How to Design a SaaS Affiliate Commission Structure

Your SaaS affiliate commission structure is the first thing a good partner looks at, and it’s the easiest thing to get wrong. Pay too little and the best partners never turn up. Pay the wrong way and you end up rewarding the ones who did the least. That’s a bit like tipping the doorman for a door you opened yourself.

[Takes hand off the door]

Let’s go through how to get it right.

The common models

• Recurring share. The partner earns a percentage of each payment for a set period, often the first 12 months. It matches how SaaS money actually arrives, and it rewards partners who send customers who stick around.
• One-time bounty. A fixed amount when a customer starts paying. Easy to explain, easy to budget, and popular with partners who like being paid quickly. Which is all of them.
• Lifetime recurring. A share of every payment for as long as the customer stays. Partners love it. Your finance director will want a spreadsheet first.
• Hybrid. A small fixed amount for a qualified trial or demo, plus a share of revenue once the customer pays. Handy when your sales cycle is long and partners need something to keep them going.

Pay for the result you actually want

Decide what a good customer looks like for you, then pay for that. If most of your free trials never convert, paying for trials attracts partners who are brilliant at sign-ups and not much else. Pay when the customer makes their first payment, or once your refund window has closed, and partners start chasing the same thing you are.

Give buyers time to make up their minds

Business buyers rarely decide on the first visit. They read reviews, compare options, have a meeting about it, have another meeting about the meeting, and come back weeks later. Many SaaS programs use a cookie window of 30 to 90 days so partners get credit for the research they influenced. Make it too short and experienced partners will assume most of their work goes unpaid. They’ll usually be right.

Stop paying for sales you’d get anyway

Some partners mostly catch customers who were already on their way to you. Coupon sites that rank for your brand name plus “discount code”, and paid search ads on your brand name, are the usual suspects. That’s the doorman again. Decide up front how you’ll handle them.

• Leave existing customers and upgrades out of commission unless a partner genuinely brought them.
• Pay coupon and cashback partners a lower rate, or only work with the ones who reach buyers before they’ve chosen.
• Ban bidding on your brand name unless you’ve agreed it in writing. My guide to brand bidding rules covers how.

Reward the partners who grow

Tiered rates give partners a reason to push harder. A content site sending ten customers a month should earn more per sale than one sending one. Keep the tiers few and the thresholds clear, and look at them every quarter.

Write it down so a tired person can follow it

The best commission plan in the world fails if partners can’t understand it. Your terms should say what counts as a sale, when it gets approved, when partners get paid and what happens with refunds and cancellations. Partners compare programs side by side, and the clear one usually wins.

Get the structure right and you’ll be paying the people who actually brought customers through the door, not the ones standing next to it. Commission design is one part of our affiliate program management work, so if you’d like help with yours, give me a shout.