Affiliate Commission Structure

Affiliate Commission Structure

Design the commission and payout structure of an affiliate program: rate model, rate level, tiers, recurring duration, attribution window, and validation/clawback/payment terms.

No named, proprietary framework exists for this discipline. Robert Glazer's _Performance Partnerships_ (2017) and Geno Prussakov's _Affiliate Program Management: An Hour a Day_ (2011) teach doctrine and process, not a branded algorithm. Prussakov's "5/80 rule" (5% of affiliates drive 80% of the work) is the one real, attributable coinage.

What exists instead is a convergent craft, taught in near-identical form across the industry:

• Derive a ceiling from unit economics.
• Set the headline rate below it.
• Differentiate by partner type and incrementality.
• Protect with validation and clawback.
• Reward top performers with tiers.

That derivation is this skill's spine - compute the rate from margin, never copy it from a benchmark.

Interview

Run these rules before designing anything:

• One question per message.
• Offer multiple-choice answers when possible.
• Skip any question the user already answered.

• B2B SaaS or B2C ecommerce? Subscription or one-time purchase?
• Gross margin? Variable costs per order (COGS, fulfilment, shipping, payment processing, platform fees)?
• Expected return/refund rate (ecommerce) or monthly churn rate (SaaS)?
• AOV or entry-plan price? How wide is the AOV/ACV spread across products or plans?
• Customer LTV? Target CAC and current blended CAC?
• Existing commission rates, if any - and which partners are on them today?
• Which partner types are enrolled or wanted: content/review/comparison sites, coupon/cashback/loyalty, agencies/consultants, creators/influencers?
• Do you have competitor program terms to calibrate against?
• Has finance set a payout budget ceiling?
• What can tracking attribute: last-click cookies, server-side events, new-vs-existing-customer flag, recurring billing events per referred account?
• By what date must the new structure be live and showing results?
• A one-off fix (get this quarter's payouts back inside the ceiling) or a compounding asset (a rate card that survives three years of plan and catalog changes)?
• What is the effort ceiling: who administers the program week to week, and what can the affiliate platform actually express - per-product payout tables, a second rate step for a taper, a new-customer flag, per-partner attribution windows?

Missing margin, churn/return, and CAC answers block the derivation - insist on estimates before proposing any rate.

Those last three answers re-rank every option menu in this skill, and each ranking says which:

• A hard date promotes whatever is one field on the platform and demotes anything needing a negotiation or a tracking change.
• A compounding mandate promotes the derivation and the partner-type split, while a one-off mandate promotes duration and threshold changes that land this cycle.
• A low effort ceiling deletes the options the platform cannot express, rather than demoting them.

Every ordering below is a default, not a law: it shifts with context and with who executes it. Re-rank against what you already know about the user:

• An existing published rate card that network rules make expensive to cut.
• A platform that cannot express a taper.
• A narrow order-value spread.
• An in-house partner manager who can run the per-partner negotiations the default order assumes away.

Workflow

1. Run the Interview. Collect every economic input before touching a number.
2. Derive the commission ceiling from unit economics - never from a competitor's rate:

• Ecommerce: gross margin → subtract variable costs → contribution margin → net out expected returns → pay one-third to one-half of post-return contribution margin. Sanity band: total commission at 20-30% of gross margin.
• SaaS: treat commission as part of CAC. Keep LTV:CAC ≥ ~3:1 and CAC payback ≤ ~12 months. Total lifetime commission per customer: 5-15% of LTV, never above 30-40% of gross margin.
• Full worked math in references/rate-derivation.md.

1. Pick the rate model - percentage of order/revenue > flat CPA > hybrid on efficiency. Full axes, margin behaviour per model, and the constraints that delete an option: Rate Model section below.
2. For recurring revenue share (SaaS): fix the duration rule before the headline percentage - it moves effective cost far more than the percentage does. Default to a 12-month cap. Ranking and cost arithmetic are in Recurring Duration (SaaS) below.
3. Differentiate rates by partner type, driven by incrementality:

• Content and creator partners run ~78-82% incremental.
• Coupon/cashback partners are often 66-71% non-incremental: they capture last-click credit on demand others created.
• Apply the controls in efficiency order: new-customer gate > rate cap below content > shorter attribution window > exclusive codes.
• Delete the gate from the menu when tracking has no new-customer flag, which promotes the rate cap to first.
• Applies identically to B2B and B2C: only the partner mix differs.
• Axes in references/partner-types-and-tiers.md.

1. Decide tiers - flat > marginal tiers > retroactive tiers on efficiency. Launch flat: with no historical performance data there is nowhere to place a breakpoint, which deletes both tiered options rather than demoting them. Axes and mechanics in references/partner-types-and-tiers.md.
2. Set the payout terms that belong to the structure (details below):

• Attribution window
• Validation/locking period
• Net payment terms
• Minimum threshold
• Clawback clause

1. Check the pass threshold (below). Iterate the levers in the efficiency order given in references/rate-derivation.md until it holds. If nothing passes, narrow the program to high-margin SKUs or plans first, and recommend not launching only when no narrowing leaves a ceiling partners will work for.
2. Calibrate against benchmarks only after deriving - references/benchmarks.md. A derived rate far below the vertical's norm predicts a recruiting problem, not a math error. If you can browse the web, verify any competitor's published terms on its live page - third-party directories often cite stale cookie windows and rates.
3. Present the decisions one section at a time - options, trade-offs, recommendation - and validate each with the user before moving on. After approval, emit the full commission structure spec (below).
4. If your harness has persistent memory, memorize the approved spec's key decisions and economics (ceiling, rates per partner type, duration, windows) so a later revision run starts from them instead of re-interviewing.

Rate Model

All three models are sized to the same ceiling from step 2 - the model decides who gets paid what inside it, not what the program costs in total. So rank it on effort and reversibility, never on headline generosity.

• efficiency: percentage of order/revenue > flat CPA > hybrid
• value: percentage > flat CPA on a narrow order-value spread, and flat CPA > percentage once the spread is wide, while hybrid > both only for a publisher that refuses pure performance
• effort: hybrid > flat CPA > percentage
• compliance cost: hybrid > flat CPA == percentage - publishing any rate card is already a contractual commitment bound by network decrease rules, which is why those two tie, and only hybrid adds a signed placement contract with its own term on top