Practical Ecommerce

Important Affiliate Marketing KPIs, for Mid-year Review

The summer months are slow for many ecommerce merchants. It is an excellent time to do some housekeeping and prepare for the upcoming busy season. Take a few days to review the key performance indicators from your affiliate marketing efforts from January to June.

Affiliate marketing KPIs are different than overall ecommerce metrics. Company leaders will likely monitor the typical top-line numbers, such as return on ad spend. But the affiliate channel usually has one of the best ROAS ratios. Thus good managers need to focus on a deeper set of affiliate marketing KPIs to show progress and success.

Unimportant KPIs

It’s easy to manipulate certain KPIs through the affiliate channel. Others are just untrustworthy. Eliminate the following from your focus.

Earnings per click. This is a traditional metric based on earnings per 100 clicks. With so many different models of active affiliates, this average can be skewed heavily by accident or on purpose. If coupon sites convert at a higher rate, then the EPC numbers will give false hope to prospective content affiliates. If coupon sites receive lower than default commissions, content affiliates might not be interested in joining based on lower EPC rates.

Managers that want to drive up the EPC could easily pay higher commissions to every model. This would assist the program in achieving higher network rankings but would also dramatically increase the cost per customer.

Number of affiliates. Merchants that focus on the quantity of affiliates in their program rather than the quality are making a huge mistake. Programs do not need 500 new affiliates per month. They need five great affiliates that will create immediate promotions to new audiences. A program with 200 affiliates can do just as well than one with 10,000.

Percent of active affiliates. The affiliate channel has an informal 80-20 rule — 20 percent of affiliates typically generate 80 percent of sales. Most of the affiliates approved will never send one click. An eager manager will remove 80 percent of the affiliate base and claim a higher percentage of activity in the program. But removing inactive affiliates only angers them, prompting them to warn others.

Conversion rate. The web development and marketing departments are responsible for conversions once shoppers arrive at a site from affiliate promotions. Affiliates have no influence at that point. Coupon and loyalty sites will convert the highest. Other models will vary wildly. However, the average conversion rate from all affiliates typically mirrors the overall website conversion.

Important KPIs

The following KPIs are the most important to in-house managers. They are also important to outsourced program managers and network management, depending on their access to internal metrics, such as new customers and comparisons to other channels within the brand.

Year-over-year growth. May 2017 could have been a good month for affiliates because of Mother’s Day. Compare those sales and orders to May 2016 for growth. Do not compare May to June. Seasonality is a huge factor for most affiliates. All the numbers can fluctuate month to month.

Managers should look at the current month in the prior year to account for any spikes or drops. A flash sale last June with huge sales numbers could make your normal monthly sales this year look weak. This potential discrepancy needs to be noted in the monthly analysis.

The “growth” statistic applies to orders, net sales, clicks, affiliates active with clicks, and affiliates active with sales.

  • Orders. Double-digit growth of orders is always a sign of a healthy and thriving program.
  • Net sales. This is the net revenue generated by the affiliate channel after deducting affiliate commissions. Average order value can impact net sales if affiliates focus on low-priced goods. Major variations in monthly net sales should be investigated and noted.
  • Clicks. Managers always want more clicks from the affiliate channel. But the quality of clicks matter. Significant increases should be investigated because this could lead to lower conversion rates and traffic from unwanted sources. Decreases may mean a good affiliate has left the program.
  • Affiliates active with clicks. This is a good indicator of program growth. Managers want to see this number increase consistently. Higher active rates demonstrate strong recruiting and activation methods.
  • Affiliates active with sales. If “Affiliates active with clicks” is a good indicator of growth, “Affiliates active with sales” is a good indicator of health. The two metrics are related. Success with the latter is contingent upon a strong conversion rate of the products or services promoted.

New affiliates approved. Recruiting never ends for an affiliate program. Some affiliates retire or give up promotions. Others are purchased by competitors and the original account becomes dormant. Managers should always be reaching out to new affiliates with various promotion models. How many recruiting pitches did you send? How many were approved?

Average order value. Is the average order value different in the affiliate channel from other marketing efforts? Examine what products were promoted by affiliates and determine if they are choosing inexpensive items because they think that’s what shoppers want. One affiliate with a high conversion rate of lower priced items can impact overall net sales and average order value. A manager can explain to the affiliate about missed opportunities on higher-priced best sellers.

Percentage of new customers. In-house managers can easily dive into analytics and determine the number of new customers being driven by the affiliate channel. Tracking pixels for many networks can report new customers as well, if the merchant’s cart and backend support it. If the number is low, the recruitment team should find more niche content affiliates with audiences who have not been exposed to the brand or products.

Campaign success. If a merchant holds an affiliate contest or tests a new consumer promotion through affiliates, results should be noted in the monthly summary. It’s always worth testing something new. This month’s failure could lead to success next month when changes are made.

Percentage of coupon and content affiliates. Always strive for a balance between coupon and loyalty sites and niche content sites like bloggers and influencers. The standard should be no less than 40 percent content driven. Content affiliates are much more likely to generate new customers.

Percentage of affiliate sales versus overall sales. Typically 10-20 percent of companywide sales come from affiliate marketing. I’ve seen it as low as 5 percent and as high as 60 percent. The larger the brand, the smaller the percentage.

Greg Hoffman

Greg Hoffman

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  1. Maryellen June 29, 2017 Reply

    Great information, Greg!

  2. Dustin Howes July 7, 2017 Reply

    If you are managing a MRR model, Lifetime Value of a customers from the program becomes a big KPI. But it’s a hard metric to keep up with because many of the accounts are still live. Do you have any suggestions on how to present this KPI to show the value of the customers the affiliate channel is bringing in?

    • Greg Hoffman July 7, 2017 Reply

      Great question, Dustin. Someone else mentioned it to me privately. In my experience, small to mid-sized merchants don’t pay enough attention to lifetime value or at least don’t share those numbers readily. I’ve always believed it was a great metric to track. Every merchant needs to have the average minimum in mind when considering how much those customers are worth. Some of your customers may last 5 years or longer. Others might only last a few months. What’s the average? What’s the break-even point for commissions paid? How high can you go? What impacts the lifetime value? If I were in your shoes, I’d start with a baseline average and check it on a quarterly basis for trends.