Affiliate Marketing is a complicated industry and the various terms used don't make it easier. In part one of our Affiliate Marketing Terms, Definitions and Abbreviations we talked about key players in the performance marketing space. In part two, we define the various affiliate marketing models that exist. This next section takes a look at the terms used when discussing common key performance indicators and affiliate marketing metrics.
Metrics and Key Performance Indicators
AOV / AOS - Average Order Value / Average Order Size
There are two general references to AOV or AOS. These are the overall Average Order Value of all purchases made on a website. If you look at your Google Analytics, for example, and go to your Conversions > Ecommerce > Overview section, this is the one called "Average Value".
The other is specific to the affiliate marketing channel and shows you the AOV that affiliates are brining in. You can then compare the Average Value from your overall site performance to your affiliate partners to determine how they are performing compared to other channels. If it's much higher, they may be doing a better job of up selling, cross selling or featuring more high value products from your site. If it's lower, you may need to help them understand your products, services and value propositions better so they can help drive higher sales.
ROAS - Return on Advertising Spend
This is a term commonly used with search affiliates or internal search departments (mainly your PPC channel). The reason it's important is search affiliates will speak with you about how well their campaigns may be converting and discuss keywords with you which will produce a higher Return on Advertising Spend.
If you have your own PPC efforts running, you will need to be strategic about your allowances with search affiliates, however there are solid win-win situations that will result in mutually beneficial relationships and dual profits for both parties involved.
ROI - Return on Investment
This one may be a bit simple to define here, but possibly THE most important abbreviation on this entire blog. Return on Investment tells you whether you are producing a positive return, a negative return or breaking even on your spend. I won't go into detail about this one since it's the basis of all business efforts - a positive ROI.
EPC - Earnings Per Click
Earning Per Click is a way for affiliates to understand what their earning potential will be if they join your program. EPC represents the average earnings of all affiliates in your program based on the number of sales (conversions) and clicks they send. To an affiliate it means "If I send 100 clicks your way, how much am I going to earn back?" If you have a $20 EPC, it means they will earn $20 from those 100 clicks. If you have a $0 EPC it means none of your affiliates are selling anything, which is not an encouraging figure for an affiliate to look at when considering joining your program. They would be taking a very big risk.
Alternatively, if you see a program with a $1200 EPC, either that program has an incredibly high AOV or there is something fishy going on. I tend to find the most common EPC range for e-commerce programs is usually between $12 - $45 EPC. Generally affiliates look for the programs that have an EPC of $15-20 or higher.
This is a term used when a sale or affiliate commission is reversed from previously affiliate credited transitions. For example, if you have a 10% reversal rate, this means that 10 of 100 orders previously credited to affiliates were "cancelled". It's normal for businesses to have some small reversal rate since there are sometimes cancellations or returns by consumers, however, very high reversal rates (say 30-50%) are a big red flag for affiliates and they will be very wary to join your program - if they ever do.
Aside from ROI, this is likely the other most important metric used online. Conversion rate measures how successful you are capturing the sale or lead. If you have a 2% conversion rate, that means 2 out of every 100 people coming to your website are completing a sale or lead generation form. (Note - there are other actions one can take to "convert" however these are the most common two).
There are a ton of ways to break conversion rate up to help you understand your strengths, weaknesses and opportunities. For example, you could measure your entire site conversion rate, a landing page's conversion rate, an affiliate's conversion rate and so on.
Very high conversion rates from affiliates could mean they are either fabulous marketers or are doing something that could be hurting you. Very low conversion rates from affiliates could mean they are not sending you targeted traffic, there is something wrong with their landing pages, another affiliate is getting credit for their sales or they may need more training about your product or brand.
This is a term used to describe when a user clicks on an ad or link (whether it be a banner, text link, product image, widget, etc) and leaves the page to land on another page. They are "clicking through" from one place to another using one of your ads or creatives.
This is simply a term used to explain how many times your links are showing. For example, if in your affiliate program you have 100,000 impressions, it means the combination of all your creatives (banners, text links, product images, etc) that have an affiliate tracking link attached to them have been "seen" that many times across all your affiliate's touch points.
You can also track each individual banner, text link and such to see which ones are showing the most, which are being used the most and so on.
Attribution is a term used to describe which chain of affiliates or marketing channels were used to complete a transaction. With attribution tracking you can better understand the values different touch points bring to your sales cycle. You can read more about attribution here.
There are various other terms used to describe key performance indicators in affiliate marketing, especially when cross referencing other marketing channels such as in search, social or mobile marketing, however this gives you a solid place to start.
My final section of affiliate marketing definitions and abbreviations will take a look at the terms used to describe tools and overall functionally of an affiliate marketing program.