When working as an affiliate marketer, it’s easy to get super invested in doing whatever it takes to get clicks to your affiliate offers. The goal of your affiliate marketing efforts is to get paid well, so why wouldn’t you go above and beyond to get that cash?
If you are counting on an affiliate program for income, you’ll want to slow down and make sure you’re aware of how much you’re investing in the process.
Marketing efforts and ROI
Much like any other business enterprise, the goal is to end with a positive Return of Investment (ROI). You need to end up making more than you spend. This can be challenging to calculate in this situation, since many eventual customers take a circuitous and indirect path from a marketer’s outreach to making that final purchase.
By calculating your “Earnings Per Click”, it’s helpful for an affiliate marketer understand the value of their efforts. Let’s examine the concept further, so you can determine your own EPC, and consider ways to reapproach a campaign that might not be creating the best ROI for you.
Meaning of EPC In Affiliate Marketing
Eearning Per Click, or EPC, is the amount of money you earn for your click-throughs or the activity you achieve on your affiliate links.
EPC is actually calculated as an average value for the clicks you bring to the affiliate offer, and the calculation of this parameter is a result of your earnings per 100 clicks, typically within a 7 day and 30 day rolling period.
Let’s say you’re an affiliate marketer. One of the businesses you promote has paid you $240.00 in commission, and reported 1,000 clicks for the affiliate link you endorsed in the past 30 days.
Some prefer to look at this as:
Commission (divided by) Total Clicks x 100EPC Formula
Others prefer the equation Total Clicks (divided by) 100, then total commission divided by that figure.
Either way, you’re going to get the same total.
$240.00/1000 is 0.24 x 100 is 24EPC Formula Example
Or: 1000/100 is 10 $240.00 divided by 10 is 24
You are earning $24 per 100 clicks for this business. Since this is a nice round number, we can break it down even further. You are making $0.24 per individual click.
How Does EPC Work?
So other than being nice to know, what does this tell both the business and the affiliate marketer?
For a Merchant
As an affiliate program owner (merchant), you want to know how your investment in a variety of affiliate marketers might be panning out for you, financially.
By calculating EPC, you can compare marketers within your program to each other to see how each one’s efforts are resulting (or not resulting) in clicks, leads, and conversions. While it can be time consuming to track down every single click, this can provide you with a broad picture of where your advertising dollars are going, and what type of result you’re receiving.
In turn, the merchant can determine where the most success is had, conduct split testing on their own end with the assistance of their affiliates, and review how different ad products have been performing against historical data. All of this information can help a business owner determine when things are working well, or when a change might be due.
Business owners can also use this metric to attract new affiliates to their program. By combining the figures of each of their marketers, the EPC equation can show the average of all affiliate earnings across their program.
For an Affiliate Marketer
For affiliate marketers, the EPC can be extremely helpful when planning campaigns. As a marketer, you will be aware of how much you’re spending on each and all of your efforts. Obviously, the goal is to make sure you’re always making more than you’re spending.
If you calculate EPC and find out that you’ve got a total EPC for a client of 14 dollars, but you just dropped $400 on a campaign, you might want to re-evaluate your efforts and redesign your ads strategy.
Additionally, some affiliate programs offer different levels of commission. For the purpose of easy math, let’s say you make $1 per click, and $2 per click that results in signing up for a free trial. Initially, you might be tempted to go after the higher payout, but bear in mind: how much of an investment are you making for those clicks, and how many $2 clicks are you getting?
You might be able to get 500 of the $1 clicks by sharing a link on your blog (easy, low investment), but need to buy ad space to get just 150 of the $2 clicks. Is it worth it? Only calculating the EPC can help you tell for sure.
What’s the Bottom Line?
Knowing the EPC calculation is important for all sides of an affiliate marketing program. Neither a business owner nor an affiliate want to spend more than they make – that’s not how profit is made!
Therefore, it is incredibly useful to have data that helps both the owner and the marketer compare and contrast how much they’re bringing in, versus how much they’re spending.
As a Merchant
In both cases, the owner and marketer might want to rethink their strategies if they’re spending more than they’re making, or making too close a margin to feel profitable. A business owner might try updating content to be more meaningful to audience members, in order to establish the overall value of their product or services.
They can also find parts of the process that are “broken” from links that don’t work, to affiliates that aren’t getting much traction with their efforts or are receiving fewer clicks than in the past.
As an Affiliate Marketer
On the flip side, a marketer can start brainstorming new and interesting ways to spread the word about the business they’re promoting. They can conduct A/B testing with different types of ad content or ad sites. They can calculate what commission level is best performing based on their efforts.
It can be difficult to determine exactly where your advertising dollars are going, since there are so many moving pieces in gaining leads with affiliate programs.
Calculating Earnings Per Click is one step both business owners and affiliates can take to gain perspective on their time, investments, and overall income.