What are Key Performance Indicators (KPIs)?
KPIs are a type of performance measurement used to evaluate progress toward a strategic objective or goal. In affiliate marketing, different companies have different KPIs by which they measure success.
Why Companies Set KPIs In Affiliate Marketing
How and why a company sets their KPIs for their affiliate program depends on a variety of factors, including revenue and/or click traffic penetration to overall e-commerce goals, average order value, new customer acquisition, return on ad spend (ROAS) or investment (ROI), etc. Ultimately, it tends to be in the effort to hit an overall e-commerce or sitewide goal with affiliate being a key component of the channel mix).
Here are 9 KPIs that most high-performance affiliate marketing programs pay attention to:
Table of Contents
- Click Traffic
- Gross Orders and Net Orders
- Affiliate Commissions
- Top 10 Affiliate Partners
- Affiliate Partner Performance
- Conversion Rate
- Total Number of Affiliate Partners
- Click-Active and Sale-Active Affiliate Partners
- Distribution of Affiliate Sales
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.
Important click traffic questions:
- Who are your top traffic-driving affiliate 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?
Gross orders are the number of sales your affiliate 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 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 affiliate program.
Important gross/net order questions:
- 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 affiliate partners joined your program but did not have strong performance?
- Any placements that outperformed? Any that underperformed?
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 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.
Important affiliate commission questions:
- 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 to get these numbers back to a healthy range?
- Is there budget available to test new placements?
- Is your affiliate program helping to increase customer lifetime value?
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.
Important top affiliate partner questions:
- Were there new affiliate partners in your top 10 this past year?
- Any affiliate partners that dropped off your top 10 list? If yes, why?
- What can be done to further optimize performance with these top 10 partners?
- What can be done to get the partners who dropped off the top 10 back on the list?
Evaluating the performance of each affiliate 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 affiliates may be a better partner focus for you.
Important affiliate partner performance questions:
- 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 may 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.
Important conversion rate questions:
- 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?
The number of affiliate 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 partner quality is there as well.
Important total number of partners questions:
- Is our affiliate program growing or shrinking?
- Is our affiliate 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?
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.
Important click-active/sale-active questions:
- Does your program have a healthy number of click-active affiliate partners?
- Does the program have a healthy number of sale-active affiliate partners?
An affiliate program should have a healthy distribution of sale-active partners. Having a program with diverse types of affiliate partners can help ensure your sales aren't being generated from one or a few top partners. If a top partner is responsible for more than 50 percent of your total affiliate program's sales, your program is very "top-heavy." Should that top partner drop out of your program or decide 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 affiliate partners into your program so that all your eggs aren't in one basket.
Important affiliate sales distribution questions:
- Is the top affiliate in the program responsible for more than 50 percent of total sales?
- What about the top 10 or top 25 affiliate partners?
- Are you comfortable with the sales distribution coming from your affiliate program?
Affiliate KPIs and Program Performance
Having answers to most or all of these KPI questions will help ensure your affiliate program is managed more strategically, and that new goals and strategies can be tested to help drive more incremental growth.
Last, but not least, it's all about execution. It's important to have a system in place for consistently monitoring the goals of your affiliate program and review them on a regular basis. Doing so 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.
Visit our Services page to learn more about our unique approach to affiliate program management and the expertise of our global team.