This is the 4th part in a 5 part series on incremental sales in affiliate marketing. Catch up on Part 1 and Part 2 and Part 3. We have discussed definitions and some possible ways to calculate incremental and who should be working on this. Today let’s dive into who the things you should know and data you should gather before you begin.
Things you should know before you get started, or start gathering now.
Data is going to be very important if you decide, or are pushed, to look at revenue this way. Let me outline those for you:
- Average Order Value – not only of the affiliate channel but all your channels and by affiliate
- Customer Aging – how often are they shopping, how long ago was this customer’s last purchase, by channel and by affiliate
- Email marketing/retention calendar and the customers targeted
- Catalog marketing calendar and the customers receiving these
- Gross Margin of typical shoppers across channels and by affiliate
- Avg conversion cost across channels and by affiliate
- New customers vs existing customers, across channels and by affiliate
- Average number of purchases per year, by channel, by affiliate
- The methods, channels and venues each of your affiliates are marketing your brand/company/products
- Customer history by affiliate -similar to above items
- Lifetime value of a customer across channels and by affiliate
That list is a start. Each company is different and the data you have available is going to be different. Like I said earlier, you may have none of this data and you may be focused entirely on first click or last click, gather what you can and keep the end goal in site. You are trying to prove the value of the channel and the value of each partnership, so the more data, both quantifiable (new % vs existing %) and qualifiable (affiliate a provides great content that helps our customers become more informed about our product, thus more likely to convert) the better. It’s a great process to go through, and if you are a data geek like me, can be a lot of fun.
Your tech team or business intelligence team may need some time to gather this for you, so getting a head start may work out well in the long run.
Why lifetime value? You may find that although a particular affiliate, or group of affiliates, initially provides a lower than optimal percentage of incremental sales, that their lifetime value of a customer is significantly higher. You want to keep those partnerships humming along. Your initial incremental analysis may move you to reduce your participation with them, but when you figure lifetime value, your equation may change significantly.
What to do after the data…
Primarily, this exercise is to evaluate the success of channels and individual campaigns or partners within that channel and determine the value of such as it relates to profitability. This process works across the online marketing universe, so feel free to apply these things to other channels as well. Once you determine your methodology and apply that to the data, you can use this to refocus budget to the high profit partners/campaigns, and work with the lower performing areas to jump up.
NOTE: If you deem a campaign or partner as less than ideal in terms of incremental sales, that isn’t the end of your dance with them. If they are performing below expectations, or your needs, it’s not time to cut bait. It’s time to get to work. Each partner is different, each partnership is different and the ways to optimize revenue is different. Now it’s time to get creative. Often times, informing a partner that you are evaluating revenue in a new way, and sharing that methodology with them, allows them to refocus their marketing on your behalf. A simple conversation can make a world of difference when they know what you are looking for.
You can also provide new tools for them to use. Things such as single use coupons and promotions targeting new customers can do wonders for a campaign and profitability. Sharing the demographic data of the customers they are sending compared with the ideal demographic helps too. Work with your partners to improve their numbers through creativity before you bail on them.
And I’d say don’t bail on them. You may find yourself commissioning differently on the quality of the sale. It’s been done in the finance space for years. Now, I know affiliates will not like this, but I don’t see this going away. Demonstrate the value and you’ll strengthen your revenue streams.
But how do you track and reward on these different types of customers Can it be done? Yes, and we go over that in Part 5.