A commission is the monetary reward an affiliate receives for performing a particular task, such as driving a sale, lead, trial sign-up, or other conversion for the merchant. The commission structure can vary significantly, including fixed amounts, percentages of sales, tiered rates based on performance, or hybrid models combining multiple elements.
Commissions incentivize affiliates to promote products effectively and align their interests with the merchant's goals. Clear and attractive commission rates are crucial for recruiting and retaining motivated affiliates. Factors affecting commission rates include industry standards, product margins, customer lifetime value, and competitive landscape.
In SaaS businesses, commission structures often reflect the recurring nature of the business model, with affiliates earning ongoing commissions for active customers they refer. Some programs offer higher initial commissions followed by smaller recurring payments, while others provide consistent percentages throughout the customer relationship, creating predictable income streams.