When deciding what commission rate to pay your affiliates, calculate what you can afford to pay and remember to leave room for time-limited commission increase offers, promos, and private offers.
An effective way to determine your default commission rate is to work out what your profit margins are. Starting from around 20-25% of your gross profit margin is a good idea to determine the maximum affiliate commission you want to pay. For example, if your calculations show that the maximum you can afford to pay your affiliates is 15% of each sale that they send to you, we would suggest setting up your default commission rate as 10%, leaving room to temporarily increase commissions to participate in campaigns.
An important component to a successful affiliate program is organising additional exposure and assigning affiliates a commission increase for a negotiated period of time to encourage them to provide additional placements or exposure. As such it is strongly encouraged to leave the maximum possible commission amount for those private offers.
It is important to find the balance between offering a generous rate that attracts affiliates to work with you, but also one that allows room so that you can offer increases when applicable and ensure you are not making a loss.
You can also look at cashback sites such as Cashrewards and Shopback to get an idea of what your competitors are offering. Remember that the cashback amount advertised is not the commission amount paid, but it gives you an indication of where you sit. Cashback sites usually work off a 70/30 split, passing 70% of their commission on to the user and keeping 30% to themselves. If you see a cashback rate of 10% advertised you can assume a commission amount of 14% is paid to the affiliate.