Tech-savvy solopreneurs, SaaS founders, and marketing managers – gather ‘round.
We know there’s a lot being said about the ‘ideal’ commission setup for affiliate programs. Mock-up calculations and real-life recommendations are filling up the web, sometimes raising eyebrows. But we’re here to give you answers to your questions, supported by rock-solid data.
Based on over 2,500 affiliate campaigns from our very own customers at Rewardful, we've identified underlying trends that help you crack the code to commission setups.
Here’s what we’ll cover:
How much commission should you be paying?
How many affiliates do you need to be successful?
The power of a super affiliate: Cometly's success story
Should you use lifetime or restricted commissions?
When should you be awarding commission?
What’s a strong strategy for setting commission rates?
The right commission rate selection can significantly enhance the effectiveness of your affiliate marketing program and result in higher conversions. But there’s more to it.
It’s easy to get stuck in the mindset of the ‘costs’ of affiliate marketing, aka, how much you’re paying your affiliates. But you shouldn't have to worry about paying large chunks of your margin to your affiliates to drive them to help you sell your products. In fact, the most successful campaigns in our research weren't the ones with the highest commission payouts.
There’s one easy way to explain that: companies should focus more on having a great product that's easy to pitch. Your affiliates won't generate more sales the higher the commission – they'll generate more the easier your product is to sell.
So what is the commission rate that our most successful campaigns won with?
Our data suggests that a 30% commission rate hits the sweet spot. Most top-performing campaigns from our database succeeded with this rate, striking a great balance between enticing affiliates and maintaining healthy profit margins.
After all, the average SaaS startup or digital business enjoys a gross margin of 75-80%, so a 30% commission on their SaaS affiliate program still allows them to make money while acquiring new customers cost-effectively and without upfront payment.
We’ve said it once, and we’ll say it again: it’s about quality, not quantity.
Affiliate marketing isn't just a numbers game, and that becomes evidently clear when looking at the exceptions that defy the 30% rule – and win big. Because there are some affiliate programs with fewer than ten affiliates, but higher commission rates, and they have seen tremendous success.
The more affiliates you sign doesn't guarantee more sales and commission payouts, even when incentivizing affiliates for conversions. What does "guarantee" sales is very active affiliates with engaged audiences.
A small pool of those will always perform better than a large number of mediocre ones.
The ROI of affiliate marketing can be massive, especially when you focus on quality over quantity. The perfect example of this is Cometly, a SaaS business that leveraged a super affiliate to go from $0 to $54k MRR in just one week. Yes, by using just one influencer.
Using Rewardful as their affiliate tracking software, Cometly joined forces with a top-tier affiliate whose audience significantly overlapped with their niche.
The partnership kicked off with a co-marketing webinar, introducing the platform and a special "founding user" discount to attendees, which was available for one week only (hello, urgency!). This strategy led to $148k on launch day and $104k over the remainder of the week.
Cometly replicated this success by attracting top affiliates a couple more times, generating over $251k in cash flow, and acquiring many long-term clients. You can read the full case study here.
It perfectly illustrates the power of carefully chosen, high-quality affiliates. So, before you start reaching out to hundreds of possible affiliates, do your research and find ten that really match what you’re looking for. It might also be worthwhile to offer these super affiliates higher commission rates.
Another thing to carefully consider is whether you want to offer your affiliates lifetime commissions or limit the payouts to a specific timeframe.
To affiliates, lifetime commissions seem more attractive. For emerging companies, that sounds like great news, too, because it makes it easier to attract affiliates.
But, it's important to remember the future costs for customers acquired through this channel. You can’t simply change your mind on this later on.
Restricted commissions make costs more predictable and avoid paying out for customers acquired years ago. Yet, affiliates might feel this is unfair, especially for some products or services that people are likely to keep buying for a long time.
Let us take your anxiety on this away: our data shows no clear correlation between payout restrictions and campaign performance.
The top 20 performing campaigns mostly did not impose a limit to commission payouts, with the only two exceptions restricting payouts to 4 and 1 month respectively.
What this means is that the decision between lifetime and restricted commissions may depend more on your business model and industry than on perceived best practices. So do think about the lifespan of commission payouts carefully and in the right context.
Let’s look at another building block of your affiliate structure: the commission model.
In SaaS, revenue share is most often used. This model involves paying affiliates a percentage of the revenue from the sales they generate.
It’s popularity in SaaS and digital product sectors, comes from the fact that it provides a strong incentive for affiliates to promote high-value products and services. It also excludes the easiest forms of affiliate fraud.
There are other options out there, however. Knowing these models, their advantages and drawbacks will help you understand what fits your business, but more importantly — what affiliates are looking for:
- Cost Per Acquisition (CPA): In this model affiliates are paid a set fee for every successful conversion they generate.
- Cost Per Click (CPC): This model pays affiliates for every click they generate, regardless of whether those clicks lead to conversions. CPC can be effective for increasing brand awareness and website traffic but may not always lead to direct sales.
- Cost Per Lead (CPL): In this model, affiliates are paid for every lead they generate, such as a form submission or account signup. CPL can be particularly effective in industries where the sales cycle is long or complex.
While we didn't include this in our latest research, it is something to keep in mind. Make sure your payout model matches your goals.
Circling back, the 30% lifetime commission seems to be a safe bet. Even safer, however, is making adjustments based on your specific business model, niche, and affiliate partners. If there's a super affiliate in your sector, offering them a higher commission may be a worthwhile investment.
*Our commission structure pro-tip
No strategy should be mindlessly copy-pasted, but based on our data and experience, we have seen what works. That being said, here’s an approach to consider and possibly adapt to your situation:
Set a high commission rate (50%-100%), but limit it to the first 3 or 12 months based on your CLV. This strategy allows you to pay a significant portion of initial revenue to the affiliate while limiting future payment efforts and liabilities. It’s an example of affiliate program optimization where you carefully evaluate performance, adapt commission rates, and, therefore, can strategically align with the right partners.
Start Building Your Affiliate Program Today!
Your commission structure is just a small part of your success.
In the end, the most successful campaigns weren't the ones with the highest average commission payouts. They were the ones with a great product that fit the needs of their market. After all, affiliates can only do so much.
That’s also why regular affiliate program performance analysis is critical to identifying the most successful affiliates, fine-tuning commission structures, and optimizing the program for maximum ROI.
Another crucial part of your affiliate program is the tools you use. If you want to join Cometly and other successful businesses in scaling affiliate marketing for SaaS, sign up for your test account. You can also request support from the Rewardful team; we’re here to help!
