Because your affiliate marketing program is really just another way to reach customers with your products and services, the simplest, most fundamental way to measure its results is to look at the dollars. No one will fault you for considering an affiliate marketing program a "success" when it generates more dollars than it costs.
Understandably, the bottom line is a practical reference point. But affiliate marketing, like other aspects of business, is actually somewhat more complicated than counting coin. In fact, there are many intangibles that can make an affiliate marketing program successful even when it fails to produce a profit during a given accounting period.
Here are a few other factors to evaluate:
Success with affiliates
Your marketing affiliates are an important resource that contributes to the success of your company in many ways, such as beating the bushes for new prospects you wouldn't find otherwise, bringing aboard additional affiliates who will expand the outreach of your company, purchasing your products and services themselves, and serving as a contact point for new relationships that may lead to entirely new prospects, customers and markets.
So it's fair to evaluate your affiliate marketing program at least partly in terms of how well it is received among this group. Do successful affiliates want to join? Do your affiliates remain with your company over the long haul? How satisfied are they with your treatment of them, and with the marketing tools, support and services you provide them?
In survey after survey, what marketing affiliates say they value most are their earnings within a program. If your program is not as successful with affiliates as you would like, their earnings is a prime candidate for tweaking.
Most affiliate marketing programs generate the bulk of their revenues from relatively few players. One way to measure the success of your program, therefore, is to see how well you're able to identify "top producers" in their earliest stages and how quickly you can nurture or guide them along to significantly higher levels of productivity.
Try surveying your top producers. Ask them questions to determine their pattern of success within your program, and to ascertain the role your program played in making them as successful and productive as they are.
Because relatively few affiliates are likely to contribute the bulk of your program's sales, another way to measure the success of your affiliate marketing program is to evaluate how well it rewards its top earners.
For example, if a particular affiliate sends you (for illustrative purposes only) 5 percent of your total program sales, but earns less than 5 percent of total affiliate compensation, it's fair to say he or she is under-compensated. This could point to a structural weakness in the program that may, over the long haul, limit your program's success at producing revenue growth.
Affiliate education and training
Since the viability of your program often boils down to revenues, one important measure of your program's success is how well it helps affiliates bring you more sales. Sure, a profitable program in which you do nothing to help affiliates can be considered successful. But it's picking the low-hanging fruit, and such sales will eventually run out.
In contrast, a program that trains affiliates to generate increased revenues through classic sales techniques and hard work will probably remain successful, and bring you significant sales, long after all the easy prospects have been converted to customers.
It's important to know how many affiliates are in your program, of course. But the raw number of affiliates is not nearly as important as the contribution of each affiliate to the overall program's results. So another way to measure the success of your program is to look at the metrics you're using, and see whether they are the best ones to guide management decisions toward strengthening your affiliate marketing program.
In addition, a program can legitimately be considered more successful when it has in place the tools and techniques to identify significant differences between top affiliates and those whose performance is average or below-average. Certainly it's important to know who the best affiliates are. But it's far more important to understand why top affiliates are producing so much more in revenues than everyone else in the program. It's even better if your program can create strategies and tactics for transferring the effective techniques of the top affiliates to the rest of the affiliate team.
To help with this analysis, an affiliate marketing program should be able to gather and calculate real-time data on such measures as:
- • Raw number of hits sent your way by affiliates.
- Conversion ratio of these hits to sales, broken down various ways.
- Conversion ratio of these hits to "further contact" permissions, whether through newsletter sign-ups or "send me more information" requests.
- Number of contacts required, on average, to convert these prospects to customers.
- Cost of the affiliate marketing program per customer, and per sale.
- Behavior patterns of these prospects and customers -- what they look at, where they visit, how much time they spend*.
- Character of sales made by these customers, including average size of purchases, frequency of purchases, contribution to total revenue and total profit, product/service mix, attributes of the sales cycle*.
* It's even better if this information is compared with customers brought in through other mechanisms and channels.
Clearly, there may be many ways an affiliate marketing program can contribute to your bottom line without actually producing a profit this quarter. That's why it's important to look at some of the more subtle and useful ways to measure the success of your affiliate marketing program.
Robert Moskowitz is a consultant and author who speaks and writes frequently in the U.S. and abroad on such topics as white collar productivity, knowledge management, practical use of the Internet, telecommuting, caring for aging parent, and business applications of information technologies. He has authored several books, including "How To Organize Your Work and Your Life," and "Parenting Your Aging Parents," and teaches several online courses.
Working in an outdated model
Terry Young, CEO and founder of sparks & honey, shares this story:
"I worked at a number of different agencies back in the day, and I remember constantly finding myself amongst groups of advertising executives who couldn't get away from working under the same traditional paradigm that we had been working under for many decades. They seemed to only want to talk about 30-second spots and wrapping digital campaigns around those spots. I knew in my heart that this was simply not where the future was going.
"I was so disenchanted by the fact that the advertising industry was not evolving fast enough and not keeping pace with the amazing change that was happening in the digital environment. I found myself going to work every day frustrated. Everyone just wanted to sell the same old thing, and the CMOs had gotten used to buying the old same thing. It wasn't that the job was bad -- it was just that the model was outdated.
"Looking back, all of this definitely served as the catalyst for me to do something different and eventually build sparks & honey with the understanding that we could actually produce content and be there in real-time without being held to some sort of traditional calendar-based media. Finally, more people started to realize that you could think about digital media from a cultural standpoint. Data is what allows us to do that."
The professional equivalent of a 16-year-old girl
Jay Miletsky, CEO of MyPod Studios, reminisces:
"I was working at PFS Marketwyse in the mid 1990s, and it was a time Photoshop was getting big and we all had the AOL connections. We were in the middle of doing a lot of marketing for interesting campaigns for clients such as Washington Mutual and doing some branding for clients such as Hershey's.
"In 2008, we rebranded ourselves into Mango Marketing. At the same time, it felt as if the whole marketing industry changed. I absolutely hated it. Everyone wanted their clients to engage in social media campaigns. No one was interested in doing anything traditional any more. Nobody wanted to do print, and radio was well on its way out the window. As an employee at a digital agency, I found it so insanely boring.
"I dreaded coming into work every morning and having to update Facebook fan pages and Facebook campaigns. If just one person wrote a negative post on Hershey's Facebook wall, it was if the entire city would shut down. Everyone was just so freaked out. We had other clients who only wanted us to create viral videos for them, but I could never seem to make anyone understand that having a video go viral is like hitting Powerball twice -- you just can't predict it! I mean, at the time, who would have thought that a video of two babies biting each other would get 350 million views?! Let's just say that expectations were very high.
"There were times in which I felt like I had turned into a professional equivalent to a 16-year-old girl updating her diary every day. There I was, updating blogs and encouraging people to upload pictures of dogs so we could vote on the cutest. It literally felt like my creativity was going stale before my very eyes. I didn't know what could hurt more -- doing work like this or shoving bamboo shoots under my nails."
Dumped in head-first
Ken Solano, group media director for digital at Prime Access, recalls this moment:
"I started out at a four-man digital shop that specialized in selling self-help books. The hours were long, the days started at 8 a.m., and we were teetering on the brink of collapse more times than I remember. This was 11 years ago, and the digital space -- albeit clearly destined for big things -- was still very different from what it is today. Social media was still regulated to message boards, and I would have to create about four different profiles for each board to infiltrate conversations and appear authentic. I knew nothing about digital, yet here I was, managing everything from affiliate marketing, social media (message boards), display media, and even video media.
"Looking back, I see that first agency team as being at the cutting edge of video media. I also felt like I was a part of something huge and revolutionary. Plus, my CEO told me that [because] I survived a year working for him, I would be able to survive at any other agency. He was right. Advice -- dive in head-first. If you are not obsessed with all things digital, you'll find out very quickly. On the flipside, there is a chance that you'll actually love what you do."
Church website entrepreneur
Andy Tabar, digital marketing consultant, tells this story:
"I was just 14 years old when I started my own digital business. It was the year 2000, and there I was, using portals such as Angelfire and GeoCities to create my own personal website. It didn't take long for people to start asking if I could build a website for them, so I would. My dad told me our church could use a website, so I made one for them. I was doing everything for free. I eventually realized that I actually had a talent, and I could actually start selling myself.
"Throughout the years, I have worked and collaborated with a ton of different clients, and have been open to their ideas for their digital space. I have always felt that it was healthy to have a bit of debate. Of course, there were also cases where clients were dead set on using a one-size-fits-all approach or a template or downright copying what someone else did. When I was asked to do that, things became difficult. I thrive in an environment that thrives on debate, but also allows the chance for data to carve out a path."
Bad training with a bad boss
Lizbeth Cardozo, co-founder and CEO of Tiny Milkshake Media, remembers this:
"The worst job in the digital and online marketing industry was the last job I had as an affiliate manager at a small ad network where I stayed way too long. I was new to the industry. My background was in traditional advertising, marketing, and sales so training in this new industry was necessary for my success. The lack of training, focus, and leadership was a recipe for failure. The fact that the company went out of business last June was just a testament to this.
"The first two weeks I started working at this company, I was eager, hopeful, and excited about learning a new industry, but to my disbelief I learned that my training consisted of just getting on the phone with clients, navigating through an online platform that was cumbersome and unintuitive, pitching campaigns I didn't yet understand, and 'the boss' instant messaging me what I should say or how I should respond with terminology that sounded like Swahili to me. I sounded like a moron, and people saw right through it. It was embarrassing and a horrible way to be introduced to people that I needed to earn respect from in the industry.
"I recognize 'the boss' really tried hard to teach me, but some people simply aren't meant to be leaders. In fact, I've learned that the best leaders understand they are actually there to support and inspire their employees, so they are even more motivated and empowered to work harder for them and the vision. In the end, 'the boss' was a difficult teacher, but a teacher nonetheless."
Cold calling in uncharted territory
Will Akerlof, president of Liquid Advertising, recalls this moment:
"I had been working in traditional advertising since I got out of college. In 1996, I knew two guys who had created an online PR firm called iAgency, so I contacted them to see if they wanted to offer any advertising on the site. At the time, the idea of online advertising was so very new. It seemed as [though] everyone was just inventing everything from scratch.
"We started cold-calling companies, and luckily for us, we noticed ears were perking at the idea. We didn't have to educate them on the nuts and bolts of online advertising because there wasn't much to know at that point. If you even dabbled in the space, you had the knowledge you needed. I specifically remember clients shrieking in delight as they watched their once-static images move and their reactions to being able to track click rates and receive data back in less than 24 hours.
"I operated as a one-person operation for many months at that firm, which would never be possible these days. All in all, it was challenging, but it was also a great time to break into the business."
The stress of crowd-funding
Matthew Granish, digital media director at Prime Access, concludes with this:
"I come from a slightly different background. My first job was managing a website that raised funds for a non-profit organization. Back in 1999, the notion of 'crowd-funding' was pretty non-existent, yet here we were -- building a digital platform that was supposed to function properly, contain decent content, and generate donations from generous individuals.
"The stress of that job was on-par with some of my most nerve-racking days today, but it prepped me for the agency life and, most importantly, for the constantly shifting digital space. Plus I learned the ins and outs of monetizing content."
Tricia Despres is a freelance writer.
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"Frustrated" image via Shutterstock.