By Matt Swan, client strategist, Affiliate Window & buy.at
Traditionally affiliates have been categorised by their primary methods of promotion. With boundaries becoming blurred it is important to assess them on their individual merits. It is now difficult to categorise all voucher code affiliates in the same way for instance, as they have different ways of driving traffic to advertiser sites and attract differing audiences.
Advertisers will have a set of key metrics which they measure the success of their campaign against. Typical metrics include but are not exclusive to: new vs. existing customer %, average basket values and lifetime value of customers. These metrics will vary from advertiser to advertiser to be in line with their core strategic objectives.
This article investigates some of the different metrics that could be considered.
New versus existing customers
A common attribute that advertisers are recognising as a key performance indicator is the split of new vs. existing customers through the affiliate channel. While new customer delivery is one indicator of value, other factors also need to be considered. Simply saying the higher the split of new customers the greater the value ignores other metrics that constitute value through the channel.
Returns and credit rejects
If a customer returns their purchase, this will have a negative impact on an advertiser in terms of cost. A further indicator of affiliates being able to drive value is by having lower rates of returns. Additionally, some advertisers may offer accounts on credit. Affiliates that are able to deliver customers that do not fail credit checks are of more value. Affiliate’s with a high rate of failed credit checks could be ranking highly for credit related terms within the search engines. By using these findings, it is possible to tweak the marketing message contained on these sites to minimise the number of failed credit checks. This could be achieved by ensuring that credit terms are expressed clearly across affiliate sites.
Cost of acquiring new customers
The cost of acquiring new customers is often the key metric for advertisers to determine value. Commission structures may be weighted toward delivering these new customers. However, without recognising the role the affiliate channel plays in customer retention, advertisers may see the cost of acquiring new customers as being unusually high where they are paying out a commission for existing customers but only recognising new customer sales internally.
AOV of new versus existing customers
A further indicator of value could be how much new and existing customers are spending on average. If existing customers are spending more through affiliates should this be considered when assessing the value of the affiliate channel? It could be expected that existing customers who are already familiar with the brand would be spending more than new customers. This is likely to vary between differing affiliate types and should be monitored closely.
One of the most important metrics is the lifetime value of customers that have been delivered through the affiliate channel. While generating a number of new customers is a key objective, the Holy Grail is also retaining these customers. Affiliates that are not only able to attract new customers, but attract customers who spend regularly should be rewarded accordingly.
Advertisers are likely to have different sets of objectives through the affiliate channel. This will vary from sector to sector. This article has explored some of the metrics that they would assess the value of the channel upon. By looking at the KPI’s that determine the value that each affiliate is adding, promotions can be tweaked to ensure that valuable customers are being delivered while driving the cost per action for acquiring these customers down.
While new customer acquisition may be key, it is also important to understand where affiliates can add value in terms of customer retention. Indeed, returning customers can actually be spending more through affiliates than they are through other channels. This is increasingly likely through incentivised sites – consumers are highly likely to spend more when they are receiving a discount for doing so. It is important to benchmark against other channels when assessing affiliate performance. This will allow for more informed decisions based on the value individual affiliates offer. There are a number of metrics that contribute to delivering valuable customers and it is possible to reward affiliates with individual commission rates based on these metrics.
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