What is a “good” ROI?
For affiliate X, the ROI was 200% – he is great, but his budget was only $10. As a result, he earned $20. It’s quite possible to buy yourself a coffee, but it doesn’t seem to be enough to pay for a tracker subscription.
Meanwhile, affiliate Y showed “only” 10% ROI, but his budget was $1000, which means his profit was $100. This may already be enough to pay for the tracker, although the profit percentage is lower, and the banner with the green case may look less attractive.
The question arises: what is considered a normal level of ROI for an average, ordinary campaign? At what value of ROI should the campaign turn off? Or, perhaps, it is better to optimize? And how long does it take to wait until the numbers in the tracker become green? Let’s discuss this in this article.
01
What is ROI
ROI (Return on Investment) in the affiliate of traffic is a key indicator that helps to evaluate the profitability of your advertising campaign.
A positive ROI indicates that your campaign brings a profit obtained as a result of targeted action. In this case, income exceeds the cost.
ROI calculation is carried out according to a simple formula: ROI = (profit - costs) / costs * 100%
In the case of a negative ROI, the costs or amount spent on advertising and attracting traffic exceed income, and the campaign is considered unprofitable.
02
What is normal ROI?
The concept of “good” and “normal” ROI depends on the goals, budget, a specific situation, a niche, an offer and strategy, as well as the expectations of a particular affiliate marketer.
Agree, if income from the attracted traffic exceeds the costs, and you will make a profit - this is already good. However, specific numbers will vary.
03
What affects specific numbers
- Niche: competition, the price of click and demand greatly depend on the niche. If the costs are higher, it is more difficult to get a high ROI.
- Geo: Tier 1 or Tier 3, the country and the region to which you target matters. Firstly, because of the difference in the price of the click, secondly, due to payment for the offer for one target action.
- Product or service: for various goods, different demands. What is well sold in the summer may not be popular in the winter. The new iPhone attracts much more than the phone released five years ago, even at a discount.
- Budget: The size of your budget affects what ROI goals you can afford. A larger budget can provide larger income, with relatively low indicators, but also costs more.
- Objectives: The goal can be not only in profit, then the ROI indicator is not critical, but also in attracting new customers, creating a brand or other marketing purposes.
04
When it becomes impractical to calculate ROI
If you are going to count ROI just in order to calculate the ROI. No matter what numbers show the calculation, it will be just numbers, if you do not work with them.
ROI is needed primarily in order to evaluate the effectiveness of its actions in marketing. If the ROI is low (and at first it is in most cases low), then you need to think what you can change; If the ROI is high - rejoice a little and think about exactly and how it happened.
It makes no sense to get hung up on the coefficient. Sometimes affiliates toying with ROI metrics, forgets about all other indicators and goals. Including the pursuit of high ROI, forgetting about the loyalty of the client and the brand. It doesn’t matter if the targeted product is a jar of a “miracle” cream or goods from Aliexpress, but if you are aiming for long -term cooperation with a specific advertiser, it is important to work for the future.
With impulsive decisions after failures. It should be remembered that most affiliates, especially at first, launch a campaign with a negative percentage of investment return. This is normal, but many give up at this stage, although you need to continue to work and improve (optimize) your campaigns and skills.
05
At what level of ROI to close the campaign?
It would be nice to know when the ROI drops to 10%, 2% or any other percentage value. And better the formula that calculates the acceptable ROI, taking into account as many variables as possible. Unfortunately no.
You need to personally decide on how minimal ROI is acceptable to you and in what cases. This is due to the fact that in different verticals and with different offers, the indicator of the "normal" ROI can vary greatly.
It is usually recommended to stop the advertising campaign if its ROI remains lower than the minimum acceptable level that you have determined for yourself.
This suggests that you do not have convincing data (with the exception of long -term campaigns, more below) or strategies to improve the situation.
06
Examples of factors that can be taken into account:
- Seasonality: some offers may have seasonal fluctuations, and it is important to consider this factor. It is strange to count on a high ROI with Christmas tree toys in May, although in November and December it was perfect. Same with other seasonal goods.
- Temporary changes: temporary factors, such as changes in market conditions or external geo and political events, can affect ROI.
- Long -term goals: while in most cases the ROI that drops to zero is a red flag, in a situation with expensive offers that requires high client loyalty, this rule is not always applicable. A person can click 200 times, think, read, see, and only after 2 weeks, or even later decide on the purchase of expensive equipment, or making a deposit, taking a loan, etc
It is important to make a decision on the closure of the campaign based on the analysis of many factors and take into account the context. You need to learn how to set yourself the levels of “maximum” costs and adhere to them, not expecting the situation to change suddenly. This is rather a matter of psychology than technical skills. In the case of a negative ROI recipe, there is only one - analyze the causes of unprofitability and try again.
07
Absence of ROI or zero ROI
When the ROI is positive, this is certainly an occasion for joy, since you have earned profit. However, when the ROI is close to 0%, this means that your income only covers your campaign expenses, and there is no additional profit. In this situation, you have two main options:
The first is optimization, by conducting tests, to try to understand what exactly does not work: maybe the target audience, ineffective creatives or problems with the landing page is wrong?
The second is the closure of the campaign until it goes down. In some cases, it may be better to stop the campaign if you see that optimization does not lead to an increase in the ROI and the budget begins to go into the minus.
It is important to analyze and evaluate whether it is worth investing more resources in the campaign to increase ROI, or is it better to redistribute funds to other advertising campaigns?
08
Conclusion:
Unfortunately, or, perhaps, fortunately, there is no one specific value of the “good” ROI with which you could compare.
It remains obvious that the larger the volume, the lower the ROI, and the income does not suffer from this.
Therefore, probably, you should not look for ideal indicators, since they are individual and depend on many factors. Instead, continue to work in accordance with your strategy and an acceptable level of risk management for you.
And, of course, you should not compare your campaigns with endless "green cases".
