The end of 2017 is nearly here. At Acceleration Partners, this means we’re knee deep in our final 2017 review process of our clients’ affiliate programs and 2018 planning. End of year program performance evaluation is a critical part of identifying where improvements can be made and what new strategies can be applied to keep our clients’ programs on a growth path in 2018 and beyond.
Some questions we ask ourselves each year when evaluating the past year’s performance are:
- What worked well? What didn’t?
- What new strategies are we going to test out in 2018?
- What strategies from 2017 worked well and should be continued in the new year? What didn’t work and should be discontinued?
- What are our client’s 2018 goals? This is different for each client. For some, it’s acquiring new customers, scale and volume, bringing on new partners or reducing risk dependence on the top performers. For others it’s, increasing AOV, more content, increasing the conversion rate or incremental revenue.
Determining the answers to all of these questions before the year wraps up helps inform our strategies and, more importantly, the steps we need to take at the beginning of the new year.
Key Performance Indicators (KPI) to review:
Combing through our client’s program data each year is essential to confirming our theories about what worked and what didn’t. They also help support our recommendations for incremental growth strategies. Let’s take a look at important KPI’s that our teams review at the end of each year and additional questions that need to be asked and answered.
1. Click traffic.
Click traffic is the number of clicks your program received over a given period of time. Looking at your traffic is an important KPI to start with because this is the main indicator of whether or not your program is growing.For example, if you received less click traffic this year than last year, it is likely your program is shrinking and will see less sales. On the other hand, if you are seeing more traffic this year, your program is likely growing, adding new and productive partnerships and thus more sales.
Questions to ask: Who are our top traffic drivers? Are they converting or sending useless traffic? Who isn’t sending traffic, but should because they have a great Alexa rank? How can we activate them?
2. Gross orders and net orders.
Gross orders are the number of sales your program has generated in total. Net orders are the number of gross orders minus any orders that were voided out due to things such as a customer returning the product they purchased, fraud from scammers or an order being cancelled for other reasons.
It’s important to look at your gross orders and net orders year over year (YOY) as this will tell you a few key pieces of information. First it will tell you if your program is growing or not. More orders YOY is a good thing, especially if you are also seeing a higher average order value (AOV).
Second, it can tell you if there is rampant fraud in your program. If you are seeing a high customer return rate or numerous orders being voided due to fraudulent activity, these red flags need to be investigated further to determine the affiliates responsible. From there, you can take action to remove those partners from your program.
Questions to ask: Are there any unusual spikes in sales? Did any promotions perform especially well? Looking at gross vs net, are there any spikes in the returned order rate? Which new affiliates joined the program and performed particularly well? Which notable new affiliates joined the program and didn’t perform? Any placements that outperformed? Any that flopped?
Commission are what you pay to your affiliate partners for the successful conversions they refer when promoting your business. This metric is a key indicator to look at because it is essential to maintain profitability from your affiliate program. If you aren’t generating a comfortable profit margin from your business, then why have an affiliate program in the first place?From the other perspective, ensuring your affiliate partners are earning a good commission rate from your program is important to ensuring your business stays top-of-mind with your affiliate partners as their incomes depend upon your commission payments.
Questions to ask: Are there any outliers to your average Cost per Acquisition (CPA)? Which affiliates are driving up/down the average CPA? Is the CPA within your goal? How about Return On Ad Spend (ROAS) or Return On Investment (ROI)? Is there wiggle room to test new placements in 2018? Or, is ROAS too low and CPA too high? If so, what strategies can be implemented in 2018 to get these numbers back to a healthy range?
4. Top 10 affiliates.
Your top 10 affiliate partners are likely driving a significant portion of your entire program’s revenue every year. Keeping a pulse on what each partner is doing in your program as well as maintaining a good relationship with the movers and shakers is key to growing your affiliate program YOY.
Questions to ask: Are there new affiliates in the top 10 this past year? Who fell off the top 10 list and why? What can be done to optimize performance with these top 10? What can be done to get the affiliates who fell off the top 10 back up?
5. Performance from each category of affiliate.
This KPI can tell you what types of customers your affiliates are driving to your website.
For instance, if you have a high percentage of coupon sites that are generating the majority of revenue for your program, then you are likely seeing more bottom-of-funnel customers who are already familiar with your brand and looking for the best deal on your products.On the other hand, if you are seeing a higher percentage come from your content partners, this likely indicates you are seeing more top-funnel customers come from your affiliate program.
Deciding which is best for your affiliate program can only be determined by your business goals and how you attribute sales internally. If you value those affiliates who are able to convince your prospects to become customers, then coupon and loyalty affiliates might be your biggest priority. If you value more brand awareness and new top-of-the-funnel customers, then content sites are likely a bigger focus for you.
Questions to ask: What percentage of sales are being driven by coupon, deal and loyalty affiliates? Is there a healthy content-to-coupon or content-to-loyalty ratio? What can be done to improve the content-to-sales ratio?
6. Conversion rate.
Conversion rate is defined as the number of conversions (usually sales) divided by clicks. This tells you how many clicks you typically receive for each conversion. Looking at the spikes and depressions over the year will tell you a lot of good information.A spike in the conversion rate can tell you if a promotion run during that time-frame resonated well with your customers. If you recently completed a re-design of your website and your conversion rate sank after the new design was launched, that can indicate your new design is turning your customers off. Looking at the ups and downs in the conversion rate and tying those anomalies back to changes, events and promotions gives you a great wealth of information.
Questions to ask: Is the conversion rate increasing? Decreasing? Why?
7. Total affiliates.
The number of affiliates you have approved into your program is a good metric to know as the more partners you have in your program the more affiliates are promoting your brand.
Questions to ask: Is our program growing or shrinking? Is the program still in a growth stage or has it matured? Should the focus be on affiliate recruitment or on activating and optimizing affiliates?
8. Click active and sale active affiliates.
This KPI offers another way to see if your program is healthy or not. If your click-active ratio is around 50% and your sale-active ratio is around 5% to 10%, then you probably have a very healthy program.Conversely, if your click-active ratio is in the single digits or if you don’t actually have any sale-active affiliates, something is wrong. Activation campaigns are a great way to incentivize those inactive partners to become active and start promoting your business.
Questions to ask: Does the program have a healthy number of click-active affiliates? Sale-active affiliates? Perhaps a good activation campaign is in our near future.
9. Distribution of affiliate sales.
An affiliate program that has tons of sale-active partners should have a healthy distribution of affiliate sales. This means that the majority of your sales don’t come from one or a few top partners.If your top partner is responsible for more than 50% of your total program’s sales, your program is very top-heavy. If that top partner drops out or decides to stop promoting your business for whatever reason, your bottom line would likely take a hit. If your program is top-heavy, it’s highly recommended that you recruit additional partners into your program.
Questions to ask: Is the top affiliate in the program responsible for more than 50 percent of total sales? What about the top 10 or top 25? Are we comfortable with the sales distribution coming from our client’s program?
The answer to these questions can provide insight into how much time to spend on our top affiliates and how much budget to allocate in order to optimize their efforts and ensure they are keeping our client’s brand top-of-mind.
So, you’ve looked at the numbers, asked insightful questions and answered them. What’s next?
The next step is to create a plan based on the data and answers to these critical questions. With this information, you can apply what worked well towards new goals. These metrics also provide the freedom to try new strategies for driving more incremental growth.
Last, but not least, once your 2018 plan is finalized, it’s all about execution. To do this effectively, it’s important to create a system for keeping track of your goals and review them on a regular basis.
With a tracking system in place and regular review of it, you’ll be able to detect where the program is getting off-track and quickly implement new supporting strategies or pivot your existing strategies to get the program back on track.
Learn more about our approach to affiliate program management and the capabilities of our team at http://www.accelerationpartners.com/capabilities/affiliate-program-management.