Flat commission rates treat all affiliates the same, whether they send one referral or one hundred. Tiered commission structures reward performance—as affiliates hit milestones, their commission rate increases.
This creates powerful incentives for top performers while keeping costs manageable for low-volume affiliates. Here's how to design a tiered system that works.
What Are Tiered Commissions?
Tiered commissions increase affiliate payouts based on performance thresholds. The more an affiliate achieves, the higher their commission rate becomes.
Example:
| Monthly Referrals | Commission Rate |
|---|---|
| 1-5 | 20% |
| 6-15 | 25% |
| 16+ | 30% |
An affiliate referring 20 customers in a month earns 30% on all their referrals, not just those above 16.
Types of Tiered Structures
Volume-Based Tiers
Commission rate increases based on number of referrals within a period.
Example:
| Monthly Customers | Commission |
|---|---|
| 1-10 | 20% |
| 11-25 | 25% |
| 26+ | 30% |
Best for: Programs where customer count is the primary success metric.
Revenue-Based Tiers
Commission rate increases based on total revenue generated within a period.
Example:
| Monthly Revenue | Commission |
|---|---|
| $0 - $1,000 | 20% |
| $1,001 - $5,000 | 25% |
| $5,001+ | 30% |
Best for: Programs with varied pricing tiers where revenue matters more than headcount.
Lifetime Tiers
Commission rate increases based on total historical performance, not resetting monthly.
Example:
| Total Customers (All Time) | Commission |
|---|---|
| 1-25 | 20% |
| 26-100 | 25% |
| 101+ | 30% |
Best for: Rewarding long-term affiliate relationships. Once affiliates hit a tier, they stay there.
Time-Based Tiers
Commission rate increases based on tenure in the program.
Example:
| Time in Program | Commission |
|---|---|
| 0-6 months | 20% |
| 7-12 months | 25% |
| 13+ months | 30% |
Best for: Encouraging long-term commitment. Less performance-driven than other models.
Benefits of Tiered Commissions
Motivates Increased Effort
Affiliates with flat commissions have no incentive to do more once they've made a few referrals. Tiers create goals to work toward.
The jump from 20% to 30% is meaningful. Affiliates actively strategize to reach the next tier.
Rewards Top Performers
Your best affiliates generate the most value. Tiered structures recognize this and share more upside with those who deliver.
This makes your program more attractive to serious affiliates who can move volume.
Controls Costs
Low-volume affiliates earn lower rates, keeping average commission costs manageable. You only pay premium rates to those who justify it.
Creates Retention
Affiliates in higher tiers are reluctant to leave—they'd lose their earned status. This makes your program stickier.
Provides Aspirational Goals
Clear tiers give affiliates something concrete to aim for. "I'm 3 referrals away from 30% commission" is more motivating than an abstract commission rate.
Designing Your Tiers
How Many Tiers?
3 tiers is the sweet spot for most programs:
- Entry tier: All new affiliates start here
- Growth tier: Active affiliates who demonstrate consistent performance
- Elite tier: Top performers who drive significant volume
4+ tiers adds complexity without proportional benefit. 2 tiers feels more like a threshold than a system.
Setting Thresholds
Base thresholds on your current affiliate performance data:
- Analyze your affiliates: What's the distribution of referrals?
- Define percentiles:
- Tier 1: Anyone (bottom 60-70%)
- Tier 2: Top 20-30% of performers
- Tier 3: Top 5-10% of performers
- Set achievable jumps: The jump from Tier 1 to Tier 2 should be achievable with effort. Tier 3 should be aspirational but realistic.
Example calculation:
If your median affiliate refers 2 customers/month:
- Tier 1: 1-5 customers (most affiliates)
- Tier 2: 6-15 customers (requires dedicated effort)
- Tier 3: 16+ customers (serious promotion)
Setting Commission Rates
The jump between tiers should be meaningful—enough to motivate effort.
Guidelines:
- Minimum 5 percentage point jumps between tiers
- Tier 3 should be 30-50% higher commission than Tier 1
- Rates must still maintain healthy unit economics at maximum tier
Example progression:
| Tier | Commission | Increase from Base |
|---|---|---|
| 1 | 20% | — |
| 2 | 25% | +25% |
| 3 | 30% | +50% |
For guidance on base rates, see our guide on setting affiliate commission rates.
Reset Period
Decide whether tiers reset periodically or accumulate:
Monthly/Quarterly Reset:
- Pros: Fresh motivation each period, predictable costs
- Cons: Can feel punishing when performance dips
Rolling Periods (last 30/60/90 days):
- Pros: Smooths out fluctuations, always forward-looking
- Cons: More complex to track and communicate
Lifetime (no reset):
- Pros: Rewards loyalty, affiliates never lose status
- Cons: Eventually all active affiliates hit top tier
Recommendation: Start with monthly reset for volume/revenue tiers, or lifetime for customer count tiers.
Implementation Approaches
Apply Rate to All Referrals in Period
When an affiliate hits a tier, that rate applies to all their referrals for the period.
Example: Affiliate refers 12 customers in a month, hitting Tier 2 (25%).
- All 12 customers earn 25% commission
Pros: Simple, highly motivating Cons: Higher cost than graduated approach
Graduated Rates
Each tier's rate only applies to referrals within that tier's range.
Example: Affiliate refers 12 customers.
- First 5 at 20% = 100% of base
- Next 7 at 25% = 125% of base
- Blended rate: ~23%
Pros: More precise cost control Cons: Less motivating, more confusing
Recommendation: Apply rate to all referrals. The simplicity and motivation outweigh the marginal cost increase.
Communicating Tiers to Affiliates
On Your Program Page
Display tiers prominently when recruiting affiliates:
Commission Tiers:
- Standard: 20% recurring (1-5 referrals/month)
- Growth: 25% recurring (6-15 referrals/month)
- Elite: 30% recurring (16+ referrals/month)
All rates apply to your entire month's referrals once you hit a tier.
See our guide on writing affiliate program pages for more.
In the Affiliate Dashboard
Show affiliates:
- Current tier and commission rate
- Progress toward next tier (visual progress bar works well)
- Days remaining in current period
- What they need to do to advance
Your Status: Growth Tier (25%)
Progress to Elite: ████████░░░░ 12/16 referrals
4 more referrals this month to unlock 30% commission!
In Communications
Include tier status in monthly summaries:
This month you referred 8 customers at the Growth tier (25%). Refer 8 more next month to unlock Elite status and 30% commissions!
Examples of Tiered Structures
Conservative SaaS Program
| Monthly Referrals | Commission |
|---|---|
| 1-10 | 15% |
| 11-30 | 20% |
| 31+ | 25% |
Low base rate, modest increases. Good for high-volume, lower-margin products.
Aggressive Growth Program
| Monthly Referrals | Commission |
|---|---|
| 1-3 | 25% |
| 4-10 | 30% |
| 11+ | 40% |
High rates across the board. Prioritizes affiliate acquisition and motivation over margin.
Revenue-Focused Program
| Monthly Revenue | Commission |
|---|---|
| $0 - $2,000 | 20% |
| $2,001 - $10,000 | 25% |
| $10,001+ | 30% |
Rewards affiliates who drive larger deals or high-value customers.
Lifetime Achievement Program
| Total Customers (All Time) | Commission |
|---|---|
| 1-50 | 20% |
| 51-200 | 25% |
| 201+ | 30% |
Rewards long-term partnership. Affiliates lock in higher rates permanently as they grow.
Advanced Tier Features
Bonus on Tier Advancement
Celebrate when affiliates level up:
Congratulations! You've reached Growth tier. Here's a $100 bonus to celebrate.
Small bonuses reinforce the milestone and keep affiliates engaged.
Tier Maintenance Requirements
For lifetime tiers, consider minimum activity requirements:
Elite status requires at least 3 referrals per quarter to maintain. Affiliates below this threshold drop to Growth tier.
Prevents inactive affiliates from permanently holding top-tier rates.
Special Tier for VIPs
Create an invite-only tier above your public structure:
Partner Tier: 35% commission By invitation only for affiliates with proven track records and large audiences.
This lets you recruit premium affiliates with special rates without advertising them publicly.
Measuring Tiered Program Success
Track these metrics:
Tier distribution: What percentage of affiliates are in each tier?
- Too many in top tier? Thresholds may be too low
- No one advancing? Thresholds may be too high
Tier transition rates: How many affiliates move up (or down) each period?
Revenue by tier: What percentage of affiliate revenue comes from each tier?
Behavior changes: Do affiliates increase effort as they approach tier thresholds?
Average commission rate: Track your effective blended rate across all affiliates.
Common Mistakes
Thresholds Too High
If almost no one reaches Tier 2, the structure demotivates rather than motivates. Set achievable intermediate tiers.
Thresholds Too Low
If everyone quickly reaches the top tier, you've just given a flat rate increase. Maintain meaningful achievement levels.
Too Many Tiers
4+ tiers creates confusion and administrative overhead. Keep it simple with 3 tiers.
Unclear Communication
If affiliates don't understand the tiers, they can't be motivated by them. Make the structure crystal clear.
Forgetting to Celebrate
Tier advancement is an achievement. Acknowledge it with emails, bonuses, or recognition.
Getting Started with Tiers
- Analyze current affiliate performance — Understand your distribution
- Design 3 tiers — With achievable but meaningful thresholds
- Set commission rates — With jumps that motivate without breaking your economics
- Build tracking — Ensure your affiliate software supports tiers
- Update your program page — Display tiers prominently
- Add dashboard visibility — Show affiliates their progress
- Launch and communicate — Announce to existing affiliates
- Monitor and adjust — Tweak thresholds based on real performance
Tiered commissions add complexity, but the motivation and retention benefits typically outweigh the management overhead.