Key Performance Indicator in affiliate marketing can be hard to define, but as the realm of affiliate marketing advances, so should the KPIs you’re focusing on. Learn how to evaluate what’s essential for your business and what you can dismiss.
Success in affiliate marketing, like success in life, looks different for everyone. It is key to create an affiliate program that is tailored to your specific requirements rather than those of others. Being transparent on how you will define success will lead to a more direct path to achieving those objectives and the best opportunity to make necessary improvements.
Table of contents
- What is a key performance indicator (KPI) in affiliate marketing?
- How to Establish Key Performance Indicators (KPIs) for Your Affiliate Program
- Key Performance Indicators to Watch in 2021
- 1. The number of Clicks vs. the number of sales
- 2. Click traffic
- 3. CPA and Commissions
- 4. Segmenting the affiliates
- 5. Affiliate Commissions
- 6. Affiliate Partners Performance
- 7. The Total Number of New Affiliates
- 8. The Conversion Rate
- 9. Average Order Value
- 10. Number of Affiliate Partners in Total
- 11. Reversed Revenue Rate
- 12. New consumer percentage
- 13. Year-on-year Growth – Best Key Performance Indicator
- Key Performance Indicator – Conclusion
What is a key performance indicator (KPI) in affiliate marketing?
In affiliate marketing, there are many meanings of a KPI, and they are often unique to each company. Some ads are based on brand awareness, while others are focused on the final sales click, while others target consumers on a larger scale, and still, others are extremely niche-targeted.
The Key Performance Indicators will be different in each of these cases.
Each Key Performance Indicator will show you how you’re monitoring over the course of your campaign and whether or not things are going as expected. KPIs in affiliate marketing are frequently numerical instead of other types of marketing, where these set targets may be emotive or sentimental in nature.
How to Establish Key Performance Indicators (KPIs) for Your Affiliate Program
You should evaluate the individual goals you plan to accomplish with each program in light of your overall digital marketing strategy. For example, check out Starbucks marketing strategy to learn from this case study.
- You want to reach out to a previously untapped international market?
- How about putting a brand-new product to the test?
- Or, how about increasing the number of customers for a valuable service?
Whatever the target, it is accompanied by a Key Performance Indicator, and you need a device that can properly deliver data on these. This is often done by using one of the data analysis tools.
The challenge in affiliate marketing is determining what to concentrate on and what to neglect.
As the industry evolves and the value of comprehensive attribution solutions becomes more apparent, many marketers are becoming less dependent on monitoring performance solely through Cost Per Click (CPC). Although this is still a metric to keep an eye on, it is worthwhile to understand that an affiliate affects the buying process and reward this.
The emphasis on affiliate marketing has shifted from ‘likes’ to ‘impressions,‘ similar to how it has in social media marketing. This should be factored into how you arrange your commission charge.
Advertisers may opt to pay a fixed commission to publishers who promote a click as part of a purchasing journey but do not actually receive the final click. Rewarding publishers who are involved in the analysis process of a customer’s purchasing habits can be extremely helpful to marketers.
There are, of course, a plethora of other objectives to achieve in order to track progress.
Key Performance Indicators to Watch in 2021
1. The number of Clicks vs. the number of sales
This is essentially your conversion rate. It is obvious that your affiliate conversion rate is an important KPI to track. However, many advertisers are focusing solely on clicks. If you notice a big disparity between the number of clicks and the number of sales, you should probably look into it further.
There may be some factors at work here. The audience may not be receiving the product they expected, implying that either the publisher is promoting the product to the wrong audience or the product or service is being sold incorrectly. Depending on how you have formed your commissions, this type of disparity in numbers may also indicate that a publisher is engaged in illegal practices to raise their numbers.
A healthy distribution of sale-active partners is important in an affiliate program. Having a program with a variety of affiliate partners will help ensure that your profits aren’t being produced solely by one or a few top partners.
If a single top partner accounts for more than half of your overall affiliate program revenue, your program is quite “top-heavy.” If that top partner drops out of your program or decides to avoid supporting your company for whatever cause, your bottom line will most likely suffer.
It is strongly recommended for top-heavy programs to recruit additional affiliate partners into the program so that all of the eggs are not in one basket.
Important questions about affiliate revenue distribution:
- Is the program’s top affiliate responsible for more than half of gross sales?
- What among the top ten or top twenty-five affiliate partners?
- Are you satisfied with the sales distribution provided by your affiliate program?
2. Click traffic
The amount of clicks obtained by your program during a specific time span is referred to as Click traffic. Looking at your click traffic is a good place to start because it is a good indicator of your program.
For example, if you got less click traffic this year compared to last, your program is most likely shrinking and driving fewer sales. If, on the other hand, you are seeing increased traffic this year, your program is most likely expanding, forming new and fruitful alliances, and generating more revenue.
Examine this affiliate marketing KPI in greater detail to determine which blogs, affiliates, or networks are sending the most traffic and which aren’t. This is a great way to focus on the most lucrative outlets for your program.
Important click traffic questions to determine Key Performance Indicator:
- Who are your top affiliate partners for directing traffic?
- Is the traffic generated by those partners turning into valuable sales and leads?
- Which affiliates aren’t driving quality traffic but should be because of their high Alexa rank?
- What could be done to get them to work?
3. CPA and Commissions
Calculating your Cost per Action (CPA) is a vital affiliate marketing metric for quickly determining whether or not your campaign is successful. By looking at the total CPA, you can see which affiliates are causing the number to rise or fall.
Some systems opt for Click Through Rate (CTR) or Cost Per Click (CPC) (CPC). Both of these metrics are valid; it just depends on which aspect of the process you want to see the most impact from.
It is beneficial to examine how a publisher influences the campaign in its entirety. While the final click to make a deal is critical for an advertiser, seeing where specific affiliates are adding value to the brand’s overall exposure can be beneficial in the long run.
Though the activities of these publishers do not result in an immediate sale, their effect may have a significant impact on potential sales.
Comparing your CPA to the commission you pay each publisher on a regular basis will help you assess the ongoing viability of your program and highlight areas where improvements may be made.
4. Segmenting the affiliates
Different types of affiliates may have an effect on various stages of your end client’s purchasing process. You are categorizing the publishers based on how they make sales, or the type(s) of content they create will help you determine which area fits best for you and your business.
It may be video material, coupon pages, direct email marketing, social media posts, or some other type, but there’s bound to be a trend somewhere. Segmenting will help you get a more clear view of where you’re succeeding.
Scaleo’s cross-device tracking technology may also provide some additional assistance in this area. Users are no longer completing their entire purchasing experience on a single unit. In reality, it has been recorded that over 65 percent of purchase journeys are carried out through multiple devices. It makes sense to be able to compensate publishers for transactions involving several devices.
Your top ten affiliate partners are most likely responsible for a sizable portion of your program’s revenue per year. Maintaining a good partnership with your high-value partners and keeping an eye on what each partner is doing in your program is key to growing your affiliate program year over year.
The following are the most important top affiliate partner questions:
- Were there any new affiliate partners in your top ten this year?
- Are there any affiliate partners that have fallen out of your top ten list? If so, why?
- What can be done to improve performance with these top ten partners?
- What can be done to reintroduce the partners who fall out of the top ten?
5. Affiliate Commissions
The commission is what you pay your affiliate partners for the good conversions they generate when promoting your company. This measure is an important one to monitor because it is critical to the profitability of your affiliate program.
While a successful affiliate program is definitely a priority for most brands, it is also a priority for most affiliate partners because their profits are directly related to the success of your program.
This is what makes affiliate marketing such a win-win situation. Since their income depends on your commission payments, attractive commissions help keep your brand top-of-mind with partners.
Questions to ask yourself about affiliate commission:
- Is there any variation in your average Cost Per Action (CPA)?
- Which partners are increasing or decreasing the average CPA?
- Is the CPA a priority for you?
- Is your target Return On Ad Spend (ROAS) or Return On Investment (ROI)?
- Are the ROAS and CPA too low? What methods can be introduced to return these figures to a safe range if this is the case?
- Is there a budget for testing new placements?
- Is your affiliate program assisting in the lifetime value of your customers?
6. Affiliate Partners Performance
Judging the performance of each affiliate partner category will provide insight into the types of customers that your partners are bringing to your website. For example, suppose your program has a high percentage of coupon partners who generate the majority of your program sales. In that case, you are likely to see more bottom-of-funnel consumers who are already familiar with your brand and looking for the best price on your goods.
If, on the other hand, you see a higher percentage coming from your content partners, it is possible that you are seeing more top-funnel clients come from your affiliate program; clients who are not familiar with your brand and learned more about you from your content partners’ educational and promotional activities.
Which is better for your affiliate program can only be determined by your business goals and how you internally attribute revenue. If you trust partners who can persuade prospects to become customers, discount and loyalty partners could be your top relationship priority.
If you value increased brand recognition and new top-of-funnel customers, content affiliates may be a better partner focus for you.
Important questions about affiliate partner performance:
- How much of your sales are influenced by discount, contract, and loyalty partners?
- Is the content-to-coupon or content-to-loyalty ratio healthy?
- What can be done to increase the sales participation percentage of your content partners?
7. The Total Number of New Affiliates
Tracking the number of new affiliates you’ve accepted will help you determine how popular your program is. Similarly, keep an eye out for possible affiliates that are still sending referral traffic and sales to your site but aren’t official affiliates.
Content creators and publishers might already produce content about your products and drive substantial referral traffic to your website. Keep an eye on referral traffic and erratic UTM parameters to see if these potential affiliates drove any unexpected sales.
These can be a goldmine for locating new and profitable affiliate relationships to pursue. They even show you how well-liked your program is among content creators and publishers.
You want to ensure that the program remains in high demand. Otherwise, the development would gradually become stagnant.
This affiliate marketing KPI is influenced by two major factors: the product you sell and how you promote the program.
You should expect to see growth in this KPI as long as you sell a product that adds value to people’s lives and successfully promotes your affiliate program.
8. The Conversion Rate
The conversion rate is calculated by dividing the number of conversions (usual sales) by the number of clicks. This tells you how many clicks you get on average with each conversion. Looking at the year’s rises and dips can offer you a ton of useful details.
A spike in the conversion rate, for example, will tell you whether your customers well received a particular offer. If you recently updated your website and your conversion rate dropped after launch, it might mean that your new design is turning off customers.
Looking at your conversion rate’s peaks and valleys and linking those fluctuations back to shifts, activities, and promotions will help you decide whether you want to repeat, delete, or move.
Important conversion rate queries include:
- Is the conversion rate on the rise? If so, when will it happen? Why is this so?
- Is the conversion rate falling? If so, when will it happen? Why is this so?
- Is there any partner with an incredibly high conversion rate who should be scrutinized more closely to ensure the operation is not fraudulent?
- Are there any affiliate partners that have a very poor conversion rate that could be improved?
9. Average Order Value
This is a fantastic metric that goes beyond how many final clicks a publisher receives. It is also known as Average Order Value or Basket Value. Even if an affiliate does not generate a large number of final sales, they can still be extremely valuable to your program if their AOV is big.
Their audience may be smaller and more niche, but they are highly committed and able to purchase more in a single transaction. Certain affiliate networks, such as Awin or Shareasale, allow you to pay a commission based on basket value rather than sales volume.
10. Number of Affiliate Partners in Total
The number of affiliate partners you’ve accepted into your program is a critical measure. Although it is true that the more partners you have supporting your brand, the more important it is to ensure partner quality.
Important questions about the total number of partners:
- Is our affiliate program expanding or contracting?
- Is our affiliate program only in its early stages, or has it reached maturity?
- Should your focus be more on affiliate recruitment or activation and optimization of high-value partners? (Tip: try also optimization calculator for affiliate marketing).
11. Reversed Revenue Rate
This is your gross sales vs. net sales ratio, also known as your chargeback percentage. While a publisher can generate a large number of sales, in the beginning, this evaluates the quality of the customers. If an affiliate has a high reversed sales rate, they could be misrepresenting the product to their audience. This harms both their and your brand. A stable rate of more than 10% should be cause for concern on average.
12. New consumer percentage
Although returning customers are great because they show an increasing loyalty to your brand, product, or service, a good affiliate program should still be attracting new customers. Your money isn’t being invested wisely if it isn’t growing. You can quickly determine if a customer is new or returning using Scaleo’s dashboard.
13. Year-on-year Growth – Best Key Performance Indicator
Hopefully, affiliate marketing is a long-term marketing strategy for you. It is helpful to measure the year-on-year progress with the program over time in order to find areas for change. During this method, you may also recognize your top ten performing publishers and consider why they are so successful.
You can then look at others who aren’t as good and reach out to them for additional help if necessary. If an affiliate has been inactive for a while – if that means they haven’t been producing clicks or sales, it’s up to you – you can either provide them with some feedback or drop them from your program.
Key Performance Indicator – Conclusion
Answering any or all of these KPI questions can help ensure that the affiliate program is handled more strategically. New priorities and ideas can be tested to help drive more gradual development.
Last but not least, execution is everything. It is important to have a mechanism in place for regularly tracking and reviewing the affiliate program’s objectives. This is an important step in determining where changes can be made and new techniques that can be implemented to keep the affiliate program growing.