Posted by Geno Prussakov, August 12, 2010

A merchant has emailed me the following text:

I would like to know what is the range of percentage paid out in the affiliate program? Someone told me it is between 3% to 25%. Is that right? What is the lowest rate you have seen so far? the median? and the highest?

Actually, the range is much wider than the “3% to 25%” you’ve been quoted. At one end of the spectrum, there are some of the larger brands (e.g.: Apple and Dell) that paying affiliates as little as 1% on the default level; and on the other end, there are industries in which merchants are happy to pay as much as 100% (or even more) in affiliate commissions (e.g.: Chemistry.com [matchmaking] and Superb Internet [hosting])

So, the range I’ve seen goes from 1% (sometimes even lower) to 100%.

However, I believe that the question we’ve started with has a huge potential to misguide a merchant in their search for the perfect commission figure to offer their affiliates. You want to look at the range within your industry. After all, you want your affiliate commission to be competitive when compared with what your principal rivals are paying.

Industry-specific affiliate payouts always depend on:

1. Size & popularity of the merchant — In most cases, the unfortunate reality is: the better the brand recognition (and hence, the click-to-sale conversion too), the lower the commission
2. Typical industry profit margins — A clothing merchant, for example, will always beat an electronics merchant in the commission figure (10-15% vs 3-6%), while a flowers and gift baskets merchant will most often beat a clothing merchant (15-20% vs 10-15%)
3. Type of sale — Is it a subscription-based service that’s being sold, or a retail product? Naturally, the commission in the former case will always be more generous than in the latter

Consider all three factors, study what your competitors are doing, and come up with both the range, and your own strategy based on a comparison of apples to apples.