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 your affiliate program on a growth path heading into a new year.
When evaluating our clients’ programs and program performance at the end of the year, some questions we typically ask are:
- What new strategies are we going to test out in the year ahead?
- What strategies from this year worked well and should be continued in the new year?
- What didn’t work and should be discontinued?
- What are our client’s goals for next year? This will be 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 average order volume (AOV), more content partnerships, increasing conversion rates or incremental revenue.
- What new publisher relationships did we develop this year that we want to optimize next year?
- What type(s) of publishers are consistently driving the most valuable actions for each client?
Answering these questions before the start of a new year helps inform strategic program recommendations and, more importantly, guide the steps that need to be taken at the beginning of the new year.
Key Performance Indicators (KPIs) To Review
Combing through our clients’ program data each year is essential to confirming our theories about what worked and what didn’t and help to support our recommendations for incremental growth strategies.
Let’s take a look at 9 important affiliate program KPIs that should be reviewed at the end of each year and associated questions that need to be asked and answered:
Click traffic is the number of clicks your program received over a given period of time. Looking at your click traffic is an important KPI to start with because it’s a main indicator of whether or not your program is growing.
For example, if you received less click traffic this year over last year, it is likely your program is shrinking and driving fewer sales. Conversely, if you are seeing more traffic this year, your program is likely growing, adding new and productive partnerships and driving more revenue.
Click traffic questions to ask:
- Who are your top traffic-driving partners?
- Is the traffic those partners are driving converting into high-value sales or leads?
- What partners aren’t driving quality traffic but should be because they have a strong Alexa rank?
- What could be done to activate them further?
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. Voids could be the result of a customer returning the product they purchased, fraudulent activity 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 review will tell you a few key pieces of information, including:
- If your program is growing or not. More orders YOY is a positive, especially if you are also seeing a higher average order value (AOV).
- If there is 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 identify the responsible parties. Once identified, you can take action to remove those partners from your program.
Gross/net order 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 partners joined the program and didn’t have strong performance?
- Any placements that outperformed? Any that flopped?
Commission are what you pay to your affiliate partners for the successful conversions they drive when promoting your business. This metric is a key indicator to look at because it is essential to maintaining your affiliate program’s profitability.While a profitable affiliate program is certainly a priority for most brands, it’s also a priority for most affiliate partners as their earnings are tied to your program’s profitability. This is what makes affiliate programs such a mutually beneficial marketing model. Attractive commissions also contribute to keeping your brand top-of-mind with partners as their incomes depend upon your commission payments.
Commission questions to ask:
- Are there any outliers to your average Cost Per Action (CPA)?
- Which partners are driving up/down the average CPA?
- Is the CPA within your goal?
- Is the Return On Ad Spend (ROAS) or Return On Investment (ROI) within your goal?
- Is ROAS too low and CPA too high? If so, what strategies can be implemented next year to get these numbers back to a healthy range?
- Is there wiggle room to test new placements in the new year?
- Is your affiliate program helping to increase customer lifetime value?
Top 10 Partners
Your top 10 affiliate partners are likely driving a significant percentage of your 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 your high-value partners— is key to growing your affiliate program YOY.
Top partner questions to ask:
- Were there new partners in your top 10 this past year?
- Who fell off the top 10 list and why?
- What can be done to further optimize performance with these top 10 partners?
- What can be done to get the partners who fell off the top 10 back on the list?
Evaluating the performance of each partner category can shed light on what types of customers your partners are driving to your website. For instance, if you have a high percentage of coupon partners in your program who are generating the majority of your program revenue, 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; customers who are less familiar with your brand and learned more about you from the educational and promotional efforts of your content partners.
Determining which is best for your affiliate program can only be based on your business goals and how you attribute sales internally. If you value those partners who are able to convince your prospects to become customers, then coupon and loyalty partners might be your biggest partnership priority. If you value more brand awareness and new top-of-the-funnel customers, then content sites may be a better partner focus for you.
Partner performance questions to ask:
- What percentage of sales are being driven by coupon, deal and loyalty partners?
- Is there a healthy content-to-coupon or content-to-loyalty ratio?
- What can be done to drive more sales from your content partners to boost their sales contribution percentage?
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.For example, a spike in the conversion rate can tell you if a specific promotion resonated well with your customers. If you recently redesigned your website and your conversion rate sank after launch, that can indicate your new design is turning customers off.Looking at the peaks and valleys of your conversion rate and tying those anomalies back to changes, events and promotions can help you determine what you may wish to replicate, eliminate or shift for next year.
Conversion rate questions to ask:
- Is the conversion rate increasing? If so, when? Why?
- Is the conversion rate decreasing? If so, when? Why?
- Are there any partners with an extremely high conversion rate that should be more closely evaluated to ensure the activity isn’t fraudulent?
- Are there any affiliate partners with an extremely low conversion rate that could be optimized?
Total Number of Partners
The number of partners you have approved into your program is an important metric. While it can be true that the more partners you have promoting your brand, the better, it’s also important to ensure the quality of partners is there as well.
Total number of partners 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 high-value partners?
Click-Active and Sale-Active Partners
This KPI offers another way to evaluate the health of your affiliate program. If your click-active ratio is around 50 percent and your sale-active ratio is around five to 10 percent, then you likely 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.
Click-active/sale-active questions to ask:
- Does your program have a healthy number of click-active partners?
- Does the program have a healthy number of sale-active partners?
Distribution of Affiliate Sales
An affiliate program with a strong number of sale-active partners should have a healthy distribution of affiliate sales. In other words, the majority of your sales don’t come from one or a few top partners; it’s more diversified.If your top partner is responsible for more than 50 percent of your total program’s sales, your program is very “top-heavy.” The problem with that is, should that top partner drop out of your program or decides to stop promoting your business for whatever reason, your bottom line would likely take a hit. For top-heavy programs, it’s highly recommended to recruit additional partners into your program so that all your eggs aren’t in one basket.
Affiliate sales distribution 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 partners?
- Are you comfortable with the sales distribution coming from your program?
You’ve Looked at The Numbers, Asked Insightful Questions and Answered Them. What’s Next?
The next step is to create a plan for the year ahead 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 supporting evidence to back testing out new strategies for driving more incremental growth.
Last, but not least, it’s all about execution. To do this effectively, it’s important to create a system for keeping track of your goals and reviewing them on a regular basis. This process will help you and your team identify if, when and where the program is getting off-track and quickly implement new supporting strategies (or pivot existing ones) to get the program back on track.
Visit our Services page to learn more about our unique approach to affiliate program management and the expertise of our global team.
Editor’s Note: This blog post was originally published in December 2017 and has been updated for accuracy and comprehensiveness.