The affiliate marketing channel, like any online channel, gives you access to comprehensive data-based traffic reporting.
The metrics used when measuring affiliate sales performance are not very different from the metrics one normally takes into account for the rest of online acquisition channels such as paid search, social media or email marketing. At the same time, integrating the affiliate channel into your online marketing performance dashboard by determining the customer acquisition cost will serve you in defining the priorities and resources allocation for your marketing mix.
Here is a quick guide to the metrics you should track to determine your affiliate sales program’s success.
- Number of sales actions
- Conversion rate
- Return on ad spend
- Incremental revenue<?a>
- Cost per click and cost per sale
- Percent of active affiliates
- Type of active affiliates
- Number of top affiliates and their share of total sales
- Reversed sales rate or chargeback rate
The number of clicks indicates your product’s level of exposure among affiliates’ promotional channels. A very high number of clicks driving only a small number of sales, or even no sales, can be an indicator of inaccurate affiliate tracking, low affinity between the audience and your products or inadequacy between the ad promoted and the landing page.
The number of completed transactions is of no less importance than the sales revenue metric. The number of sales effectively reflects the rate of new customer acquisition independent of the revenue associated with it.
One of the more highly used KPIs in e-commerce, the conversion rate applied to affiliate traffic will demonstrate the effectiveness of individual affiliates, and about the performance of this channel compared to others. Very high rates (>10%) could mean that the affiliate’s traffic has a good affinity with your market or that they may be employing suspicious promotional methods.
This is a useful metric when dealing with rigorous budget planning. ROAS can be calculated in several ways. One common method involves dividing the earned affiliate revenue by the amount spent (commissions paid to affiliates, affiliate system usage costs, affiliate management, OPM, etc.)
Typically considered as the new to file customer—referred by affiliates—that has not been “touched” by other marketing channels (SEM, email, organic, etc.), the ultimate goal of the affiliate channel is to deliver incremental revenue. However, defining and measuring incremental revenue is not always an easy task.
These two derived performance indicators are useful when benchmarked against other marketing channels such as AdWords or Facebook ads. They establish the average price you have paid for each new customer acquisition.
NOTE: The affiliate sales numbers in your advertising dashboard can be very useful for reporting, but for a better understanding of the source of your affiliate sales, you need to look at your program quality metrics to understand what is working well and what is actionable.
The first step is to define what “active affiliates” means to you. You can define this to mean affiliates generating clicks —or alternatively, affiliates generating sales—in a given period of time. A six-month interval is typically taken into consideration.
Segmenting your affiliates based on the way they generate traffic will help you understand at which stage of the user journey your product is converting most effectively, your audience price elasticity, and finally the incremental value that each type of affiliate is generating.
Traditionally, affiliates are segmented based on their content or how they are closing the sales: content websites such as editorial reviews, deals & coupons, paid search affiliates, email marketing affiliates, bloggers or even affiliate networks working as sub-affiliates.
Very often, the Pareto law applies in the case of affiliates sales as well. The definition of “top affiliates” is relative, though, and it depends on the size of the program and of your overall online sales.A “super” or “top” affiliate can be considered one that brings in a minimum of 5% of the overall online sales.
For example, if your total online sales—including affiliates—are $100,000, a typical top affiliate should count for $5,000 of it. Extrapolating, advertisers with $1M in online sales can expect their top affiliates to drive at least $50,000 of this revenue.
This will give you very useful information about the quality of the traffic that your affiliate partners are sending to your website. A reversed sales rate of greater than 10% of sales will probably indicate that the affiliate sending the traffic might not be promoting your product to the right audience or might exaggerate some of the product features in order to obtain the conversion.
Get a grip on your affiliate sales performance & quality metrics with help from FastSpring’s Affiliate Program KPIs template. Once you’re able to accurately track the performance of every aspect of your program, you’ll have a better handle on your business’s potential for success.