Module 2 of 8
Build the business case
Decide whether the channel fits your economics, customers and growth goals.
By the end
Draft a realistic business case using contribution margin, target outcomes and total channel cost.
01
Start with the business outcome
Define the result the company needs before choosing partners or a platform. Common goals include profitable new-customer sales, qualified leads, entry into a new audience or stronger consideration content.
- Use one primary outcome for launch.
- Separate revenue from profitable revenue.
- Define what counts as a new customer before reporting begins.
02
Know what one result can cost
Work backward from revenue, gross margin, expected returns and other variable costs. The room left is not automatically the commission rate: it must also cover platform, agency, placement and internal operating costs.
- Model total channel cost, not commission alone.
- Use category-specific economics rather than a universal benchmark.
- Create scenarios for average order value and return rate.
03
Recognize when affiliate is a weak fit
The channel may struggle when conversion is poor, tracking is unreliable, margins cannot support partner value, or the offer has no clear reason for a partner to recommend it.
- Fix the customer journey before recruiting at scale.
- Confirm legal and brand restrictions early.
- Partners need both an audience fit and an economic reason to participate.
Worked example
Commission headroom
On a $120 order with $54 of contribution before marketing, a manager tests 8%, 12% and 16% commission scenarios. They then add expected network, management and placement costs. The right decision comes from the resulting contribution—not from whichever percentage looks most competitive.
Common mistake
Watch for this
Using a competitor's commission rate as your budget. Their margins, repeat purchase rate, attribution rules and fees may be completely different.
Manager checklist
Put this module to work
- ✓Define the payable result.
- ✓Calculate a contribution-margin range.
- ✓List launch costs beyond commission.
- ✓Agree how new customers and cancellations will be measured.
Check your understanding
Which number is most useful when setting an affordable commission?
See it in practice