AUG 09 2011
Affiliate Marketing Metrics - How To Be Successful At Affiliate Marketing
Have you ever wondered why some sites do really well, and others do very poorly?
Maybe you've dabbled in affiliate marketing, setup a site or two that seemed to get traffic, but never really generated any sales.
It comes down to one thing.
Understanding metrics.
Metrics are the key indicators for understanding if something is successful or not.
For example, if you were wanting to track the metrics for losing weight, you'd want to track body fat percentage lost and muscle mass gained, two realistic, measurable things that are identifiable.
To illustrate this point, let's walk through a scenario that I know I've personally been down before, and maybe you've experienced something similar.
You find a market/product to promote, you setup a site, you get some content on that sucker, and pretty soon you've got some traffic flowing in.
You're thinking to yourself, "hey, I'm pretty good at this stuff!", but still you're not making any sales, there's no real cash in the door!
This continues, you get the traffic... and... nothing...
What you're suffering from is not a failed site, not a failed product (necessarily) but a failed merchant.
Now if you didn't know this, you'd probably just look at the site, throw up your hands and go "BAH! Stupid internet marketing hogwash doesn't work!"
What are the metrics that go into actually making money from affiliate marketing?
That means when you're saying to yourself, "Damn I wish I was making more affiliate sales", it's not something you can even remotely impact, all you can do is work on the METRICS, the things that make up the formulas.
Traffic (Metric):
Is simple, the amount of total visitors you have going to your site (you are looking for the highest qualified/targeted traffic possible)
Click Through Rate (Metric):
How many people out of every 100 visitors see the link/banner/ad, and actually click on it. E.g. if you had 100 visitors, and 5 clicked on your links, you have a 5% Click Through Rate.
Merchant Traffic (Result):
The result of the amount of Traffic you have, multiplied by your Click Through Rate E.g. using the same formula/numbers above, if you had 100 visitors, and a 5% Click Through Rate, you'd get 5 for the Merchant Traffic value.
Merchant Conversion Rate (Metric):
This is the conversion rate of the merchant you are promoting, how many out of every 100 visitors do they convert. This number is in my opinion the single biggest factor in the success or failure of an aspiring affiliate marketer, it is the one thing you have no DIRECT control over.
Number of Affiliate Sales (Result):
This is the result of the Merchant Traffic multiplied by the Merchant Conversion Rate, E.g. if the merchant converted at 5% and you sent 100 visitors (Merchant Traffic) you'd make 5 sales (100*5%).
Sale Price (Metric):
The cost of the product you are promoting - simple really...
Affiliate Commission (Metric):
The percentage you get paid for each sale you make (this figure can vary from 3% to 100% or more depending on the market).
Total Affiliate Sales (Result):
How much money you actually make at the end of the day...
So how does it look?
Let's use a site example (with nice rounded easy numbers) for a monthly period
Site A (following the formula above):
A pretty average performing site considering it's getting 10000 unique visitors a month!
So let me illustrate the power of how understanding these metrics work and show you what happens when you improve each one.
Traffic - 11000 (10% increase - you targeted some more keywords, added some extra content)
Click Through Rate - 10% ( 33% increase - going from 7.5-10 isn't hard, change the banner you're using to promote the product, add some extra links in, make it easier for them to click it)
Merchant Traffic - 1100 (rounded down because you don't get half a visitor :D)
Merchant Conversion Rate - 4% (33% increase, you looked around and found a better converting merchant for the product you were promoting)
Number of Affiliate Sales - 44 (again rounded down because you can't make half a sale)
Sale Price - $300 (same product, same price)
Commission Amount - 12% (20% increase - as you make more sales, you can usually negotiate higher rates)
Total Affiliate Sales - $1584
That's how you take a site, with nearly exactly the SAME TRAFFIC, and increase its earnings by 240%
In later articles/guides I'll target and explain how to improve each of these metrics, and things you should be looking at, but I can guarantee, that just by measuring these numbers your business will start to improve.
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Comments (27)
Yes, excellent article about Clink Bank, however; my feelings are you are still better off with physical products such as coffee
Hi Augustus, yeah my money is still in the physical products camp but it was an eye opener for me at least, I'm keen to see how the sites do
Daniel
Hi Daniel, wish i could spend all day reading your posts and comments, there is so much interesting and useful stuff here, thinking of taking some holiday days just to read it all.
Thanks again, keep posting! x
One question - how do you find/calculate the Merchant Conversion Rate?
Hi Pam, sorry for the late reply, it's the number of sales you made, divided by people that are sent through to the merchant (clicked on the banner, links etc. on your site) multiplied by 100
E.g. you make 4 sales, you sent 400 visitors
(4/400)*100 = 1%
Hope that helps :D
Daniel
Hey Daniel excellent posting and I'm very happy to see that you take the time to followup with your readers/followers. The one question I have for you is would you look at the metrics differently when marketing a physical product versus an information product?
Best regards, Derek
Heya Derek, good question mate, I'm assuming you mean from the perspective as an affiliate?
In this case no, because as an affiliate we are paid a flat commission, we don't need to take into consideration margins etc.
As a merchant however, yes, you need to incorporate your cost of goods to establish your Gross Sales, no point spending a $1 thinking you're making $1.20 when in reality you're losing $.50
Hope that answers your question (and if you meant something different let me know)
Daniel
hi It was a good articles to read but how to get 10000 unique visitors. we much consider our cost per visitors we bring to our sites. affiliate marketing is a business where we put our money to earn some money
It depends if you are paying for those visitors
If you are buying 10,000 uniques, for say, $1.00 each, then you need to break even at worst, and make a profit at best
However, the majority of the traffic we get for our sites is good old fashion SEO traffic (free Google traffic)
While it's "free" it does take work and time to get top rankings
Daniel
Thanks for this, its really helpful info for those of us trying to learn this crazy business, keep the posts coming x
excellent post.. My goal is to find a niche product, build a website around it and make $100 per day. I agree the formula is traffic and conversions. Approximately how much traffic would I need to generate 3 sales a day, that would help achieve my goal. Thanks
Heya Richard, $100 a day, and 3 sales a day is not enough metrics but I'll give you the formula to work it out for niche products
Traffic X Conversion Rates = Number of Sales
Number of Sales X Average Sale = Total Sales
So if you were selling a $35 product, and converted at 3% you would need
100 Visitors X 3% = 3 Sales
3 Sales X $35 = $105 a day
So 100 visitors a day, or 3000 uniques
I've found that most niche sites convert anywhere from 1-3% on average (some less some more) so 3% would be in my opinion a little high, but it depends very much on the quality of the traffic you have going there
Hope that helps
Daniel
A good post thanks Daniel however I think bobs comments have merit. If you can deliver an acceptable CTR to the merchants site and your customers are not confronted with any nasty surprises when they get there, then you don't have much more control. Such is the life of an Affiliate Marketer.
Heya Pete aka Decatrim :) Have a read of my reply to him, there are two scenarios in which it will increase just as an example, it's one of those things you have no direct control over (i.e. the merchant) but do have indirect control
thanks for breaking it down so that I can easily understand it.
Hey guys, you guys break things down so easy to follow. I've struggled with making money from IM for almost 3 years. I bought to many shiny new objects and lacked focus to the point I'm sick. I decided to stop buying and start doing. Your training resonates with me as you make everything seem easier to do. As soon as I figure out how to set my permalinks settings to get them to show up like you do it in CWS training I already have 7 sites setup but don't want to go any further until I know I've set them up right. Awesome post and just want to say thanks for the continued support. Looking forward to getting in your mastermind group. Have an awesome week.
Jim Conyers
Heya Jim, thanks mate :D
To answer the Permalinks thing:
to have www.mydomain.com/product use
/%postname%/
to have www.mydomain.com/brand/product use
/%category%/%postname%/ in the permalinks section
Should take care of it all :D
Glad to see you're focusing on it mate, no more shiny objects!!!
Daniel
The one additional metric that is needed to really show the benefit of those minor tweaks and changes is the cost of the sales that you are getting if you are using paid ads to attract visitors.
Once you know the cost per click or cost per view, then you can quickly tell whether your promotion is making a profit (even a small one), or if each sale is losing you more money.
Heya John, yeah absolutely, if you do pay for your traffic its an additional metric you most definitely need to add in, for the average beginner, its not something I recommend they do because they can go backwards very quick (or also forwards very quick too depending on how you look at it :D)
Daniel
Great post as always Daniel. Your comment "hey, I'm pretty good at this stuff!" resonated with me as I was able to rank No. 1 on Google (47,400,000 results in the SERPS) for a keyword in the insurance niche that gets 450,000 global and 165,000 local monthly searches. The disappointing thing though is that I did not get one click on my Adsense ads or on the insurance cpa offer I am monetizing with besides Adsense; that in spite of getting 450 visitors and 2560 pageviews in July, and 182 visitors and 1574 pageviews so far in august. Even the number of visitors is not congruent with what a No.1 spot should receive. The site is not specific to any insurance type and I have no way of knowing what my visitors are looking for. How would you fix this problem? I would really appreciate your input.
I found that in additional to Google Analytics, a great addition is the use of Google Webmaster Tools to fully understand what traffic is coming to my website and how to better layout my copy and increase conversion.
Yeah, Google Webmaster tools is just insane
This is where there is actually a further metric that goes behind traffic but I didn't want to go into it cause it might freak people out :D
You can use Google Webmaster tools to test your Title tags and monitor the CTR of the searches that happen using their Impressions/Search feature (I'll do a segment on Webmaster Tools at a later date because it is really cool)
E.g. if there is 2000 searches per month for a given phrase, 1st position gets 22-23% on average for that traffic, but why not 15% or 35%?
The reason is 3 things:
Title of the page
Description that shows up in Google (could be meta description or a piece Google has pulled out)
Destination URL
The primary thing people read/click on is the Title tag, and much like a headline for an Ad, is the first thing you can use to improve your Click Through Rate of the searches that happen in Google
Assuming the numbers you give 240% is a great improvement BUT, you assume you can find a merchant with a higher commission rate and simultaneously has a better conversion rate. How likely is that, not much. The only things you have control over are the traffic and your CTR. The rest is nothing more than conjecture and if you did your original research correctly there wouldn't be a better merchant for that product.
Heya Bob, good pickup ;)
Though I'll give you a few scenarios in which this happens:
For any industry, so long as you've picked a market that isn't reliant upon a single merchant (e.g. a specific branded product that is only sold by the manufacturer and no where else) you'll usually find a range of commissions, in one recent one it went from 3% - 10%, a big difference on a $400-500 sale.
Since this is the case, it's the CTR of the merchant next.
1) some merchants convert better than others, this is just a fact, some will convert at less than 1%, while others convert at 10%+ (extreme example I know but check out http://visualwebsiteoptimizer.com/split-testing-blog/top-ecommerce-websites-conversion-rate/ for some of the top converting websites in the world) - this is something, that as an affiliate marketer you don't have any DIRECT control over, but you do have control over where you send traffic and therefore you have INDIRECT control over it, I for one would rather send my traffic to someone converting at 5% vs someone converting at 1%
2) some merchants/affiliate programs allow direct linking to products, while others only to specific pages, or at worse, to the main domain - this is where you can have a merchant that converts at say, 2%, but because this is their overall traffic - their paid campaigns are promoting specific products/pages, their natural seo is targeted specific pages/products - therefore this conversion rate is "buffered" and yet you as the affiliate have to send to the main page, so your conversion rate is .5% because you're relying on the person caring enough to search through the damn merchants site - this one thing can make a huge difference in your personal conversions as an affiliate marketer, finding a merchant that has even a lower commission amount, that allows direct product linking, will usually overall net a higher return for your traffic
There are other factors that come into it as well, but I just wanted to give you some examples where, while you don't have direct control, you do have indirect control to influence the merchants CTR of YOUR traffic
Daniel
It is very informative..
The only thing I see that you added to the formula was TRAFFIC. Maybe you should include "quality of traffic".
Hey mate, whenever I discuss traffic in training it is (usually) quality traffic - so yes you are correct ;)
For most if not all our sites we rely on SEO traffic, and by default, if someone is searching for Bugaboo Cameleon Stroller Reviews, and we rank for that phrase, then that person is as close to as qualified as they come
Daniel