Like other marketing channels, affiliate marketing needs to be tracked and understood in a way that helps a brand (merchant) or affiliate understand the value of what they are driving, and whether it’s providing a positive return on investment for them or not.
Other KPIs also come into effect that produce a perceived value to the affiliate or to the merchant, depending on the types of KPIs they are focused on.
Typically tied to company goals and objectives, here are the main value-drivers’ companies are focused on increasing when putting effort into an affiliate marketing program (in no particular order):
New Customer Acquisitions
Frequency of Purchase
AOV (Average Order Value)
Profitability & ROAS/ROI
Brand Loyalty & Customer Retention
For an affiliate to gain traction with a brand / merchant (which often results in higher earnings from that merchant), they need to understand what KPIs are most important, and focus their time, effort and own results around improving their KPIs tied to those. That said, they need to do it in a way that creates a positive return on investment for themselves and helps them grow their business and income too.
Let’s take a closer look at some KPIs ecommerce merchants would be looking at within their affiliate marketing program to determine who is a good partner and how to work with them to succeed.
The above screenshot is an example of an affiliate program performance report, where an ecommerce merchant gets a high level view of which affiliates are producing which results tied to KPIs such as Net Revenue, Total Commission earned or paid out, how many leads they generated (if applicable), how many clicks they drive in that defined period of time, how many transactions they produced in that same period (Sales-Net), the average CPA (Cost Per Acquisition), the Return on Ad Spend (ROAS) and the average conversion rate (CR) of that particular partner within the defined time period.
Additional KPIs such as AOV (average order value), lifetime value or number of new versus returning customers by that affiliate might also be added to this insight report.
What’s important for an ecommerce merchant to note from a report like this is which affiliates are impacting the KPIs that are most important to them and which KPIs can be optimized with affiliate partners to drive increases in the desired results they are looking for.
For example, if a merchant can help a partner increase their conversion rate from 1% to 2%, then they have ultimately doubled their sales with that affiliate.
If the merchant can help that same affiliate partner increase their AOV from $50 to $100 and but the conversion rate stays the same, they have still doubled (100% increase) their revenue with that affiliate.
However, if the merchant (or affiliate themselves) works to understand how to best pre-sell and position their products or brand, create some engaging content and capture their audience in a way that produces a 100% increase in both conversion and AOV, they have increased that affiliate partner’s performance (together) by 200% (four times revenue).
If one affiliate can increase their revenue four times by doubling just their AOV and conversion rates, imagine the additional increases in revenue from each partner if they also increase their traffic, click-through-rate, frequency of perchance or lifetime value of a buyer from their audience, etc.
Ecommerce brands who understand how to work with affiliate partners to optimize these types of KPIs at scale are the ones who have the most successful and best affiliate programs this year.
Here’s an example of another report a merchant might look at identifying which affiliate partners are “risers” and which are “fallers”. This type of report gives insight into how performance is changing over any given period, from day of the week to weekly performance, monthly results or even quarterly and annual performance by affiliate.
What these reports tell us is which affiliates are improving in their results, and which ones are declining in their results tied to the most essential KPIs (revenue, payouts, conversion, etc.)
There are many variables that will impact the rise or decline of performance metrics for partners. These can range from seasonality to content quality, offers being pushed out, even Google Algorithms updates which can decrease that partner’s traffic significantly overnight.
Here are a few other variables that can impact increases and decreases in affiliate performance:
Day of the week / holidays
Freshness of the offer or content
Competition (for both the advertiser / merchant and the affiliate partner)
Budgets (spend vs organic)
Marketing and content distribution channels the affiliate used (ie: Facebook vs their email list vs content on their blog vs paid search campaigns vs all of the above)
Buyers behaviors, trends
The economy/location of that affiliate and/or their audience
It’s also important for an ecommerce merchant to keep track of which affiliates are being “Productive” (sales active, revenue driving), “Active” (click active but not sales driving), and “Inactive” (meaning they are either not promoting the merchant at the time at all, or their tracking links are not working to showcase their activity.)
Ecommerce brands and affiliates who focus on going from inactive to click active to sales active and then optimizing the KPIs outlined above that can impact the greatest growth in revenue and profitability such as conversion, average order value, and frequency of purchase (or lifetime value), as examples, will be the ones that earn the most as a collective team (merchant and affiliate) together.
Our final tip for affiliates looking to understand and optimize their KPIs and drive value to merchants is to use the data insights and support resources available to create a game plan tied to the most essential KPIs.
Affiliate networks and tracking technologies provide great reports where you can dig into your own data more granularly, and see which pages, campaigns, offers and content is working best for you. You should also be tracking and analyzing your stats on your website or landing pages, in your social channels, etc., to create an optimization game plan that will drive better results for you and your merchant partners.
If you need help, work closely with an experienced affiliate program manager or affiliate management agency to get a better understanding of what you can do to improve these KPI's. They can provide tips and best practices of what is working for other affiliates and ecommerce brands alike.
Written by Sarah Bundy