The value an affiliate has in a specific programme is one of the key metrics a manager should measure or know about in order to make the right decision for business growth, optimisation and recruitment.
Choosing the wrong affiliates for a programme will inevitably lead to low engagement and small activation rate, as well as a rise in the number of publishers that are in a latent state and need to be managed.
Moreover, there are recruitment costs, usually around $20 per lead, that need to be optimised. Spending $20 per lead for affiliates that will never be productive in your programme is every recruiter’s nightmare. This is why the key questions we need to ask are: “Who are the most productive affiliates for our programme?” and “What are their particularities?”
But there’s more to think about. Would content affiliates from a specific country work better with my programme, or is there a pattern for what type of promotional methods they are using in order to be more productive? Does my programme need more coupon or content affiliates? Or maybe media buyers or search engine marketing affiliates are the top performers for my product or service?
It’s extremely important to know if the amount per lead you are currently spending is the right one – make sure you know the overall lifetime value of your affiliate. If you are investing $20 per lead and your overall affiliate lifetime value is $15, you might want to reconsider your recruitment strategy.
For example, if a programme has 5000 registered affiliates, of which 10% are actually productive, we should take a look at the total revenue they have generated within the last one to three years, depending on how old the programme is.
To find the overall lifetime value of your affiliates you should split the revenue generated by your active affiliates to all the affiliates that are registered with you.
Let’s say, for example, that the 10% active affiliates have generated a total revenue of $100,000 in the last year. This means that the overall lifetime value of an affiliate in this program would be $100,000/5,000 = $20. Remember to take into consideration the revenue, not the volumes they are generating. So $20 would be the maximum amount to be paid per lead for recruitment purposes.
Of course, many of these affiliates might turn out productive with the right tactics, and the overall value might actually be higher in the future, and this is the goal we are all aiming for. But what if 50% of those 90% inactive affiliates are not even a good fit for your programme? They might never become productive, and they are still a cost for you. You are allocating a lot of time and effort in managing and activating them too.
The right match
To see who the most productive affiliates are and what their lifetime value is you should take a look at those that are active in your programme. To use the example above, the 10% active affiliates would mean that 500 affiliates are driving $100,000 revenue per year. The lifetime value of an active affiliate would be $100,000/500=$200/year.
To go further with the example, we can also take a look at the active affiliates and split them into five major categories based on the revenue they are generating: above $10,000, between $9,999 – $5,000, $4,999 - $1,000, $999 – $100, and under $99.
Then take a look at each category and see where most of the affiliates are from, what their promotional methods are, etc. This way you will be able to identify your best matches for the programme, set smart recruitment tactics based on real data from what works best within your programme, and set the right techniques for optimising performance.
Taking a closer look at the affiliate lifetime value tells you more about the state of your programme, the status of your affiliates, the most productive affiliates, top potential affiliates and the ones that are definitely not a good fit for your programme.
It's very important to know what the real value of affiliates in your programme is and it’s key to remember it can only be calculated for a specific programme. We already know that conversion is not only the responsibility of an affiliate but also of both the advertiser and the publisher. The same affiliate can rank higher with a specific advertiser, and have low results with a different one. The affiliate lifetime value is not the general value of one affiliate, but rather the value they have with a specific advertiser.
The European landscape has its particularities in regard to the affiliate marketing industry and therefore there are some other challenges and barriers to take into consideration for proper recruitment.
If in your analysis you find out that the affiliates from the UK are the ones that have the highest lifetime value for your programme, and a further analysis shows you that these are usually SEM affiliates, then you know where to focus your recruitment budgets in the future, and moreover, you know how much you can spend per lead and have full control over your budget.
At the same time, you may find that you have many affiliates from a specific country who are not productive at all, or not even a good fit for your programme, and you may want to remove these from future recruitment campaigns target. This may happen because there is a language barrier or because they are targeting countries that aren't necessarily relevant for your product, or your product or website is not optimised for that market, etc.
The affiliate lifetime value is a unique and easy method to evaluate the health of your programme and to get insights that can be applied to various segments in order to control costs, improve ROI, and optimise the programme’s growth.
For more insights and to find out how to optimise your recruitment techniques by leveraging the affiliate lifetime value, join my session 'Affiliate LVA and Other Ways to Effective Publisher Recruitment in Europe'at the upcoming PMI: Europe.
If you would like to discuss more opportunities, please contact me to schedule a meeting.