Leveraging the affiliate marketing channel is a powerful function of the sales funnel. When managed correctly, it can deliver exceptional and immediate returns while growing brand equity over time.
Adopting the right strategies and learning how to track the progress of your affiliate marketing campaign is integral to running a successful and sustainable program.
Affiliate marketing is a highly effective tool to integrate and work in tandem with your existing marketing efforts.
It’s an ideal channel for SMEs since it is incredibly cost-effective,
transparent, and easy to control. Low upfront costs allow brands to explore and try different strategies with minimal risk, based on a cost per acquisition (CPA) model.
transparent, and easy to control. Low upfront costs allow brands to explore and try different strategies with minimal risk, based on a cost per acquisition (CPA) model.
Working alongside a reputable affiliate marketing network increases the growth potential. Affiliate marketing networks help facilitate connections and provide many other services to both publishers and advertisers. These include reporting tools, tracking technology, training material, and payment management.
Affiliate marketing is highly targeted and guarantees a high return on your investment.
A successful affiliate marketing campaign is not only based on making smarter connections with content partners but it is also based on the foundations which make up the campaign, as demonstrated below:
- Guarantee your data feed is high quality
- Ensure your offering is enticing
- Validate your tracking
This article will cover the four core elements to help you build and manage an affiliate campaign to empower your eCommerce growth.
The Metrics
As with most strategies, measuring a set of objectives indicates the success of a project and frames its learnings. Your affiliate marketing campaign is no different. You can assess the information through two sets of measurements - quantitative and qualitative.
Both are extremely valid at providing you with key information to improve and build upon the outcome of your campaign. Together they deliver a 360 view of what activity to continue, what to stop, and what to start doing.
Understanding Quantitative Measurements
Quantitative measuring is the analysis of empirical data to decipher the success of a certain campaign. It is highly specific and uses hard data to measure against a set of objectives.
Quantitative measurements can be broken down into the following metrics:
Cost per Lead
This metric (also known as CPL) measures how cost-effective your campaign is when generating new leads.
The purpose of this metric is to provide your team with a numerical value to work out how much to spend on acquiring new leads.
CPL can be worked out by promotional spending divided by the number of leads generated.
However, as a business, you need to factor in additional costs associated with running a CPL campaign, such as resources for servicing inbound leads and optimizing specialized landing pages to improve the lead generation journey.
Cost per Acquisition
Cost per acquisition (or CPA) is the hallmark payment method for the affiliate channel. It offers the ability to only pay for a piece of activity that has generated an actual event of a sale, e.g., a product or service.
A CPA campaign provides maximum transparency to the brand and has low barriers to entry for brands that are not entirely au fait with affiliate
marketing.
marketing.
The CPA model provides an added confidence and assurance that you will not be wasting money.
Incremental Revenue
Incremental revenue is the profit made from an increase in sales. This can be attributed to the additional sales generated by a certain product or service from a specific marketing campaign.
The advent of mobile means the user journey has multiple touchpoints across several devices making, quantifying incremental revenue difficult.
Incremental revenue is attributed to the additional sales generated by a certain product or service from a specific marketing campaign. Thus the simplest way to measure incremental revenue is the additional revenue generated by a specific piece of activity that you would not have otherwise generated.
For example:
If you generate £100,000 through your standard practice, i.e., TV ads, display campaigns, and PPC campaigns, and add an affiliate campaign to your marketing efforts generating £110,000 - £10,000 of this can be considered incremental revenue as you did not have this before starting your affiliate marketing campaign.
In practice, quantifying the incremental revenue is a lot more complex than the example we’ve laid out. You will need to analyze qualitative metrics to gain a truer reflection of the incremental revenue. However, this should provide a good overview and a basic understanding.
Click-through Rate
Also abbreviated to CTR, this metric refers to the number of clicks merchants receive through their adverts.
This metric can add value by showing you the impact of your creative call to action in driving prospects to click the link and pass through to your site or landing page.
You can optimize CTR by improving and testing your creative ideas and call-to-action triggers to increase conversion rates.
Conversion Rate
This metric indicates how effective your traffic is at leading to a conversion on your site. A rule of thumb is to divide the sales by traffic (clicks) then multiply by 100.
ROI (Return on Investment)
This is the most important metric when assessing how effective and worthwhile your marketing campaign is.
ROI is the profit divided by the total cost. It is important to benchmark your ROI figures across your marketing channels to understand which is the most effective at driving revenue with the minimum cost.
How to Stress Test Your Affiliate Campaign
Meeting your KPIs by utilizing both qualitative and quantitative metrics is imperative to a successful campaign.
Go one step further by stress testing your campaign. Below are some of the metrics which can help ensure you are tracking the progress of your affiliate campaign:
New Customer vs. Existing Customer
This metric allows you to see what proportion of your sales are being generated by existing customers and what level of incremental customers the affiliate channel is bringing in. This can also be viewed at a granular level by monitoring which specific affiliates drive the most ‘new customers’ for you.
Average Order/Basket Value
This metric indicates the average amount a customer is spending per transaction. It is a very useful metric to track if you are aiming to increase the basket value. You can use tactics such as stretch and save vouchers or bundle products. This metric can also be used to benchmark the effectiveness of your affiliate campaign vs. other channels.
Affiliate Behaviour
Affiliates typically work on a CPA model; therefore, it is imperative you provide them with key information to promote your products. This information should include the company overview, your product range, and hero products, including the following metrics:
- Commission rates
- Average order/basket value
- Terms and conditions on methods they can and cannot use for promotion, e.g., PPC bidding
Once your campaign is live, it is advised that you continuously engage with the affiliates and track the performance of your affiliate partner base using the reporting suite available.
Affiliate Sales Variations
The performance of your affiliate campaign can vary from week to week. The affiliate channel is not exempt from external factors like the weather or trading policies; however, insights can help manage sales variations through analysis of the affiliate's performance and the overall performance of the channel.
An increase in competition and changes in commission rates can also impact the performance of your campaign.
The winning strategy to adopt when running an affiliate campaign is to ensure you plan your activity as far in advance as possible. Agility is also a key factor, as you can make tactical decisions when short-term opportunities present themselves.
Do Vanity Metrics Matter?
Yes and no. The number of impressions and visits does not have an impact on your campaign in terms of costs.
However, vanity metrics can be used as a good indicator of how engaging
your creative and content is to drive people to your site. Vanity metrics also
play a key role in identifying specific affiliates who complement your brand
and affiliate strategy, as well as identifying affiliates that have dropped
off the radar and need to be re-engaged.
your creative and content is to drive people to your site. Vanity metrics also
play a key role in identifying specific affiliates who complement your brand
and affiliate strategy, as well as identifying affiliates that have dropped
off the radar and need to be re-engaged.
Summary
So, we have covered the basic cornerstones surrounding the metrics used to measure the performance of an affiliate marketing campaign.
Many of these metrics can be used to measure the success of a digital marketing campaign but understanding the fundamentals can significantly
optimize your affiliate activity.
optimize your affiliate activity.
To get to the stage where you can effortlessly measure the progress of your campaign, it is integral that you clearly outline your objectives from the start.
Consider this three-step approach:
1. Purpose
What is your objective for the campaign you want to run? Is it to increase sales volume? Average basket value? Or to acquire new customers? Answering these questions will inform the metrics you need to measure so you can monitor the success of your campaign.
2. Tracking is the key
Ensure you track the key events your objectives are based on. Using an affiliate network can help deepen your understanding and optimize the performance of your campaign on a granular level.
3. Reports are your friend
Once you have outlined the objectives of your campaign and have your tracking in place, use the reporting suite to track the progress of your campaign activity, optimizing all elements constantly to ensure you are achieving KPIs and delivering great ROI.