ROI in affiliate marketing

Measuring ROI in Affiliate Marketing | Analysing and Improving

It’s important to constantly monitor the performance of your affiliate marketing program to ensure that you are getting the results you want and to perhaps catch any small problems that can become much bigger down the line. Take a look at our guide to help you better measure your ROI in affiliate marketing campaigns and better yet, improve it.

The equation

If we were to sum up your ROI expectations, it would be in this handy formula:

(Affiliate marketing revenue – affiliate marketing costs) / affiliate marketing costs x 100 = ROI

That has the potential to make some of us go cross-eyed, so to give an example: If you are receiving £100 from your affiliate marketing program, you should subtract the commission to the affiliate, in this case 10% or £10, so your gross profit comes to £90. Then divide your gross profit by your affiliate marketing costs, which is £90 / £10 = £9. Then multiply this by 100 to get your percentage ROI: 900%. You are getting a 900% return on investment in this example.

Key metrics

A long list of key metrics that you should be looking at exist when it comes to ROI in affiliate marketing. The first of which is obviously the conversion rate, or the number of visitors who complete an action you’re looking for, like: subscriptions, sales, signing up for a newsletter, etc.

Another is AOV (Average Order Value) or the average value of your orders, which will point to the quality of traffic coming in, or CLV (Customer Lifetime Value), which studies customer loyalty, or ROAS, (Return on Ad Spend), which measures the revenue spent on affiliate marketing. Not forgetting, CPA (Cost Per Acquisition) and CTR (Click-Through Rate). A whole collection of acronyms to learn!

Analysing affiliate marketing data

The next question is how you should best track and measure these KPIs. As we’ve mentioned in other blogs, there is a list of tracking and analytics software that we’d recommend, and they go a long way to taking the work out of understanding your affiliate marketing data.

You’re going to want to look at your cohort analysis, or your data from various factors that might show patterns or trends, your affiliate performance, your product performance, and seasonal trends.

Improving your ROI

There are a few things that you can do to better improve your affiliate marketing ROI. For example:

–  Evaluate your commission structure and fees

Take a look at your commission rates and adjust as you see fit. Identify the programs or affiliates that are the most valuable or bring in the most sales and set higher commissions for high sales value and lower ones for low sales value.

– Provide meaningful resources and promotions

We are constantly talking about nurturing your relationship with your affiliate partners, and that isn’t purely because you want to make phone calls less awkward. It will reflect in your ROI. For instance, if an affiliate partner is a little lost as to how to get the most out of their efforts, offer them resources that can help them get a better return on their efforts.

– Improve your landing page’s conversion rate

An affiliate partner’s role is to drive traffic to the landing page, but that’s all for nothing if the landing page isn’t worth the user’s time. Make sure any landing page for your affiliate links are fully optimised for the user. They should be easy to navigate, simple to use, and quick to execute.

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