[Note from Clay: This is a guest post from Gina Wang, our in-house Director Of Partnerships (and overall awesome person)]
There’s a well known Sufi tale of 5 blind men and an elephant. As the story goes, the men were asked to describe what an elephant looks like by touching different parts of the body.
“It’s a pillar,” said the man who touched its leg.
“It’s a fan,” said the man who touched its ear.
“It’s a throne,” said the man who touched its back.
“It’s a rope,” said the man who touched its tail.
“It’s a plow,” said the man who touched its trunk
Introducing The Elephant (When It Comes To Running Your Affiliate Program)
Like the blind men in the room with the elephant, it’s easy to get sidetracked by the wrong numbers when it comes to explaining your products to new affiliates and JV partners.
Let’s assume that your primary mode of marketing your product is through webinars with affiliate partners. One traffic source. One offer.
Even in a seemingly straightforward case like this, it can be easy to get overwhelmed by the sheer amount of numbers to track:
- the number of people who purchase after seeing the sales page
- the number of people who register for the webinar
- the number of people who show up on the webinar
- the number of people who purchase on the webinar
- the number of people who purchase after the webinar
- the number of people who open the promo emails
- the number of people who click through the emails
And on and on and on.
With all these numbers floating around, is it possible to arrive at a quick, simple number that can effectively convey the power and earning potential of your program to a potential affiliate partner?
Why Earnings Per Click (EPC) Is The Most Important Number You’ll Need (To Encourage Affiliates And JV Partners To Promote Your Products)
Like the blind men and the elephant, focusing on the (wrong) number can lead to a (misguided) tunnel vision that causes you to dismiss the elephant in favour of an (illusive) rope.
In order to see the elephant, it’s important to know what the Earnings Per Click (or EPC) is for your products.
In a nutshell, this single number lets your affiliate partners know how well your product is performing and what kind of earning potential they can expect if they promote for you.
A quick caveat before we launch into how you can (easily) figure out the earnings per click (EPC) that you affiliate partners will make after promoting your product.
I am by no means advocating that you stop tracking any of the numbers listed above. (We’re kind of numbers geeks here. If there’s a number associated with it, we are probably tracking it. So telling someone to stop tracking would go against the core of our own practice and beliefs. Which, of course, we’re not going to do!)
How to Calculate EPC (Earnings Per Click)
With The Interactive Offer, for every click an affiliate partner sends our way, the average commission earned is $3.26 (i.e. an affiliate earns $3.26 per click they send our way).
[VERY IMPORTANT NOTE: The $3.26 earned per click by our affiliates is after refunds have been deducted. Most affiliate programs artificially inflate their EPC numbers by reporting what earnings would be . . . if no one ever asked for a product refund. We like to be more honest than that, and we encourage you to always ask for, and report, EPC numbers that account for refund rates.]
Here at The Interactive Offer, for a webinar campaign with affiliate partners, our affiliates’ earnings per click (EPC) after the 30 day money back guarantee period is over . . . is $3.26.
(This number, by the way, is high by affiliate marketing standards).
In order to figure out EPC (and yes, each product will have their own EPC number), you only need 4 numbers:
- the price of your product
- the commission an affiliate makes each time she sells your product
- the net number of sales an affiliate has made (total sales – number of sales = net number of sales)
- and the number of times your JV partner’s affiliate link has been clicked (most affiliate software programs will automatically track click through rates on affiliate links that have been clicked)
Here’s An Example Of How This Works
Let’s say your product is $500. And your affiliate partners receive $50 each time someone buys through her affiliate link. And let’s say that the most recent promotional campaign you did with your affiliate partner, Amanda, sold 30 programs and generated 1000 clicks. In other words, Amanda’s affiliate link was clicked on 1000 times.
[IMPORTANT NOTE: All clicks count, not just unique clicks: So if the same person visits the sales pages 3 times through the same affiliate link, that counts as 3 clicks. But don’t fret about this. Most affiliate software programs will track this for you so there is no manual guesswork involved.]
And let’s say that during your generous 30-day no questions asked refund period, 5 people requested a refund on their purchase.
Here’s the quick and dirty formula for calculating your EPC (I promise there is no calculus involved, though a calculator may come in handy):
Net Commissions Earned (after refunds) divided by Total Number of Clicks = Earning Per Click (EPC)
Here’s how it works out for the example above:
1. Price of your product: $500
2. Affiliate commission received for each sale: $50
3. Net number of sales (after refunds): 25
4. Total number of clicks on affiliate link: 1000
Net Commissions Earned ($50 x 25 sales) divided by Total Number of Clicks (1000) = EPC $1.25
Why Your EPC (Earnings Per Click) Matters
Based on the EPC rate, Amanda can expect to earn $1.25 for every click she sent your way. In this case, it would mean she would likely have received a commission of $1,500 based on the 1,000 times that her affiliate link was clicked on.
Earnings Per Click (EPC) Matters Because It Reflects Your Product’s Ability To Convert Clicks Into Conversions. The Higher Your EPC Number, The More Earning Power (And Enticing) It Is For Your Affiliate Partners To Promote For You Again And Again
Knowing your product’s EPC also avoids the trap of focusing on the wrong numbers and missing the weak link in your sales process. For example, you may have a high conversion rate on your webinar registration rate – but if your EPC numbers are low, then it may be a sign that there’s a weak cog in your sales funnel that needs to be strengthened.
The high webinar registration rate may hide the fact that you are losing sales as a result of a weak follow-up sequence.
Likewise, you may have a high percentage of people who purchase on a live webinar, but if your EPC numbers are low, then it may be hiding the fact that your web page conversion rates are low and costing you sales. In each case, prioritizing your EPC number allows you (and your potential affiliates) to quickly understand and assess the strength of your entire offer and sales process, not just one isolated aspect of it.
We’re kind of numbers geeks here at The Interactive Offer. If there’s a number associated with it, we follow it. And yet, when it comes to our affiliate programs, EPC is the only number that matters because it stands as the the ultimate litmus test of how well our product is performing.
It’s also the only way (that I know of) to recognize that what you’re seeing in the room is truly an elephant, and not something else.
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