A typical question I get asked from new affiliate programs or those in their infancy is the sales mix expectation. What sales mix do I think they will achieve from affiliate marketing?
By sales mix, we mean the expected revenue of your affiliate channel as a percentage of all digital marketing efforts.
Although I can state some average numbers, it is important to understand the key elements of that data and how they can be influenced.
The majority of affiliate programs generate 15%–30% of all online sales revenue for advertisers. Now, that is a big chunk and supports the importance of affiliate marketing within your digital space.
But, not all brands can expect to hit those sales mix figures.
On paper, the low-end figure of 15% is a great start. Especially when you consider you are only paying affiliates for driving sales. This unique payment model is another tick in the box of affiliates. Any commission is being paid on qualified orders, not just on clicks like you might see in other channels such as paid search.
Let’s dig a little further into the 15% sales mix figure and apply some other KPI’s to see the full formula for affiliate targets.
Keeping to the 15% sales mix, we are going to apply a top-line online revenue to add some context. If a site is driving £100k in revenue weekly, that sales mix for affiliates now has a £15k target number attached to it.
Going further still, adding a site AOV (for example £30), can give us an order target for the channel. Based on an AOV of £30, the order target would be 500 affiliate orders every week to hit the £15k sales mix.
Breakdown
Website revenue: £100,000
Affiliate target: £15,000
Average order value: £30
Affiliate target / AOV = 500 orders
Now, how does that stack up against your current program?
After breaking the individual KPI’s down into manageable bitesize numbers, we can start to see a clearer vision of the channels targets. It can also make us aware of how a change in each element can affect the final revenue number. We will touch on this further.
Back to our 500 order target.
Does this look achievable? If not, let’s see what traffic you need to be generating to get close to these orders.
The average conversion rate within affiliates is 2-3%. Taking the lower 2% rate, it would take 25,000 clicks to get 500 orders on paper.
Again, we need to revert to our actual data. How achievable is it to reach 25,000 visitors to your site through the affiliate channel?
If it seems far fetched, you need to review your current strategy or revise the targets for the channel.
To get more traffic, a brand might need to bite the bullet and start investing in more tenancies. Remember, a lot of these affiliates have big audiences. Tapping into them could supercharge your program.
The above numbers we ran are just one example of KPI’s a company might have. You can run your brands numbers using the below formulas.
A basic conversion rate formula is:
- 100 x (Orders / Traffic) = Conversion Rate
Working backwards from revenue, if you are looking to find your traffic target, then use the below formula:
- (100 x Orders) / Conversion Rate = Traffic Target
As digital marketers, our numbers are key to our success. When we have a better grasp of what they are, we can learn to manipulate them to hit our goals. Your affiliate channel will not hit the numbers you want them to unless all elements are working together.
Now there are always going to be issues that might affect each KPI.
If you get a sudden influx in traffic, conversion might drop. So, do you need purchasing customers to have a higher AOV or traffic from a more engaged audience?
Again, it is about reacting to the data and finding solutions. Different publishers may have different variants of each KPI, so getting them to work harmoniously is the end goal.
Conclusion
When looking to invest in any new digital channel, it is important to set some expectations. This will give your team targets to work towards and help you manage budgets closely.
Reviewing your affiliate channel, you might say on paper it is or isn’t working. A closer look at the numbers will let you understand why it is successful and how to grow further. Or, what you need to do to hit your targets.
How does your current affiliate program stack up against the channel averages? Let us know the comments section below.
