In this article, we delve into the critical values that underpin affiliate marketing success, explaining their significance, calculation methods, and providing real-world examples.
Welcome to OnClickA Academy! While the concept of affiliate marketing might seem straightforward – promoting products or services in exchange for a commission – achieving success demands a deep understanding of the key values. Let us consider each of them in detail!
Before diving into the details of calculations, we would like to mention that most metrics we discuss here, are calculated automatically at marketing accounts like GA, but even more are available at your OnClicka personal account. However, some metrics (e.g. ROI) may be only calculated after you have set postback for accurate tracking.
Read more about setting postback here
Click-Through Rate (CTR): Navigating the Path to Engagement
The Click-Through Rate (CTR) measures the effectiveness of your affiliate marketing campaign in compelling users to take action. It calculates the ratio of users who click on your affiliate link or ad to the total number of users who viewed it. A higher CTR signifies engaging ad content and increased chances of converting viewers into customers.
Calculation: CTR = (Clicks / Impressions) * 100
Example: If your affiliate ad receives 500 clicks out of 10,000 impressions, your CTR would be (500 / 10,000) * 100 = 5%.
Average Click-Through Rate (CTR):The average CTR can vary depending on the industry and target audience. A medium CTR is around 2% to 5%.
Conversion Rate: Transforming Clicks into Revenue
The Conversion Rate indicates the proportion of users who complete a desired action, such as making a purchase, after clicking on your affiliate link. It is a direct indicator of the effectiveness of your affiliate marketing efforts in driving actual revenue.
Calculation: Conversion Rate = (Conversions / Clicks) * 100
Example: If your affiliate link generates 100 conversions from 500 clicks, your Conversion Rate would be (100 / 500) * 100 = 20%.
Average Conversion Rate: A good conversion rate often ranges from 2% to 5%. A medium conversion rate would be around 3%.
Earnings Per Click (EPC): Measuring the Affiliate Marketer's Revenue Generation
Earnings Per Click (EPC) measures the average amount of money an affiliate earns for each click on their affiliate link. It factors in both the commission earned and the number of clicks generated.
Calculation: EPC = Earnings / Clicks
Example: If you earn $500 from 1,000 clicks, your EPC would be $500 / 1,000 = $0.50.
Average Earnings Per Click (EPC): A reasonable EPC can vary from $0.20 to $1.00. A medium EPC would be around $0.50.
Return on Investment (ROI): Determining Campaign Profitability
ROI measures the profitability of your affiliate marketing campaign by comparing the revenue generated to the cost invested in running the campaign. It provides a clear insight into whether your efforts are yielding substantial returns.
Calculation: ROI = ((Revenue - Cost) / Cost) * 100
Example: If your campaign generates $2,000 in revenue with a cost of $500, your ROI would be (($2,000 - $500) / $500) * 100 = 300%.
Average Return on Investment (ROI): A healthy ROI typically ranges from 100% to 300%. A medium ROI would be around 200%.
Customer Lifetime Value (CLTV): Valuing Long-Term Relationships
The Customer Lifetime Value quantifies the total revenue generated from a customer throughout their engagement with your brand. This metric emphasizes the importance of building long-term relationships and customer loyalty.
Calculation: CLTV = Average Purchase Value * Average Purchase Frequency * Customer Lifespan
Example: If the average purchase value is $50, average purchase frequency is 2 times per year, and the customer lifespan is 5 years, the CLTV would be $50 * 2 * 5 = $500.
Average Customer Lifetime Value (CLTV): CLTV can vary greatly depending on the industry and customer behavior.
Cost Per Mille (CPM): Knowing the Price for Impressions
Cost Per Mille (CPM) shows how much it costs to show your ad to a thousand people. It helps you understand the cost of reaching a big audience.
Calculation: CPM = Cost of Ad Campaign / (Number of Impressions / 1000)
Example: If your ad campaign costs $500 and your ad is seen 200,000 times, your CPM is $2.50.
Average Cost Per Mille (CPM): The cost varies depending on the ad format, GEO and other targets you set. For instance at OnClicka, if you advertise via banner ad format, targeting ios mobile devices in Germany, the pricebox will recommend you $0.016 CPM. Meanwhile, if your target GEO is the US, the recommended price in the pricebox will be $0.014 CPM.
Cost Per Click (CPC): Figuring Out Click Costs
Cost Per Click (CPC) indicates how much you pay for each click on your ad. It helps you see if getting people to your website is worth the money.
Calculation: CPC = Cost of Ad Campaign / Number of Clicks
Example: If your ad campaign costs $300 and 500 people click on it, your CPC is $0.60.
Average Cost Per Click (CPC): The cost can change because of different things, like how many other ads are around and who you're trying to reach. On average, it's between $0.20 and $2. For most accurate figures, check the pricebox when setting targets for your campaign at your OnClicka account.
Cost Per Acquisition (CPA): Managing Campaign Costs
The Cost Per Acquisition measures the average cost of acquiring a single customer through your affiliate marketing efforts. It is crucial for maintaining a balanced marketing budget and ensuring that your efforts are cost-effective.
Calculation: CPA = Cost / Conversions
Example: If you spent $1,000 on an affiliate marketing campaign that generated 100 conversions, your CPA would be $1,000 / 100 = $10.
Average Cost Per Acquisition (CPA): An acceptable CPA can vary based on the product or service being promoted. A medium CPA might be from $1 to $10 in gaming vertical.
Return on Ad Spend (ROAS): Evaluating Ad Investment
ROAS evaluates the effectiveness of your ad spending by comparing the revenue generated from ads to the cost of those ads. It provides insights into the efficiency of your advertising strategy.
Calculation: ROAS = (Revenue from Ads / Cost of Ads) * 100
Example: If your ads generate $5,000 in revenue with a cost of $1,000, your ROAS would be ($5,000 / $1,000) * 100 = 500%.
Average Return on Ad Spend (ROAS): A strong ROAS often exceeds 400%. A medium ROAS may reach 150%.
Average Order Value (AOV): Boosting Revenue Per Transaction
The Average Order Value represents the average amount a customer spends during a single transaction. It helps affiliate marketers focus on strategies to increase the revenue generated from each sale.
Calculation: AOV = Total Revenue / Number of Orders
Example: If your total revenue is $10,000 from 200 orders, your AOV would be $10,000 / 200 = $50.
Average Order Value (AOV): The average order value can differ significantly between industries. A medium AOV might be around $50 to $70.
Remember, all medium values provided in this article are approximate. These values can vary widely depending on factors like industry, niche, target audience, advertising platform, and the specific products or services being promoted. It's important to monitor these metrics closely for your particular campaign and compare them against industry benchmarks.
Conclusion
In conclusion, you need to understand that you do not need to monitor all the metrics of your campaign. First of all, define your goals. This will help you create your personal set of metrics that you need to monitor. Then, by closely monitoring and optimizing these values, you can refine your strategies and maximize revenue. If you have just started with affiliate marketing and need any help, OnClicka account managers will be happy to help you out and set you marketing account for the most profitability.