Are your affiliate program’s results worth what you’ve paid in, or are you investing too much for small returns? Your affiliate marketing ROI lets you know if your company’s affiliate program is performing how you expect, or if you need to make some changes to more effectively grow your revenue. Wondering how to measure and improve the ROI of your affiliate program? We’ve got you covered with this guide.
Affiliate marketing ROI: The fundamentals
Affiliate marketing ROI, or return on investment, measures the profitability of your brand’s affiliate program – the revenue minus the costs of running it.
In order to calculate affiliate ROI, you’ll need two key figures:
- Total revenue generated from your affiliates in a given time period
- Costs of running your affiliate program
Your affiliate program costs include the commissions you pay your affiliates, as well as any extra affiliate incentives you’ve paid out. But it also includes the costs of running your affiliate program – the costs of your affiliate software, or all the fees you pay to use an affiliate network.
(If you pay a dedicated affiliate manager, their salary is also included in program costs.)
Measuring affiliate marketing ROI
To measure your affiliate marketing ROI, there are two calculations you can use. One shows ROI as a dollar amount, and the other as a percentage of growth or loss.
To calculate ROI as a dollar amount, simply add up the affiliate program’s revenue over a given period, then subtract the costs of running the program over that same period.
To calculate ROI as a percentage of growth, use this formula: (Affiliate marketing revenue – affiliate marketing costs) / affiliate marketing costs x 100 = ROI
Whichever calculation you use, compare your affiliate program ROI with other channels’ ROI to see which campaigns are performing best.
How to improve your affiliate marketing ROI?
Does your ROI need improving? Here are our top tips for generating a higher ROI from your affiliate marketing program.
1. Rely on affiliate software, not an affiliate network
If you currently use an affiliate network to run your program, you’re probably spending more money on your program than you need to. Affiliate networks charge extra fees to use their services. Often, they charge extra “finder’s fees” on top of the commissions you pay affiliates. These fees can sometimes be as much as 30% of the revenue your affiliates bring in.
If you run your own affiliate program using affiliate software, you’ll only have to pay once for the software, and then only pay out affiliate commissions as they’re earned. The software doesn’t take extra “middleman” fees every time your affiliates generate ROI for you, like a network does.
Plus, using affiliate software means you own your affiliates and can build lasting relationships with them. This helps keep affiliates engaged with your brand and motivated to keep more ROI for you. You also have total freedom to set the commissions you desire, and award other affiliate incentives if you wish.
In contrast, networks make more money when affiliates divide their time between multiple companies’ affiliate programs. So, networks have no reason to help you keep your affiliates motivated to sell your products.
Clearly, when you compare affiliate software to affiliate networks, affiliate software is a much better choice for ROI.
2. Set the right commissions
Besides the software you use to run your program, the most crucial factor that determines affiliate ROI is the commissions you offer.
You’ll need to choose a commission that’s competitive, relative to commissions offered by both your direct competitors, and by other programs that could attract similar affiliates. So, check out the commission terms of other brands in your market and set yours accordingly. This means checking the commission rate, the amount of time affiliates are eligible for commissions, and any bonuses or added incentives that they throw into the mix.
If the average affiliate commission in your market is 15%, for example, a 10% commission might not attract affiliates. This will result in a lower program ROI. But if you offer a 20% commission, or a 15% base commission with other incentives available, that will motivate more affiliates to join your program and drive more revenue.
Of course, you’ll also need a commission that’s affordable for your business to pay out consistently – in cash. Balance competitiveness and sustainability for the best ROI.
3. Consider performance-based bonuses
Setting added incentives for your highest-performing affiliates will motivate all your affiliates to drive more sales. And since these bonuses are tied to the revenue your affiliates bring in, they’ll still be affordable for your business to pay out when done right.
You might offer flat bonuses when affiliates meet monthly, quarterly, or lifetime sales goals. Or, you might create a tiered structure, where affiliates get a permanent commission boost after making a certain amount of lifetime sales.
Or, you might base commissions on the average order value, with higher-value products or services worth more in affiliate commissions.
Alternatively, you might offer store credits or free products as affiliate bonuses, in addition to cash commissions. These are inexpensive for your brand, and also inspire stronger loyalty to your brand from affiliates.
4. Create high-converting landing pages
Have you noticed that your affiliates are bringing in lots of traffic, but not as many sales as you expect? It might be down to your landing page.
Once affiliates drive traffic to your website, the ball is in your court. You need to convince the lead that your product or service is worth purchasing or investigating further, through a compelling landing page (or pop-up offer). This should include:
- A compelling headline that shows your benefits
- A brief, targeted description of your unique selling points
- Text that makes it clear what the lead should do next (Buy? Fill out a form? Request a demo?)
- Eye-catching imagery that relates to your product or service
- Easy navigation with an uncluttered layout
- An enticing, easy-to-find CTA button that gets leads to take the next step
Another great way to drive more ROI is by placing an offer for the lead on the landing page. This could include a discount on the purchase, store credits, or free products. This not only encourages more purchases, but also can motivate a higher average order value.
5. Check other metrics to evaluate affiliate program success
Although ROI is one of the best ways to track your program’s success, checking other metrics will give you the maximum visibility on what’s going well and what aspects of your program you could improve. We recommend checking the following other metrics:
- Conversion rates of the program vs other channels
- Sales per affiliate
- Contribution margins per affiliate
- Lifetime value of customers acquired through the program
- Average order values from the program vs other channels
Improve your affiliate marketing ROI today
Improving your affiliate ROI largely comes down to picking the right commissions, optimizing your landing page, and selecting the right affiliate marketing software.
Referral Rock affiliate software can help you maximize ROI and customize your affiliate program to your needs. Pay once for the software with no added fees, set your own commissions based on your program’s needs, and build strong relationships with affiliates that go beyond the transaction. Plus, we’re flexible enough to run tiered programs, and our software works with over 30 of the integrations you already use. Schedule a demo to see how Referral Rock can work for you.
