Pricing and margin
How much can you afford to pay an affiliate?
The arithmetic that decides an affiliate rate: contribution, the margin you protect, and the ceiling above which a sale costs you money. With the numbers worked through on a £100 product.
How MarketWar handles it
MarketWar computes a Safe Reward Ceiling from your own unit economics and REFUSES a campaign that breaches it, rather than warning you and letting it run. On a £100 order with £38 of variable cost and a 20% protected margin, £42 is available for acquisition and the ceiling for total reward spend is 5% of contribution — £3.10 on that transaction.
Most affiliate programmes pick a commission by looking at what competitors pay. That is how a business ends up paying 15% on a product whose contribution is 11%, and discovering it four months later when the volume is high enough for the loss to be visible.
The number has nothing to do with the industry. It comes out of four figures you already have.
The arithmetic, on a £100 order
Take a product at £100 with £30 of goods, £5 of fulfilment, £3 of payment fees, and a 20% margin you refuse to spend.
- Contribution is £100 − £38 = £62. That is the only money in the transaction that can pay for anything.
- Protected margin is 20% of price = £20, which is not available to any campaign.
- The acquisition pool is £62 − £20 = £42. Everything — the affiliate, the platform fee, the reserve for refunds — comes out of that.
An affiliate at 15% would take £15 of the £42, which fits. At 45% they would take £45, which does not, and the transaction loses money before a single refund.
The ceiling above the ceiling
MarketWar applies a second limit on top: total reward spend may never exceed 5% of the verified economic value the programme generates. On the order above that is £3.10 of reward capacity from this transaction.
The two limits do different jobs. The pool stops any one sale being unprofitable. The 5% stops the programme as a whole quietly becoming your largest cost while every individual sale still looks fine.
What happens when the numbers do not fit
The campaign is refused, with the arithmetic shown. Not flagged, not warned about, not allowed with a note in a settings page nobody reads.
That is a deliberate design choice and it is the one thing here a spreadsheet will not do for you: a spreadsheet lets you type the number anyway.
Where this sits
The same figures decide whether a product can carry a commission at all, and they set the rates in the creator programme. When a live campaign starts drifting, the kill switch uses them again.
Run a free audit of your own site first if you have not — there is no point optimising a commission on traffic that does not convert.
What this does not do
It cannot tell you whether the affiliate will actually sell anything. It tells you what you can pay if they do, which is the half most programmes get wrong in the expensive direction.
Common questions
What is a normal affiliate commission rate?
You will see 5–30% quoted all over the internet; nobody here has measured that and it is not the point. The number is meaningless without the margin behind it. 10% on a product with 12% contribution loses money on every sale; 30% on software with 90% contribution is comfortable. The rate follows the arithmetic, never the industry.
How do I work out my contribution?
Price minus every cost that varies with the sale: cost of goods, fulfilment, payment fees, the tax you collect and pass on, and a realistic returns allowance. What is left is the only money that can fund acquisition.
What is a protected margin?
The share of contribution you refuse to spend, whatever the campaign promises. Naming it before a campaign starts is what stops a good month of revenue arriving with no profit inside it.
Related
What should you pay a creator who has no followers?
Most programmes turn away anyone under 10,000 followers and lose the person who was about to be big. The two-door model: 0.5% with no gate at all, 0.75% and 1% for a verified audience.
Why some products cannot carry a commission at all
Thin-margin products cannot fund a percentage, however small it looks against the price. What to do instead of quietly cutting the rate — and why a headline rate that shrinks is worse than no programme.
How do you know when to stop a campaign that is losing money?
The four numbers that decide it, why ROAS on its own is misleading, and what a holdout group tells you that attribution never will.