Affilate Marketing: Paying for affilates that convert net new customers and dropping the ones that dont
Since around the early nineties affiliate marketing has been around in the online marketing arena. The concept was pretty simple. Encourage other site owners to join your affiliate program giving them links and images and in return you'll give them a slice of any sale that was generated through those links. However, as we have progressed through time affiliate website publishers are getting more sneaky when it comes to tagging a user with their own affiliate ID. To illustrate, it was discovered that Facebook's 3rd Biggest Advertiser is a Bing Affiliate Scam. You can read the source article for more information, but the gist is that someone is advertising on Facebook only to have the user land on a site tagging them with their Bing affiliate ID and by changing their default search to Bing. The user is completely unaware of what is happening. Sneaky? Very.
The next question I raise is: how can you tell if your affiliate program is working by generating new sales of customers that haven't already been to your site? If you have a good analytics package installed on your site then you shouldn't have a problem. Inside of your analytics package look for a report called original referring domain. This reports the original path the user took to get to your site or the "first touch". Most analytic campaign reports only give credit to the "last touch", so whichever your last marketing campaign touched the customer, that campaign would get credit for the sale/conversion. However, the original referring domain report gives the first touch.
To illustrate: lets say that a user visited your site, went to checkout and decided to hunt for a coupon code. He leaves your site only to find an affiliate site with a "coupon code" that is apparently from you. He clicks the link to the affiliate website (as is tagged with an affiliate ID). Except that you haven't created any coupon codes. Your company has a strict "no coupon code" policy. The customer tries typing the coupon code into the box and alas it doesn't work. Frustrated, the customer completes their order. In this scenario the affiliate website would get credit for the sale and it would be reported on your affiliate sales report. Obviously, this isn't the expected result. You want new customers that haven't been introduced to your brand or haven't ordered before. Why should you pay an affiliate on average 6% in commission for this?
Running your original referring domain report, and comparing it with your top affiliate sales report gives you a snapshot of what sites bring in the most new customers that haven't interacted with your brand or that haven't already visited your website through another online marketing campaign. Here is a sample report, lets see what we can learn.
As I stated earlier, we matched the affiliate sales and the original domains up together. Instantly, I see that my top affiliate website in terms of sales is "Website A", however looking at the next column over I see that of the $35, 267.58 of sales generated only $411 of that was originally from their website. The rest of the sales, were generated from a customer leaving my site and eventually returning by means of that affiliate. Remember though that I am paying 6% in commission of $35,267.58 which is roughly $2116.05 in fees. To generate $411 in net new income, I spent $2116. That's a really bad return on my investment.