Across every marketing channel advertisers look to increase the value of each customer they attract. The affiliate program is no different. In the affiliate marketing channel companies have the luxury of relating sales directly back to the spend incurred to obtain that sale. Other channels focus on brand awareness and relationship building which can be attributed to overall sales but not necessarily individual conversions (with exceptions of course). With this inherent tracking advantage a responsibility is placed on advertisers and/or their affiliate marketing companies to provide a deeper level of ROI analysis for the channel.
With the right level of tracking, advertisers can calculate the exact ROI of an affiliate program marketing dollar spent. If a customer visits an advertiser’s website on an affiliate click and makes a purchase, that amount can be tracked. The commission paid out to the affiliate generating the sale can also be tracked. Along with the spend on internal resources and the affiliate agency. But to take it a step further, the advertiser can track just more than the initial purchase. The yearly or life-time value of customers can be tracked. This can be done on an individual level (each purchase and customer) or the use of averages can be applied. This type of tracking is seen most prominently from advertisers in the area of new customer acquisition. A higher premium is placed on attracting new customers than on sales generated from current customers. Generally speaking, a new customer has x percentage likelihood of making another purchase from the advertiser. This additional revenue can then be associated with new customers and rolled into the ROI calculation. For example; if company X has an average order value of $30 for new customers and 35% of new customers spend an additional $50 in the first year, then the first year value of a new customer would be $47.50. This data drastically changes the ROI calculation as opposed to using just the initial purchase revenue. This can also be extrapolated out to the life-time value of a new customer. The point being, this information can be tracked, is extremely valuable and can be acted upon.
The action taken from this data can be wide ranging. Commissions can be increased to affiliates generating new customer sales. Internal processes and marketing procedures can be optimized to increase life-time value. The spend on staff or outsourced program management can be justified. At the end of the day this information helps companies make well informed decisions on their marketing spend.
Below are a few ways that companies can increase the value of customers and hence spend a larger marketing budget to acquire them.
- Include an up-sell aspect to the shopping cart check-out process
- Optimize the up-sell path during check-out (testing is key here)
- Retarget to current consumers through an email campaign
- Utilize a shopping cart abandonment service to contact customers that left the checkout process early
- Display other companies’ products as affiliate links on the sale confirmation page (after they have made a purchase)
- Include an auto-ship option for goods that consumers will likely need to repurchase, etc…
There are many ways to increase the value of customers (new or existing). It’s extremely important for companies to optimize the monetization of traffic that marketing campaigns generate. Increasing conversions by just a percent, the average order by $5 or the repeat business by 10% can have a profound impact on revenues.
At Versa Marketing we strive to track the “real” value of affiliate channel conversions. This insight allows us to build a profitable and fundamentally sound affiliate program. As part of our affiliate marketing service we work with our clients and make recommendations on how to increase a company’s customer value. Managing at this level has allowed us to truly measure the ROI of an affiliate marketing campaign and optimize according to the numbers. For more information on our management practices please contact us and a company team member will be happy to reach out.
Posted By Joel Wood