If you want to get the most out of your affiliate marketing campaign, track it. You can hardly grow your business without monitoring your affiliate efforts and evaluating the outcomes, so you can know what you’re doing right and wrong. Let’s see which metrics to examine and which to avoid when launching an affiliate marketing campaign.
High-growth companies monitor 33% more metrics than other companies in order to evaluate their marketing effectiveness. No-growth companies lean toward examining mere baseline metrics, such as the number of new clients acquired. These numbers might make companies feel good, but they don’t show the real picture.
For instance, let’s say that 30,000 new users have visited your website this month. That sounds great. But it’s more important to know why they did so, what actions encouraged them to view your products, and how you should respond. It’s quite important to understand which metrics show you a realistic picture.
To help you, I’ve gathered the most valuable metrics and split them into two main groups: quantitative and qualitative. We’ll start with the quantitative.
How to estimate the performance of your affiliate marketing
The best way to measure your affiliate marketing performance is to apply quantitative metrics. Quantitative metrics cover all aspects of online marketing that you can represent numerically. Among the most common metrics are:
- cost per lead (CPL),
- incremental revenue,
- click-through rate (CTR),
- conversion rate,
- return on investment (ROI),
- reversed sales rate,
- percentage of fraudulent orders.
Cost per lead
When measuring cost per lead, you need to measure each lead generation channel used in your marketing strategy. Just divide the average monthly expenses on a given campaign by the number of affiliate leads you acquired during this campaign. Suppose you spent $600 on a pay-per-sale campaign and converted 15 people into leads. In this case, your CPL would be $40.
Once you’ve got the numbers, you can compare them with previous campaigns and evaluate the efficiency of your current affiliate program. In the chart below, you can see the average CPL for various industries.
[Image source: SurveyAnyplace]
Although affiliate campaigns increase revenue, they can be quite expensive. So, you’d better prove their worth by measuring incremental revenue.
Incremental revenue is revenue from transactions completed thanks to the efforts of a particular affiliate without any paid media, marketing channels (SEM, email, organic traffic), or other affiliate involvement. In other words, incremental revenue is the income generated from unique sales independently provided by an affiliate.
To calculate incremental revenue, first add the total revenue (base revenue) for some period (e.g. a quarter or a year). Then measure your revenue after introducing the affiliate campaign and deduct the base revenue from it.
Imagine you’re running a T-shirt shop and your base revenue is $27,000 per year. You’ve adopted an affiliate program from YourWinningAffiliate. After doing so, you bring in $32,000 over the next period. This means your incremental revenue is $5,000.
An affiliate hardly ever provides 100 percent of incremental sales. The key here is to determine what percentage of sales are incremental and whether that’s enough for your business.
CTR measures the number of users who click on an ad or on a link to your site from a third-party and leave the page to land on another. With the click-through rate, you can find out which types of links get the most clicks and measure the overall success of your affiliate advertising campaigns.
What is an average CTR? When starting their career, advertisers should aim to achieve a 2 percent click-through rate. In fact, the average CTR on AdWords is 1.91 percent across all industries.
The conversion rate shows the percentage of people referred by an affiliate who then complete a sale or fill out a lead generation form on your website. If you have a 3 percent conversion rate, that means that 3 users out of 100 who come to your website either make a purchase or leave their contact details. This is one of the most used KPIs in e-commerce.
Beware of high conversion rates (over 10 percent), though: a very high conversion rate may mean that your affiliate is a fabulous marketer, but more likely it means that they’re using suspicious promotional methods. The average conversion rate is about 2.35 percent.
Return on investment
Return on investment is thought to be the most important measure of performance as it shows the profitability of a marketing campaign. In other words, ROI tells you how much money you’ve gotten back for each dollar invested.
With ROI, you can either evaluate the efficiency of an investment you’ve made in a particular affiliate program or compare the payback across a range of such programs. All you need to do is divide the benefit you receive from your investment by the cost of that investment.
Let’s look to Andy for an example. Andy is the owner of a cat hotel. He decided to spread the word about his hostel and invested $500 in an affiliate strategy. A year later, Andy earned $600. So, his ROI is ($600 – $500)/$500 = $100/$500.
ROI is usually expressed as a percentage or a ratio. So, we can express Andy’s ROI as 1:5 or 20 percent. Is that a good rate? Not quite. Many entrepreneurs target a 5:1 ratio, as that’s considered strong for most businesses.
Reversed sales rate
The reversed sales rate indicates the number of users previously credited to an affiliate who return products bought from your website for a refund. A 7 percent reversed sales rate would mean that 7 orders out of 10 that are attributed to an affiliate are canceled.
It’s common for businesses to have some reversal. A reversal rate over 10 percent, however, may show that affiliates are sending low quality or mis-targeted traffic to your website or that affiliates exaggerate your product features to get more conversions.
In most cases, you can’t analyze the reversal sales rate before joining an affiliate program – except for the AvantLink and ShareASale networks. So, you need to measure this rate periodically during your affiliate campaign and take preventive measures to safeguard your business.
Percentage of fraudulent orders
Last year saw at least $7.4 billion lost to fraudulent or unviewable ads, which is 56 percent of all display ad dollars. And this number is expected to increase to $10.9 billion by 2021. Moreover, 37 percent of desktop ad impressions in the USA and up to 80 percent in Japan are fraudulent.
[Image source: Statista]
This is why you’d better monitor your affiliate campaigns for fraudulent orders to save your time and money. If you’ve noticed that fraudulent orders have grown with a particular affiliate or have even exceeded genuine orders, then remove that affiliate as soon as possible.
That’s all about quantitative metrics. Now you understand the figures that your affiliates deliver to you. But what about the overall quality of an affiliate marketing campaign?
How to test the quality of your affiliate program
Don’t focus exclusively on data that is easy to gather, but examine the intangibles as well using qualitative metrics. Qualitative metrics give you important insights into the strengths and weaknesses of your affiliates, their competitive advantages, and their trustworthiness.
I recommend considering affiliate behavior and affiliate sales fluctuations.
You need to understand how many affiliates you have, how active they are, and what potential they offer. Consider the following metrics:
- Level of program adoption among your affiliates ‒ Check how your affiliate relate to your brand to see whether they’re really engaged in promoting your product and addressing the traffic you want or if they’re neglecting your brand voice in pursuit of quick income.
- Types of active affiliates ‒ Segment your affiliates by the way they generate traffic (bloggers, deals and coupons, paid search, etc.). This will help you understand at what stage of the customer journey most users are converted. This metric depends on what you mean by “active affiliate,” which generally speaking is any affiliate that generates clicks, leads, or sales.
- Percentage of dormant and top affiliates ‒ Detect affiliates that generate low volumes or have stopped generating leads at all to enhance the efficiency of your affiliate campaigns. You may try to reactivate lapsed affiliates by sending dedicated emails or offering some kind of reward, or just leave them and invest more in your top affiliates.
Affiliate sales fluctuations
Direct your attention to rises and falls in your sales. Generally, sales are high during the shopping seasons (fall and winter) and slump during spring and summer. Of course, everything depends on the kind of products you sell. For instance, for Disney, products sell best on weekdays and holidays.
Your sales can also fluctuate due to technical problems, a better offer coming from your competitors or your affiliate’s blunders. Track changes, discover the cause and take action to obtain the best results.
But affiliate sales fluctuations aren’t the only pitfall you can face. Many marketers have the constant temptation to focus on so-called vanity metrics. What are they?
Vanity metrics include the number of downloads, followers, registered users, tweets per day, and so on.
These variables make entrepreneurs proud of their brand but are hardly related to the numbers that really matter: revenue, user retention, engagement, and repeat use.
So what vanity metrics should you forget about? In my humble opinion, the vainest are impressions, total visits, and bounce rate. Let’s see why.
Impressions and total visits
To put it simply, impressions are the number of times your ad (banner, button, text link) has been shown to a potential user. Each time an ad appears on a page counts as one impression.
“Wow, my ad was shown 70,000 times… 30, 000 users have visited my website this month!” This data may please your ego, but what does it give you? Users can view your advertisement dozens of times and not visit your site or may browse it and not buy anything. Impressions and total visits don’t provide any clear guidance for what to improve or what to do next.
A bounce is when a user opens a single page on your website and then leaves your site without visiting any other pages.
Many marketers see a 70 percent bounce rate and think they need to close the campaign. But everything isn’t so simple with the bounce rate. It isn’t set in stone, and there can be hundreds of reasons for it to go up and down. For example, mobile traffic usually has a higher bounce rate than desktop traffic.
What’s more, the average bounce rate varies between 10 and 90 percent depending on the type of site you have. Check out the infographic below:
Those are huge gaps, which is why you can’t consider the bounce rate particularly reliable and can’t reach any adequate judgment based on it. You can easily justify a high bounce rate without worrying about having bad content or ineffective landing pages. So, measure the success of your affiliate campaign with actionable metrics.
What gets measured gets managed
Have you adopted a successful affiliate program? It’s not enough to believe that you’re using an effective model. You also need to measure the efficiency of your affiliate marketing strategy. Measuring the right metrics can pave the way for your company’s success.
Conversely, vanity metrics can mislead you and damage your brand’s vitality. Stop investing your energy into misleading indexes and focus on metrics that really matter instead. Remember that the measure-and-optimize process should be ongoing.
Do you know of more actionable metrics? What metrics do you trust most? Share your thoughts in the comments section below.