Creating Incremental Revenue Growth in Affiliate Programs
Something that often comes up during the onboarding stage of a new merchant is, ‘Can the affiliate program effectively drive incremental growth? If so, how do we do that and how is it measured?’. These are great questions! Incrementality within the affiliate space is 100% measurable and possible if you know how to do it. To start, let’s cover the basics:
What is Incremental Revenue?
It’s the revenue you cannot attribute to any other channel and that you wouldn’t have received if you hadn’t participated in a specific activity. Many advertisers consider it to be revenue that can be attributed to ‘new customer sales’ or to users that were not previously planning on making a purchase from a specific brand.
How Can We Drive Incremental Revenue Up Using the Affiliate Channel?
It comes down to tactics and visibility. Gone are the days of using mostly Coupon and Loyalty sites within the affiliate program publisher base. It’s been a common trend over the last 5+ years for advertisers to want to shift publisher focus to a Content majority publisher base in an effort to drive those new customer sales. The problem with both tactics is that they ignore every other publisher type in-between. A truly healthy publisher base will include a mix of well-converting site types such as:
- Coupon & Loyalty sites for fast conversions.
- Strong Content, Blog & Influencer sites for the long-tail traffic & brand introductions.
- Review & Comparison sites for brand awareness & education.
- News/Media sites for big exposure opportunities.
- Sub-Affiliate Networks for a wider audience reach.
- Niche sites for targeted audiences & higher conversions.
- Technology partners for tools like cart-abandonment messages, emails, etc.
Having a diverse publisher base is the foundation of creating an incremental revenue-driving affiliate program. Once that is in place, it’s time to focus on optimization and incentivizing tactics. This includes personalization- everything from recruiting new publishers to content articles, offers & sales, text links, banner ads, educational content, placement campaigns, commission structures, tracking models (first click, last click, multi-touch), etc.
Affiliate programs that are agile and open to trying new things such as API or custom widget creations for publishers, adding data feeds, or creating white label landing page solutions can be especially effective in the B2B, Travel, and SaaS industries.
I should mention here about the importance of network selection for incremental growth. The network an affiliate program is set up on is a key factor in the possibility of effectively:
- Recruiting the right publishers for a program.
- Tracking specific actions, customer types, attribution methods, and multi-channel attribution paths.
- Commissioning levels with diverse possibilities.
- Reporting attributions and KPIs effectively.
- Customizing offers, newsletters, promo codes, etc.
How Can We Calculate Incremental Revenue?
Everything you want to attribute to the affiliate channel and for program optimization efforts should be measurable.
Step 1: Decide how you want to measure ROAS/ROI.
Step 2: Measure & test within the affiliate program.
How to Determine ROI/ROAS:
ROI = (Revenue – Ad Spend)/Ad Spend
E.g. The ad spend for a promotion was $10 and it generated $20 in revenue. Minus the $10 spend from the $20 profit, then divide that amount by what you spent ($20-$10)/$10, this equals $1. So, your ROI would be 100% because you would earn $1 for every $1 spent.
ROAS = Revenue/Ad Spend
E.g. If the ad spend in the channel equals $20 for example, and the revenue generated equals $100, you need to divide the $100 income by the $20 spend, which gives you 5, or a ROAS of 5:1.
In the end, driving incremental revenue growth using the affiliate channel is possible, and can be very rewarding. However, keep in mind that brands who want to explore, test, and push forward their online marketing channels as a whole (not just Search or Email or Affiliate) will have the best results; as optimizing each digital marketing channel will only strengthen results over time.
If you have questions or would like help driving incremental revenue for your business, contact us today.