Stop Guessing Your Affiliate Commission: How to Structure It Around AOV and Margins

Ask a new affiliate manager what commission they should offer and you will usually hear one of three answers:

• “Competitors are paying 15%, so maybe we should too.”
• “Let’s start at 10% and see what happens.”
• “Can we just increase it until more creators join?”

None of these is a commission strategy.

Your affiliate commission sits at the center of your offer. It gives a creator a reason to join, continue talking about the product and put effort behind driving a sale.

Set it too low and good affiliates have little reason to prioritize you.

Set it too high and you can grow revenue while quietly destroying your margins.

The answer is not to find the “standard” rate for your category.

It is to work backwards from your economics.

Start with the money you can afford to give away

In a recent session on building an affiliate program from the ground up, influencer and affiliate strategist Andreea Moise made an important point: your unit economics need to be clear before you start adding commission tiers, discounts, bonuses and other incentives.

Every one of those comes out of the same margin pool.

Here is a simplified example.

Imagine your brand has:

• $100 average order value (AOV)
• 70% gross margin (GM)
• 10% affiliate discount for the customer
• $15 in additional variable costs such as fulfilment, payment fees and returns
• A target of keeping at least $20 contribution profit per order

The customer pays $90 after the discount.

From that $90:

• $30 goes toward cost of goods (COGS)
• $15 covers other variable costs
• $20 is the contribution profit you want to preserve

That leaves roughly $25 per order available for affiliate acquisition and incentives.

Here is your starting point.

Not “other brands pay 20%” or “an affiliate asked us for 30%.”

Your P&L just told you what you can afford.

If you want room for bonuses, free products and other incentives, you probably should not spend the entire $25 as your standard commission either. You might start at 18% or 20% and reserve the rest for rewarding the affiliates who create more content or hit performance milestones.

One small detail matters here too: understand what number your percentage applies to.

A 20% commission on the original $100 order is $20. On the $90 post-discount revenue, it is $18. At scale, that difference adds up quickly.

New customers and returning customers should not automatically earn the same commission

Once you know the maximum amount you can spend, the next question is what behavior you are paying for.

For most brands, acquiring a new customer is more valuable than receiving another order from somebody already in the customer base.

So why pay exactly the same commission for both?

You could, for example, offer:

• 20% for a new customer
• 5-10% for a returning customer

Or, depending on your business model, commission only the first purchase.

Reformed, a fast-growing supplements brand, takes the latter approach. Its public affiliate program currently pays £10 for a new-customer order, rising to £15 for its VIP affiliates. Repeat purchases do not earn commission.

That makes sense for a subscription-oriented business. The affiliate is heavily rewarded for doing the difficult part: bringing a new person in. The brand keeps more of the economics from subsequent orders.

That does not mean every company should eliminate repeat-customer commissions. If affiliates genuinely influence reorders, cross-sells or higher-value purchases, rewarding that behavior can still make sense.

The point is to make the decision intentionally.

SATHI lets brands distinguish between new and returning customer purchases and structure commission tiers accordingly, rather than applying one blanket percentage to every order.

But commission has one big limitation

Commission rewards the sale.

A creator has to do quite a lot before a sale happens.

They receive the product. Try it. Create the first post. Mention it again. Answer questions. Put it in a Story. Include the link another week. Make a second video.

The commission might arrive weeks later.

This creates a dangerous gap in many affiliate programs: brands reward the final outcome but give affiliates very little reason to keep producing the behavior that eventually creates that outcome.

An affiliate posts once.

Nothing sells immediately.

They move on to the next brand.

The program manager concludes that the affiliate “didn’t work.”

The problem may be the incentive design, not the affiliate.

Reward the actions that lead to revenue

This is where a second incentive layer becomes useful.

At SATHI, we call these Booster Rewards: additional rewards tied to milestones such as posting, sales volume, revenue or order count.

For example, a brand could create a progression like this:

• First qualified post: $10 bonus
• Three posts in a month: $25 store credit or free product
• 10 new customers: $50 cash bonus
• 25 new customers: higher commission tier
• 50 new customers: VIP tier, exclusive products or larger bonuses

The exact numbers should still come from your economics. A brand selling a $20 product cannot copy the incentive structure of one selling a $300 product.

But the principle works across categories: reward both contribution and consistency.

MUD\WTR is a good example. Its public ambassador program currently offers $35 for each new customer, a free starter kit and product discounts. It also adds bonuses after the first five and 10 sales and another $500 bonus for every 50 sales.

Reformed follows a similar layered approach. In addition to its standard commission, affiliates can unlock cash bonuses as their order count grows. At 50 orders they reach VIP status, which comes with a higher commission, monthly product, event invitations and early access to launches.

Neither program relies on a single commission percentage to do all the motivational heavy lifting.

Think of your affiliate offer as a reward ladder

A useful affiliate structure has several rungs.

1. At the bottom, make joining worthwhile.
2. Then make posting worthwhile.
3. Then make selling worthwhile.
4. Finally, make becoming one of your best affiliates disproportionately worthwhile.

This gives affiliates something to work toward instead of handing everybody the same rate indefinitely.

It also protects the brand. Your highest-cost incentives are reserved for affiliates who have demonstrated that they can create value.

With tiered commissions and Booster Rewards in SATHI, brands can set these rules once and automatically trigger different commission rates, bonuses, products or rewards as affiliates hit the required milestones.

That becomes increasingly important once you move from 20 affiliates to 200 or 2,000. Nobody wants to spend the last Friday of every month working through a spreadsheet to figure out who crossed which revenue threshold.

Your commission structure should change as the program learns

Your first commission structure does not have to be permanent.

In fact, it probably should not be.

Once you have several months of data, look at:

• Which affiliates consistently acquire new customers?
• Which affiliates post frequently but need help converting?
• Who drives high-AOV orders?
• Who generates repeat customers?
• Where is most affiliate revenue concentrated?
• Which incentives are increasing posting frequency?
• How much are commissions, discounts, gifting and bonuses costing you together?

Then adjust.

Maybe your best affiliates deserve a larger commission.

Maybe your base commission can come down while milestone bonuses go up.

Maybe returning-customer commissions are consuming the budget without generating incremental revenue.

Maybe a $20 posting reward creates more useful content than adding another two percentage points to everyone’s commission.

Your data should tell you.

Because a commission structure is not just a percentage attached to a referral link.

It is your affiliate program’s economic model.

Start with AOV. Work through your margins. Decide which customer and creator behaviors are most valuable. Then build the rewards around those behaviors.

That is a much stronger strategy than guessing 15% and hoping everybody posts.

About the author: Muskan leads growth at SATHI, the affiliate marketing platform built for Shopify brands, where she hosts AMA: Affiliate Marketing Answered, a show that brings affiliate operators and agency leaders together to answer the questions ecommerce brands ask most.