10 Most Important Metrics in Affiliate Marketing for Advertisers

Metrics are numbers to see if you are achieving your goal, or moving away from it.

Just like measures that tell you how many kilometers are left to your destination, and the compass to check if you go the wrong way. 

Why are metrics important in affiliate marketing?

Generally, the essential metrics in affiliate marketing are similar to other types of marketing (just like social media marketing or email marketing). 

However, affiliate marketing allows a brand’s promotion to appear on many platforms, reaching the majority of varied groups of customers. If you are new, explore affiliate marketing here. 

Therefore, an affiliate program will give you a wide-ranged, type-diverse, comprehensive database. 

The collected data will help you identify business shortcomings. Here is our guide on how to approach such metrics, and how to translate them into customer insight – for affiliate marketing only! 

10 Most Important Metrics in Affiliate Marketing for Advertisers

In preparation for an affiliate program, if possible, you should segment your affiliates into different categories.

Classifying affiliates would improve your data quality, from which you can extract better user insights.

Typically, segmentation is based on their promotion platforms and potential.

There are many platforms affiliates use to gain traffic, e.g.: Facebook, Twitter, or YouTube… or content types: product reviews, comparisons, blogs, paid search, email marketing, etc.  The potential of an affiliate can be estimated by conversion rate and audience size.

The potential evaluation is important since 80% of your sales will come from 20% of affiliates. Identifying who is in that 20% could help design an effective affiliate program.

In reality, it is impossible to collect all of the marketing data from affiliates. However, any efforts to extract customer insight, even a tiny one, will increase your chance of success. 

Here are the top 10 metrics you should care about: 

1. Click-through rate (CTR) 

CTR measures the percentage of people who click on an affiliate link compared to the total number of impressions (times the link is displayed). A higher CTR indicates that the affiliate content is engaging and compelling to the audience.

The number of clicks helps to evaluate the performance of a link/content in stimulating users to make a click.

A high number of clicks often indicates how attractive and persuasive an affiliate is.

But it is just about a superficial level. The amount of clicks does not mean anything if stands alone – it needs to be associated with the sales amount. 

A very high number of clicks may drive only a very small percentage of sales or no sales, which can be an indicator of an error affiliate link or landing page. The worst cases? Your affiliates are targeting the wrong customer or using the wrong information.

On the contrary, if the number of clicks is low, perhaps e affiliates are not doing well. 

2. Conversion rate

Conversion rate is probably the most important and often prioritized metric.

The conversion rate will demonstrate the effectiveness of individual affiliates, and the effectiveness of each affiliate type compared to others. 

In the end, what grows a brand is sales, not the number of people it reaches.

Conversion rate is calculated by the number of sales coming from a source based on the number of customers approached: 100 x Number of Conversions / Actions.

For example, if there are 1000 clicks on the link and 50 purchases made via that link, the conversion rate would be 5%.  

The conversion rate demonstrates the effectiveness of each affiliate and how this channel performs compared to other channels. 

A very high rate, probably >10%, could mean that the affiliate’s traffic has a good affinity with your market or that they may be employing suspicious promotional methods.

The best practice is that the conversion rate and click go relatively similar patterns. However, an advertiser should focus on channels or affiliates that bring high conversions.

3. Sale actions

Not only the conversion rate, but new customers’ actions also indicate their attitude toward your business. A comprehensive picture of your campaign needs to be taken into account actions such as reversed sales rate, the number of transactions, or sale volumes of your business.

Imagine that an affiliate can do as well as he successfully approaches high-class end-users – who can buy your product in mass volume and contribute an exceptional part of the revenue of the campaign. In this manner, tracking the trade volume guides you to a new potential landscape for your business, indirectly changing your branding strategy. 

In some other cases, a large reversed sales rate indicates that perhaps the affiliate is over-exaggerating the product features, or that their customer base is not a good fit for the product.

4. Commission

A thorough commission plan can help you identify Cost per sale (CPS) and Cost-per-customer. As a low-risk marketing strategy, affiliate marketing often results in good CPS. 

You can make comparisons between this indicator in affiliate programs with those of other marketing channels, such as Google Ads. By comparing these values, you could identify weaknesses in your existing marketing channels, and gaps in your market knowledge or could potentially be inspired to deploy alternative approaches to improve your marketing efforts.

5. Return on Investment (ROI)

ROI calculates the profitability by comparing the revenue generated from affiliate sales against the total costs incurred. 

All expenses related to affiliate marketing are taken into account. They include commissions paid to affiliates, discounts, or annual fees for affiliate management. 

The average ROI from affiliate marketing is 13. This means you can get $13,000 for each $1,000 spent on affiliate marketing. 

The data was in a survey on well-established brands – who already have a strong fanbase. 

For a small or medium business, a lower ROI, probably 4 or 5 may be a more reasonable expectation. 

6. Cost per Acquisition (CPA)

CPA represents the average cost incurred by the advertiser for each customer acquisition resulting from the affiliate marketing campaign.  To calculate the CPA:

CPA = Total campaign costs / Number of conversions

CPA = $2,000 / 100

CPA = $20 per acquisition

So, in this example, the cost per acquisition (CPA) for the affiliate marketing campaign is $20.

A lower CPA indicates that the advertiser is acquiring customers at a relatively lower cost, which means the marketing method is effective. 

CPA helps advertisers evaluate the efficiency of various marketing channels. Say, if CPA in affiliate marketing is lower than that of paid advertising, a business owner should allocate a budget to affiliate marketing. 

7. Average Order Value (AOV)

AOV measures the average amount spent by customers in a single transaction. Advertisers often track AOV to assess the effectiveness of affiliate traffic in driving higher-value sales.

• Through affiliate links, they generate a total of 200 conversions (customer acquisitions).
• The total revenue generated from these 200 conversions is $10,000.

To calculate the AOV:

AOV = Total revenue / Number of conversions

AOV = $10,000 / 200

AOV = $50 per transaction

So, in this example, the Average Order Value (AOV) for the affiliate marketing campaign is $50 per transaction.

An affiliate bringing higher AOV means that they are excellent at upselling products. However, please note that AOV comparisons have to be within the same product segment. 

Plus, adjusting commission structures based on AOV can incentivize affiliates to drive higher-value transactions.

The best option is tiered commissions and bonus rewards that allow affiliates to earn extra when reaching certain AOV thresholds.

8. Customer Lifetime Value (CLV)

CLV represents the total revenue generated from a customer over their entire relationship with the company.

In other words, CLV is about all the purchases that a customer can bring within their lifetime. 

In affiliate marketing, CLV highly depends on how strong the connection between affiliates and customers is. The connection can influence purchasing decisions, and drive repeat business, leading to higher CLV as customers continue to engage with the brand over time.

CLV is calculated by multiplying the average revenue generated from a customer in a given period (often a year) by the average duration of the customer relationship. The formula for CLV typically looks like this:

• CLV = Average Revenue per Customer × Average Customer Lifespan

Average Revenue per Customer can be calculated by dividing the total revenue generated from all customers by the total number of customers.

Average Customer Lifespan is the average duration for which customers remain engaged or active with the business.

9. Sale per Affiliate

Sales per affiliate in affiliate marketing refers to the total number of sales generated by each affiliate over a specific period.

With this method, you can evaluate the performance of their affiliate partners and understand the effectiveness of their affiliate marketing strategy. 

10. Retention Rate

The retention rate measures the percentage of customers who continue to engage with the brand over time. Advertisers may analyze retention rates to assess the quality of customers acquired through affiliate marketing. 

Retention rate has a strong correlation with CLV. Both metrics are used to evaluate the long-term profitability of a customer. 

For example, an advertiser runs an affiliate marketing campaign for their subscription-based meal delivery service. During a particular month:

• Through affiliate links, they acquire 500 new customers.
• After three months, 300 of these customers are still actively subscribed to the service.

To calculate the retention rate:

Retention Rate = (Number of Retained Customers / Total Number of Customers Acquired) × 100
Retention Rate = (300 / 500) × 100 Retention Rate = 60%

So, in this example, the retention rate for the affiliate marketing campaign is 60%.

11. Click Fraud Detection

Click fraud detection is vital in affiliate marketing to spot and stop fake clicks on affiliate links, which can skew traffic and earnings.

For instance, if an e-commerce advertiser sees a sudden increase in clicks without a corresponding increase in sales, it could indicate fraud. To catch it, check out some patterns like clicks from the same IP address or strange user behavior like rapid clicks without meaningful interaction.

You do not need to worry about fraud, as many affiliate management software can now detect fraud, and have built standards for valid conversions. 

Side-Note: Metric is not everything 

There is a marketing rut that businesses and marketers often go down: “Anything that cannot be measured by metrics is too risky to implement.”

Yes, we did talk about how important metrics are. But we must emphasize that marketing is much more than that.

The entire marketing industry today depends heavily on metrics. You know you’re doing well if the metrics indicate it, and vice versa. However, metrics are not always marketers’ reliable friends. Such a completely rational and mechanical approach would downplay human psychology and behavior – which are believed to drive how we market as well as the entire economy. 

There are loopholes in human psychology awaited. Small impacts on these cracks can completely change the face of your business.

For example, setting an estimated bus arrival at the stops will tell people how much longer you have to wait, instead of giving customers a sense of uncertainty. The cost of this is not even 1/10 compared to buying a new bus, and it does not necessarily make buses more punctual. But, people prefer what they can control. So, one day they may say“To catch the bus, I should go 15 min early” instead of “I’m not sure how long I’ll have to wait for the bus, so taking a taxi will be a safer option”.

When managing a campaign, the best thing you can do is focus on small interventions in the customer experience, or with affiliate marketing in particular, pay attention to the most important affiliates, the people who can convey effectively the brand’s message.