Understanding EPC - 1 Click, 100 Clicks or 1000 Clicks?

With so many terms and variations used in performance marketing there continues to be confusion in the space. With metrics measuring ROAS, CRM, CTR, CPC, PPC and so many more, the terms used to describe EPC in affiliate marketing, or Earnings Per Click, is no exception.

EPC is one of the most important metrics both for affiliates and affiliate managers alike . It helps EPC - Earnings Per Clickunderstand the success rate of an affiliate program over a particular timeframe compared to other programs, helps affiliates understand how much they may earn and if a program is well managed, and helps merchants understand how well their affiliates are performing and what they may potentially be doing to drive sales.

Variables that affect EPC are things like cookie days, website conversion rates, commission payouts, the quality and quantity of affiliates driving clicks to a program, how they are driving those clicks and more.

But the confusion comes in more so by the variances in EPC definition. Some networks, such as Google Affiliate Network, use a 100 click EPC benchmark to describe the average earnings, and others, such as Commission Junction, describe it as the average earnings for every 1000 clicks.

Further, some affiliates break it down themselves to understand what they might earn per one click. This is generally the case with PPC affiliates who have to measure true EPC to determine Net Earnings Per Click which are calculated, not on gross sales, but on RPC (Revenue Per Click) minus CPC (Cost Per Click).

eFax.com has an interesting description of EPC to clarify further:

"Your EPC (Average Earnings Per One Hundred Clicks) is a relative rating that illustrates the ability to convert clicks into commissions. Your EPC is calculated in an "apples to apples" comparison with all publishers by taking each publisher's total commissions earned (regardless of currency) and then converting that total (if necessary) to US dollars."

Commission Junction also breaks it down well based on their internal processes:

"Three month EPC values are calculated and updated daily, using data beginning five months previous through three months previous. On the first of each month the "five months previous through three months previous" timeframe changes to accommodate the month change. For example, an EPC rating in June is calculated using data from January, February, and March. It is necessary to use data beginning five months previous to give accurate EPC ratings that may include extended or reversed transactions.

There must be at least 1000 clicks for the 3-month period to calculate your EPC. If less than 1000 clicks occurred, N/A will display for the EPC.

7 day EPC is a calculation made by taking data from yesterday counting back seven days. We take the sum of all commissions for the 7 days and divide it by the sum of all clicks for the same 7 days then multiplying this by 100. If today's date = N, the date range used is N-8 to N-2. NOTE: There must be at least 100 clicks for the 7-day period to calculate your EPC.

In the words of Carolyn Kmet, the point of this exercise is to understand that EPC should be used to determine if a merchant is converting or not and how it's performing in relation to other programs.

If an affiliate is calculating their own EPC, they need to use whichever calculation makes the most sense for them.  For many, EPC is more of a standardized approach to gauging whether or not a program converts over time, rather than an end-all-be-all in determining exact financial earnings.

Affiliate Marketing Terms, Definitions and Abbreviations – Part 3: Metrics and Key Performance Indicators (KPIs)

Affiliate Marketing Terms, Metrics and KPIsAffiliate 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.

 

Reversal Rate 

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.

 

Conversion Rate

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.

 

Click Through

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.

 

Impression

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

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.

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