days of a new affiliate program, which includes commission structure decisions on day one.
What happens when your commission is too low
I’ve seen this play out hundreds of times. A business owner undercuts the market, usually because they’re scared to give up margin, and then wonders why they can’t get any affiliates to promote.
Here’s what actually happens when your commission is below market rate:
Top affiliates skip you. They’re comparing programs constantly. If yours pays 20% and competitors pay 40% in the same niche, they don’t even respond to your outreach. You’re invisible to the people who could move the needle most.
Mid-tier affiliates deprioritize you. They might say yes to your program, but when they’re deciding which offer to promote this week, yours goes to the bottom of the list because the payout doesn’t justify the attention.
You attract coupon and cashback sites, which tend to cannibalize sales you would have made anyway, rather than the content creators and email marketers who actually drive net-new revenue.
The math people miss: a 40% commission on a product that generates 100 sales is worth more than a 20% commission on a product that generates 15 sales because no affiliates are excited to promote it. Margin optimization that tanks affiliate volume isn’t optimization. It’s just leaving money on the table with extra steps.
One of the fastest ways to fix a struggling program is to audit your commission against what competitors are paying. If you’re consistently below market, that’s often the first and biggest problem to solve. You can download my Top 20 Affiliate Program Mistakes report, and setting commissions too low is one of them.
When it makes sense to offer higher-than-average commissions
Sometimes going above market makes strategic sense. Here are situations where it pays off.
You’re just starting out. If you have zero affiliate relationships and no track record, offering a premium rate is a legitimate way to get people to take a chance on you. It costs you more per sale, but it builds the relationships and social proof that help you grow. Once you have a proven conversion rate and strong EPC, you have more leverage.
You’re launching a new product. A launch is a great time to bump commissions temporarily, even if just by 5-10 percentage points. It signals that this is a priority promotion, and affiliates respond to that. Some of the most successful launches I’ve managed offered elevated commissions for a limited window.
You want to recruit a specific affiliate. If there’s one person whose audience is a perfect fit for your offer, it may be worth offering them a custom, higher rate. We call this a tiered or special rate. It’s not for everyone, but for the right affiliate, it’s worth the extra cut. Just make sure it’s sustainable based on the conversion rate you expect from their specific audience.
Your lifetime customer value is high. If your average customer buys again and again, you can afford to pay more on the first sale because you’re recouping it over time. Some programs even pay a flat fee that exceeds the margin on sale one, banking on repeat purchases. Whether to pay affiliates on upsells and downsells is a related question worth thinking through here too.
Commission structure options beyond a flat percentage
Most programs default to a flat percentage of the sale, and that’s fine. But there are other models worth knowing about.
Tiered commissions. Affiliates earn a higher rate once they hit a certain sales volume. For example, 30% up to 10 sales a month, 40% above that. This rewards top performers and gives everyone an incentive to push harder. I’ve used this structure with multiple clients and it consistently increases output from the top tier.
Recurring commissions. This works especially well for subscriptions. The affiliate gets paid not just on the first sale but every month the customer stays. This model attracts affiliates who think long-term and tend to be more selective about what they promote, which often means higher-quality traffic for you.
Flat-fee commissions. Some programs pay a fixed dollar amount per sale rather than a percentage. This works well when your product has variable pricing or bundles. It simplifies tracking and can be very attractive when the flat fee is generous relative to the effort required.
Pay per lead. If your sales cycle is long or involves a phone call or demo, you might pay affiliates per lead rather than per sale. The commission is lower because conversion is lower, but it still incentivizes affiliates to send qualified traffic.
One thing I always recommend regardless of structure: pay commissions on upsells and downsells. Affiliates who know they’ll earn on the full funnel, not just the entry product, are significantly more motivated. It’s also just fair. They sent the customer. They should get credit for what that customer buys.
Should you offer tiered commissions for different affiliate types?
This is a question I get a lot, and the answer is yes, carefully.
It’s common for programs to have a standard commission rate for most affiliates and a negotiated, higher rate for top partners. That’s legitimate and normal. Big affiliates often ask for a better deal, and if their audience is right for your offer, giving them one can be worth it.
What you want to avoid is a situation where affiliates compare notes and feel like the system is rigged. Keep your standard rate public and competitive. Any custom rates should be framed as earned incentives, tied to performance thresholds or a specific agreed-upon promotion, not just handed out because someone asked nicely.
A structure that works well: set a strong base rate that you’d be happy paying anyone, then create a published performance tier. Something like, “All new affiliates earn 35%. Affiliates who generate 25+ sales per month earn 45%.” Now the path to a higher commission is transparent, achievable, and gives everyone something to aim for.
If you want templates to help onboard and communicate with affiliates at every level, here’s a full affiliate onboarding checklist that covers what to communicate on day one, including commission details.
Common mistakes when setting affiliate commission rates
Setting it once and never reviewing it. Your market changes. Competitors adjust. Your own conversion rates shift. Look at your commission structure at least once a year, and whenever you see affiliate volume declining, check whether your rate has fallen behind.
Ignoring EPC. Most new program owners obsess over the commission percentage and never calculate EPC. But that’s the number affiliates care about. If you don’t know your EPC, you can’t have a meaningful conversation with a potential affiliate about why your program is worth their time.
Not paying on the full funnel. If you have upsells and your affiliates don’t get credit for them, you’re leaving relationship equity on the table. Affiliates talk to each other. Word gets around fast when a program cuts affiliates out of upsell commissions.
Using commission to compensate for a bad offer. Jacking your commission rate up to 60% or 70% doesn’t fix a product with a 0.5% conversion rate. Affiliates will figure that out fast. Focus on conversion first, commission second.
Making the rate confusing. If your commission structure requires three paragraphs to explain, simplify it. Affiliates want to know one thing: how much do I earn per sale, and what’s my EPC? If you can’t answer that in one sentence, the structure is too complicated.
If you want to dig into more of these pitfalls, the How to Double Your Affiliate Commissions in 30 Days or Less covers commission-related errors in detail, along with how to fix them.
How to communicate your commission when recruiting affiliates
This is where a lot of programs drop the ball. They have a decent commission rate but bury it in the fine print of their affiliate page, or lead with it before they’ve established any reason the affiliate should care about the product.
Here’s what works. In your outreach email, don’t open with “we pay 40% commission.” Open with why you think this affiliate is a great fit, what the product does for their audience, and what the conversion rate looks like. Then present the commission as the cherry on top.
And lead with EPC, not just percentage. “We’re paying 40% on a $997 product that’s converting at 3.2%, so affiliates are averaging $12 EPC” is a much more compelling opening than “40% commission.” The first number tells them exactly what they’re walking into. The second number means nothing without context.
If you’re ready to start recruiting, download my number one affiliate recruiting email, the exact template that’s been used to recruit affiliates responsible for over $1 billion in sales. It handles the commission conversation the right way.
And if you want the complete system for building an affiliate program that actually attracts and retains top affiliates, The Book on Affiliate Management covers commission structures in detail, along with every other piece of the puzzle. It’s the most comprehensive resource I’ve put together on running a program that scales.
