Commission Structures and Economics

Determines partner mix and economics. Models, tiers, incentives, economics, adjustments, compliance.

Why commissions

Commission structure determines partner mix, fraud risk, and unit economics. Wrong commission = wrong partners attracted; right commission = sustainable program.

Commission models

• Revenue share (% of order).
• Flat CPA per conversion.
• Tiered (different rates per partner tier).
• Hybrid (flat + commission).
• Sliding scale (volume-based increases).
• Category-specific rates.

Tier design

• Base tier: most partners.
• Mid tier: proven partners.
• Top tier: highest performers; invited.
• Custom: strategic partners.
• Tier-up criteria documented.
• Tier benefits clear.

Incentives

• Time-limited bonuses.
• Performance milestones (X conversions = bonus).
• New customer bonuses.
• Category exclusivity premiums.
• Co-marketing fund.
• Annual contest prizes.

Economics

• Commission as % of margin.
• Sustainable commission rate per partner type.
• Coupon affiliate margin erosion.
• Cohort LTV by source.
• Cost per new customer acquired.
• Annual commission rate review.

Adjustments

• Performance-based increases.
• Category changes.
• Seasonal bonuses.
• Promotional period adjustments.
• Communication to partners.
• Migration plan.

Compliance

• FTC disclosure requirements.
• State tax implications.
• 1099 reporting.
• International payment compliance.
• Anti-fraud agreements.
• Termination terms.

Advanced

• Tiered commission structure.
• Partner-type-specific rates.
• Cohort LTV by source informs rates.
• Annual commission review.
• Coupon margin protection.
• New customer premium.
• Performance bonuses.
• Long-term contracts for strategic partners.
• Compliance documentation.
• Annual cost-of-program assessment.

Mistakes

• Single flat commission across all partners.
• Coupon affiliates over-paid; margin destroyed.
• New customer vs existing customer not differentiated.
• Cohort LTV by source not tracked.
• Annual review skipped.
• Compliance reactive.
• Tier structure absent.
• Performance bonuses ad-hoc.
• Strategic partner commission generic.
• Communication on changes poor.

Checklist

• Commission models documented
• Tier structure
• Partner-type-specific rates
• New vs existing customer differentiation
• Cohort LTV by source
• Annual commission review
• Coupon margin protection
• Performance bonuses defined
• Strategic partner contracts
• Compliance documentation

Part of the Affiliate Marketing series.