How to Calculate Affiliate Marketing ROI

Posted on3 CommentsCategoriesAffiliate Program Management, General Discussion, Thoughts for Affiliates

ROI, or Return on Investment, is one of the key indicators of your affiliate marketing campaign’s success of failure. Analyzing your campaigns’ ROI figures is a must both for merchants, and for affiliates. As a result, you get a better understanding of what works and what doesn’t. And since at the end of the day, it’s all about optimizing your investments in a way that brings you most income, I recommend that everyone analyzes the ROI of their affiliate marketing efforts on a regular (weekly or bi-weekly) basis.

But how do you do that?

It is actually very simple. ROI is generally expressed as a percentage or a ratio. To calculate your ROI from any given campaign/marketing effort, you really need to have just two pieces of information: (a) your gross profit, and (b) the investment which was required to receive that profit. Then you go by the following formula:

ROI = (Gross profit – Investment) / Investment * 100

So, for example, if a campaign yielded $100 in gross profit, and it took you $80 to generate that profit, your ROI from that campaign was (100 – 80) – 80 * 100, or 25%.  In other words, the campaign had a 25% ROI.

3 thoughts on “How to Calculate Affiliate Marketing ROI

  1. Geno,

    It’s a very interesting topic in terms of Affiliate Marketing.

    Speaking about other channels (e.g. PPC) you usually have direct investment (keywords cost or smth else). If you calculate ROI properly indeed you can optimize your investments at the end of the day. One can say that if we invest $5 we’ll get $15. And if we invest more – we’ll get more.

    With affiliates it’s usually reneue share and you pay per sale. In fact you mostly have fees that affect “Gross profit”, not investment.

    From my point of view only costs that are not based on revenue are investment (like additional promo, creatives creation etc.)

    So the question is what do you take as investment when calculating ROI?

  2. Maxim, it seems that you’re asking as a merchant (you didn’t clarify, so please correct me if I’m wrong in my assumption). For merchants I consider all investments as investments into the overall task of producing results. This will include affiliate commission, affiliate network (or software) fees/costs, creation and maintenance of banners, text links and data feed, and all affiliate program management expenses (e.g. investments into tools for affiliate recruitment, feed processing, compliance policing, etc, etc).

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