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We’ve already talked a lot about the importance of analyzing all the metrics of your campaigns. Any business needs to be monitored for effective budget allocation and timely tracking of performance drawdown. Only by keeping a clear eye on your metrics will you be able to spot performance glitches in time, and fix them quickly and cost-effectively. But which particular indicators should an affiliate pay attention to? In this article, we’ll deal with the key KPIs for affiliate marketing, so you don’t get lost in the pile of acronyms in your affiliate account.
What are KPIs in affiliate marketing?
The term KPI, or key performance indicators, is used to describe a set of metrics or statistics that give a clear picture of the performance of an advertising campaign. These are the quality requirements of the offer, set by the advertiser or the affiliate network, and are usually written in the offer card. The affiliate may also set criteria by which he will consider the campaign a success. In other words, KPIs provide the data you need to understand whether your ads are working, and what to do if they’re not.
All campaigns are different, so the list of KPIs needs to be tailored to the specifics of each campaign. When you reach or exceed the KPIs, the campaign is working well, and if not, it’s a sign that you need some adjustments.
Why KPIs are important?
KPI in the affiliate space is an important tool for checking the quality of traffic against advertiser expectations. It seems that such requirements only make the job harder for affiliates because it is more difficult to bring in traffic that meets certain criteria. On the other hand, no advertiser wants to pay for leads that are dummy or fake. Meeting the KPIs of an offer makes affiliate marketing trustworthy and a safe environment.
Fundamental KPI metrics in affiliate marketing
Before listing the important metrics, it’s worth mentioning not only the importance of analyzing them, but also the way the data is collected. For your analysis to be relevant and your data as accurate as possible, you need to understand the quality of your tracker. For a basic understanding of your marketing campaign, the tools integrated into your affiliate network account are sufficient. However, many professionals use additional services to enhance their advertising analytics capabilities. Try an approach like end-to-end analytics as well — this will increase your conversion rate.
If you’re confident in your data collection methods, let’s discuss the exact metrics that you’ll need for a full checkup of your affiliate campaign.
The conversion rate (CR)
A metric that measures the percentage of visitors who have successfully completed a desired action, such as signing up for a free trial or subscribing to a premium plan. Conversion rates are essential as they help identify the most effective advertising channels, evaluate campaign performance, set ROI expectations, and identify valuable customers for personalized campaigns.
Conversion Rate = Total Number of Conversions / Total Number of Leads * 100
Return on ad spend (ROAS)
This is the percentage of your advertising campaign’s costs and revenues. If the bottom line is higher than 100%, the campaign is successful, if not, you are spending more than you are making.
ROAS is very similar to ROI because they both show the effectiveness of a campaign, but the main difference is that ROI takes into account the margin, while ROAS doesn’t.
Return on Advertising Spend = Revenue Dollars / Advertising Spend Dollars
Return on Investment = Net Income / Cost of Investment
Cost per action (CPA)
The amount you pay to the advertising platform when a user performs a targeted action. The advertiser decides which action the user will take, this is shown in the offer card. This can be a subscription to a mailing list, making a deposit, buying an item on the site, registering, etc.
Cost per Action = Advertising Cost / Number of Actions
Customer Acquisition Cost (CAC)
This is the cost per customer referred. Please note that the costs include the costs of advertising, software, creation of creatives, your time resources, and — if you are working in a team — the salaries of your colleagues.
The metric is similar to CPA, and in some cases is calculated the same way, but CAC provides more specific data because it only includes users who eventually become customers.
Customer Acquisition Cost = Cost of Sales and Marketing / Number of New Customers Acquired
Cost Per Click (CPC)
A relatively superficial indicator as it reflects the cost per click without much context. Nevertheless, it is useful for monitoring your financial expenses and making advertising campaign forecasts.
Cost per Click = Total Advertising Cost / Number of Clicks
Frequency of ad impressions
Ad impressions frequency tells you how many times your users see your content in a certain period. For example, you may set how often you want your ads to be shown to one person 2 times a day, or you may choose to only let users see the same ad once every few months. In this case, it is up to you to decide which approach you are getting the best results with.
Ad Frequency = Ad Impressions / Ad Reach
Customer lifetime value (CLV)
It is a metric that measures the total value a typical customer is expected to bring to a business over their lifetime, minus the cost of acquiring the customer. CLV is an important KPI as it has a direct impact on a business’s profit margin, helps assess the type of affiliate activities that attract high-value customers, and aids in tracking affiliate team performance in acquiring loyal customers.
Customer Lifetime Value = Average Value of Sale * Number of Transactions * Retention time * Profit Margin
The average order value (AOV)
The average amount spent by customers each time they make a purchase from a business. AOV provides insights into customer behavior, repeat orders, and the effectiveness of affiliate program members. AOV is crucial for affiliates because it provides direct insight into customer spending behavior, impacts revenue growth, and helps structure product pricing and marketing strategies.
Average Order Value = Total Revenue / Number of Orders
The cost per lead (CPL)
The average amount of money spent on acquiring a sale or lead through an affiliate program. Measuring the cost per affiliate sale or lead is crucial for determining the effectiveness of affiliate marketing efforts and comparing costs with other marketing platforms.
Cost per Lead = Cost of Lead Generation (Marketing Campaign Spend) / Total Number of Leads
The Churn Rate (Rate of return or cancellation)
The percentage of purchases made through affiliate links that are returned or canceled. The reasons for cancellations or returns may vary depending on the vertical. It helps to determine if affiliates are promoting products to the right audience and if any issues with the product or service need to be addressed.
Churn Rate = Lost Customers / Total Customers at the Start of Time Period * 100
You now have a clear idea of what certain performance indicators in your affiliate account mean. Yes, there are many and not all of them can give you a clear understanding of the state of your campaign. The key point here is customization. Instead of relying on common metrics, determine which data will help determine the effectiveness of your advertising in your particular case. Then you’ll figure out what you need to change if things haven’t gone according to plan. Also, remember to stay up-to-date and revise your KPI set at least once a year. KPIs change depending on the objectives of the ad campaign. We are absolutely sure that behind the clear analysis lies your fabulously high ROI!
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