How to set affiliate commissions for a D2C brand

Commission is the cost of a sale you would not otherwise have made. The right rate is the one that is attractive to affiliates and still leaves you a healthy profit, so start with your margin, not with what others pay.

Start with your margin

Work out gross margin per product after the cost of goods, packaging and delivery. Commission comes out of that margin. Many brands start somewhere between 10 and 20% of the order value, but your own numbers should decide. Where products have very different margins, set rates per product rather than one rate for everything.

The terms that matter

• Tracking window. How long after a click a purchase still counts. Thirty days is a common starting point.
• Lock period. How long commission is held before it can be paid, so returns and refunds are covered. Many brands choose 30 to 60 days based on their return window.
• Minimum payout. The smallest amount that is paid out, which keeps payments tidy.
• Discount codes. Decide where codes may appear. Unmanaged codes tend to leak to coupon sites.
• Brand terms. Say whether affiliates may bid on your brand name in paid search. Most brands say no.

A simple example

If a product sells for £50 and has a 60% gross margin, it earns £30 before other costs. A 15% commission is £7.50, which leaves £22.50. Check that figure still works after your marketing and overheads. If it does not, lower the rate or start with higher-margin products.

Rewarding your best partners

Once the basics work, consider tiers or small bonuses for affiliates who consistently drive sales. Change one thing at a time and note the date, so you can see what made the difference.

The ranges above are rules of thumb, not recommendations for your business.