August 13, 2015
As the affiliate industry matures, concerns about the value of the affiliate channel, and of specific affiliates, are coming up. Advertisers are questioning their capabilities in driving incremental traffic to their site. Technology and tracking developments in the past five years have given us access to the data that allows insights into the click path of a customer, which, in turn, enables us to understand the value of each online marketing channel. The use of this big data is still in its infancy, but allows senior online marketers to question the value of the sale that each affiliate brings to an advertiser’s website.
How to measure incremental traffic depends on a variety of factors: the program’s business model, brand presence, consistency in offers across marketing channels, available tools to measure and collect data, in addition to other considerations.
Incrementality is not solely related to new customers. Incrementality is about being included in the consideration set when the customer is shopping, as well as when they are purchasing.
A sophisticated marketer will use company and affiliate program goals, coupled with thorough attribution data, to effectively measure incremental sales in an affiliate program.
How To Determine Affiliate Channel Incrementality
The first step to assessing the affiliate program’s contribution to incremental sales is to define what incremental means to your company. Depending on business priorities, it could mean attracting new customers, clickstream placement, a correlation to internal reports, or any combination of the above. We recently spoke with a retailer who understood that incremental traffic for them was not a new customer, but related more to the life-time value of that customer. For them, a new customer garnered through steep discounting did not equal an incremental sale. What they were looking for through their affiliate acquisition strategy were more customers reflective of the LTV of their core.
Once an incremental sale is defined, put parameters in place for measurement. You can do this by leveraging tracking software and affiliate network features to gather the relevant data. You’ll then want to analyze the accrued data to direct program strategy. Look at the average touch points across channels, the typical initiators, and the typical closers. Work to define an average cost-per-sale across all channels by assigning a value to each touch point.
With a comprehensive strategy in place, resources can now be directed to improve avenues that drive strong incremental traffic. On a per affiliate basis, determine who is driving higher volume traffic and work to optimize that relationship. If an affiliate drives low-value traffic, consider decreasing affiliate commissions to value that traffic appropriately.
A Real-Life Example
One of our clients was concerned that a category of affiliates was hijacking traffic at the last minute and getting full credit for the sale. We set out to define the traffic from this group, as well as to define traffic on a per affiliate basis. We used the client’s internal attribution reporting and compared it to affiliate network data to identify patterns in incremental value per affiliate group. Some affiliates had a high percent of orders credited to another media channel, indicating low-value traffic. Others, we determined, had high-value referral traffic. We then segmented publishers based on the quality of traffic, lowering commissions for the low-quality referrals, and increasing engagement with the high-value affiliates. After the first year, we saved the client $605,000 in unnecessary commissions, while increasing high-quality revenue 25% YOY.
Defining incrementality is a multi-faceted issue that requires a multi-faceted approach. With the right technique and the right clarity into the data, you can feel confident about the value of the affiliate channel.
If you are interested in learning more, download our comprehensive whitepaper on Creating an Affiliate Program that Drives Incremental Revenue!
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