When deciding at 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.
There are various opinions on how to calculate what you can afford to pay your affiliates. Some would say to pay as much of your gross profit margin as possible, and if you can afford to pay out as much as 50% of that margin do so.
The idea behind such thinking is to be generous to your affiliates, which will automatically make your program more attractive. However, do not forget to think three steps ahead, and leave a little room for growth.
Starting from around 20-25% of your gross profit margin may be a better 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 to not set your default commission rate as 15%.
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 want 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 wriggle-room so that you can offer increases when applicable and ensure you are not making a loss.