Ultimate Guide to Maximize Affiliate Revenue With TikTok Shop Affiliate Commissions
Since its launch in the US in September 2023, TikTok Shop's sales skyrocketed by 219.4% within just five months.
One of the main reasons for this is TikTok Shop’s affiliate program, where brands can list their products on the platform and partner with creators to promote their products. Creators then earn a commission on every sale generated through their videos.
While this setup is pretty straightforward for brands looking to widen the reach of their products, there are strategies, like setting the right affiliate commission rates, that can help steer the success of the brand.
In this blog, we'll dive into how to set a commission rate that maximizes revenue, attracts the best affiliates, and creates a sustainable TikTok Shop affiliate marketing program for your ecommerce business.
What are TikTok Shop affiliate commissions?
When an affiliate sells your product, and the order is not canceled or refunded before the settlement period, TikTok Shop will deduct an amount from the order to pay the affiliate. This deducted amount is called the affiliate commission.
In simple words, it’s the fee that you pay the affiliates for successfully promoting your products on TikTok.
These commissions serve as an incentive for affiliates who drive sales to your ecommerce business.
Why is a commission-based structure better than traditional payment models?
The commission-based structure of TikTok Shop's affiliate program offers several advantages over traditional payment models such as:
- Performance-based payments: You only pay when a sale happens with no upfront payment to the influencers. This reduces financial risk and increases your return on investment (ROI).
- Flexibility: You have complete control over your expenses. You can set higher rates for high-margin products, lower rates for low-margin products, and even adjust rates based on seasonal trends to maintain your profitability.
- Motivation for creators: When you tie your affiliates' income potential with their performance, it motivates them to generate more sales for your store. I's a win-win situation for both parties. You get more customers, they get more commissions.
- Long-term partnerships: Unlike one-off sponsorships, the commission payments are ongoing. This encourages sustained promotion and builds long-term partnerships between brands and creators.
- Scalability: As sales increase, commissions grow proportionately. This means you’re not limited by fixed budgets and maintain profitability at any scale.
Types of commission rates for TikTok Shop affiliate program
The two main types of commission rates are:
- Percentage rate: In this, your affiliates will earn a percentage of each sale they generate. For example, if the rate is 15% and the product sells for $100, the affiliate earns $15 per sale.
- Flat rate: In this, your affiliates will earn a fixed amount for each sale, regardless of the product's price. A brand might offer $10 per sale, whether the product costs $50 or $200.
If you partner with macro creators or influencers, you might have to pay them an upfront fee in addition to the commission per sale. This is called the hybrid commission rate. For instance, an affiliate might receive a $1000 base fee for posting about your brand, plus a 10% commission for each sale they generate for you.
How to set the right TikTok Shop affiliate commission to maximize revenue
To run a successful TikTok Shop affiliate marketing program, you need to set a commission rate that is attractive enough to motivate affiliates while still maintaining healthy profit margins for your store.
The optimal commission rate can help you boost your profits and build long-term relationships with your affiliates, turning them into brand advocates.
Here’s a simple 5-step process to help determine the optimal commission rate for your ecommerce store:
1. Benchmark against competitors
If you’re new to TikTok Shop or confused about where to begin, start by researching what commission rates your competitors are offering.
Look at brands similar to yours in size, product range, and target audience. This gives you an idea about the industry-standard rates.
With this data, you can strategically set your commission rates while staying competitive and attracting the best affiliates.
For example, if you're selling beauty products and notice most competitors offer 10-15% commission, you can set rates within or slightly above this range to have an edge.
2. Factor in the product price
The price of your product plays a crucial role in determining the commission rate.
Expensive or high-ticket products naturally attract affiliates, even with lower commission rates. This is because affiliates can earn a substantial amount from each sale.
On the other hand, if your products are less expensive and have low commission rates, it might be difficult for you to find new affiliates or keep the existing ones motivated.
So, you need to make sure that your commission rates are not too low for affiliates to promote your products.
For example, if you sell luxury watches for $1000, a 5% commission ($50) might be enough to attract affiliates. But for a $20 phone case, you might need to offer a 20% commission ($4) to make it worth the affiliate's time and effort.
3. Analyze your profit margins from past campaigns
Examining your profit margins from previous campaigns provides valuable insights, which can help you decide your current commission rates. Here's how:
- Review your costs, including production, shipping, and platform fees.
- Calculate your average profit per sale.
Use this as a guide for what you can afford to pay in commissions.
If your margins are tight, you need to keep your rates lower or focus on higher-margin products. Conversely, if you’re making good profits, you can offer attractive commission rates.
4. Align commission rates with CLV
According to Earnest Analytics, more than 80% of TikTok Shop sales are generated from repeat customers.
When setting commission rates, consider Customer Lifetime Value (CLV)—the total revenue a customer generates over their entire relationship with your brand.
If your CLV is high, you can afford to pay affiliates more because you'll earn more from each customer they bring in.
For example, if your CLV is $500, you can offer a 15% commission. However, if your CLV is $100, you might offer a 10% commission to maintain profitability.
This strategy helps boost both your immediate and future revenue.
5. Test and adjust your commission rate
Getting your commission rate right the first time is not easy. But with some trial and error, you can figure it out.
Start with rates based on your research and analysis, then monitor your performance closely. Track key metrics like affiliate sign-ups, active promoters, sales volume, and overall profitability.
If you're struggling to attract quality affiliates, consider raising rates. If your sales are high but profits are suffering, you might need to lower commissions.
Conduct regular reviews (e.g., quarterly or annually) and experiment with different commission rates based on performance data.
3 Common pitfalls to avoid when setting TikTok Shop affiliate commissions
While setting commission rates, you might make mistakes that negatively impact your TikTok Shop affiliate program. However, you can avoid these errors by understanding the common pitfalls.
1. Not analyzing industry standards
When you’re not aware of the industry-standard rates, you risk setting your commission rates that are either unappealing to potential affiliates or unnecessarily high, reducing your profit margin.
For example, let’s say the standard commission rate in your niche is 15%. If you offer only 5%, affiliates might not be interested in promoting your products.
On the other hand, if you offer a 25% commission when your competitors are succeeding with 15%, you are cutting your profit margins too thin.
To avoid this pitfall, you need to conduct thorough research on your industry’s typical commission rates.
Get insights from experienced affiliates in your niche, use industry reports as resources, and perform competitor analysis.
The goal is to set your rates competitively while maintaining profitability.
2. Failing to adjust commission rates over time
Setting your commission rate is not a one-time task. You need to regularly review and adjust it. But if you fail to do so, it will lead to declining affiliate interest and missed opportunities.
For instance, if you start with a 10% commission rate but after a few months, notice a drop in new affiliates, you might need to increase the rate to attract more affiliates. Alternatively, if your product becomes highly popular, you can slightly reduce the rate without losing affiliates.
So, regularly review and adjust your commission rates. Monitor industry trends, competitor offerings, and your own profitability metrics.
Social Snowball allows you to track different metrics—revenue, orders, new affiliates, and ROI of TikTok Shop affiliate program—to help you make data-driven adjustments to your commission rates.
You can also get an instant overview of all the important metrics like total revenue, total affiliates, and top-performing affiliates on Social Snowball’s dashboard.
3. Setting very low/high commission
Both low and high commission rates can affect your TikTok Shop affiliate program.
Setting rates too low may save money initially but can result in low affiliate participation and reduced sales.
On the contrary, excessively high rates might attract affiliates but could seriously impact your profitability.
So, you need to set the right commission rate that not only attracts affiliates but also maintains profitability.
Bonus tip ⛄: Test different commission rates with small groups of affiliates before rolling out program-wide changes.
Remember, the goal is to create a win-win situation for both your business and your affiliates.
How do I prevent commission fraud or code leaks in my TikTok Shop affiliate program?
When running a TikTok Shop affiliate program, if you notice a sudden spike in orders using your affiliate discount code but cannot attribute sales to any of your affiliates, there is a high chance that your discount code is leaked to a coupon website.
When such code leaks occur, anyone can use the discount code without watching your affiliates' TikTok videos or clicking their links.
This not only cuts into your profits but also demotivates your TikTok influencers who aren't getting credit for these sales.
To prevent affiliate fraud such as code leaks, Social Snowball offers you an effective solution—Safelinks.
Safelinks generates unique, single-use coupon codes for each customer who clicks on an affiliate link, eliminating the risk of code leaks and unauthorized use.
You can also customize the discount codes generated from Safelinks, adjust the cookie attribution window, add Google Analytics UTM parameters, and shorten the links.
Additionally, you can set minimum cart requirements or apply Safelinks to specific products, collections, or customer segments.
By implementing Safelinks, you can confidently run your TikTok Shop affiliate program without worrying about fraud or code misuse.
To learn more about Safelinks, read this article.
Conclusion
Setting the right TikTok Shop affiliate commission rate is crucial for attracting affiliates, maximizing revenue, and building long-term affiliate partnerships.
By considering factors like industry standards, product price, and profit margins, you can set a commission rate that attracts top affiliates while maintaining profitability.
Regularly monitor the performance of your affiliate program and adjust your commission rates. Also, make sure to avoid the common pitfalls while setting commission rates.
If you are looking to manage all your affiliates (both TikTok and DTC affiliates) in one place, Social Snowball has got you covered with its native TikTok Shop integration.
With features like unified affiliate management, consolidated reporting, and gamified rewards, Social Snowball allows you to optimize your affiliate campaigns and drive more sales.
Book a demo with the Social Snowball today!
Frequently Asked Questions
Should I offer the same commission rate for all products?
For simplicity, yes. If you have many products that fall into a wide range of prices, offer a percentage commission instead of a flat fee commission rate. Something like 15% of the order value.
What are tiered commissions, and how do they work?
Tiered commissions are a structure where affiliate commissions increase as sales grow. It's a great way to gamify your affiliate program and give your affiliates something to aim for as they promote you. For example, an affiliate might earn 10% on their first $1000 in sales, 15% on sales between $1000-$5000, and 20% on sales above $5000. This structure boosts motivation and rewards top affiliates, driving more sales for your business.
How often should I review and adjust my affiliate commission rates?
Review your affiliate commission rates periodically (eg., quarterly or annually). Be ready to adjust them more often if necessary, especially when you launch new products or during peak sales seasons. Regular reviews help you react to changes in the market, know what competitors are doing, and how your business is performing. Keep an eye on key metrics like affiliate engagement, sales volumes, and profitability to make data-driven adjustments to your commission rates.
