Multi-tier Commission

What is a multi-tier comission?

A multi-tier commission is a hierarchical payment structure where affiliates earn commissions not only on their own direct sales but also on the sales generated by sub-affiliates they recruit into the program.

This type of commission structure is also commonly associated with multi-level marketing (MLM) affiliate programs, where commissions can be distributed across multiple levels of an affiliate referral chain.

How it works

In a standard two-tier setup, a Tier 1 affiliate recruits a Tier 2 affiliate. When the Tier 2 affiliate drives a sale, they earn their standard direct commission, while the Tier 1 affiliate earns a smaller commission from that sale.

This structure can extend across additional levels, with different commission rates assigned to each level.

For example:

• Affiliate A refers a customer who makes a $100 purchase and earns a 10% commission ($10).
• Affiliate A also recruits Affiliate B to the affiliate program.
• Affiliate B refers a customer who makes a $100 purchase and earns their regular 10% commission ($10).
• If the program offers Affiliate A a 2% second-level commission, Affiliate A earns an additional $2 from Affiliate B’s referred sale.

This creates an extra incentive for affiliates to introduce other quality partners to the program.

Affiliate software can help businesses manage more complex versions of this model. For example, LeadDyno’s Multi-Level Marketing (MLM) feature lets businesses create multi-level commission plans and reward affiliates at different levels of a referral chain.

Multi-Tier vs. Standard Affiliate Commissions

The main difference is who generates the qualifying referral.

With a standard affiliate commission, affiliates earn from customers they directly refer.

With multi-tier commissions, affiliates can potentially earn from both their direct customer referrals and qualifying sales generated by affiliates they recruited.

Importantly, multi-tier commissions don't have to reduce the recruited affiliate's earnings. The brand can calculate and pay commissions at each level separately according to its program rules.