Conversion Point vs KPI
All businesses have conversion points and KPIs that help to track the performance metrics related to marketing channels, like affiliate or even SEO. For the purpose of this article, the focus will be on affiliate marketing and the distinction between conversion points and KPIs. However, the idea behind each is the same, no matter which marketing channel is driving the traffic to or from.
What is a Conversion Point?
In affiliate marketing, a conversion point is where an affiliate is credited with a sale. The way a program is “built” will dictate where that conversion happens. On a typical cost per sale campaign, the conversion point is the purchase of a good or service. This is pure performance marketing where an affiliate is commissioned on driving a new customer or sale and an advertiser only pays money when they make money. A sale, however, is not the only conversion point in affiliate marketing and a campaign may have numerous conversion points.
If an advertiser has a long flow and there are numerous stages to acquiring a new customer, the campaign may have multiple conversion points. For example, a business that connects lenders and borrowers may reward an affiliate in different stages of the customer acquisition funnel. Along the funnel, there could be CPI, CPL, CPA, and possibly more.
The Conversion Funnel
Let’s look at the details of the affiliate connecting borrowers to lenders. The first conversion point is getting a potential borrower to download and install an app (CPI – Cost Per Install). This conversion point will have a low payout because there’s no return on investment directly by having the app installed. The second conversion point is the CPL (Cost Per Lead or CPR – Cost Per Registration). In this stage, the user has installed the app and now they must register. Registration could be as simple as name and email, or more complex requiring a social security number or linked bank accounts. The more information needed; the more payout will typically be paid. In this example, the linked bank account is part of the CPR, but it may be separate and an additional conversion point. Lastly, an approved borrower would be the final conversion point and reward an affiliate the largest commission, as this has the most value to the lender.
Conversion Points That Don’t Matter
Why would a program payout on an install if “there’s no return on investment directly by having the app installed?” In the previous example there was a commissioned earned for the installation. There are a few reasons why an advertiser would pay for an install.
Most CPI campaigns payout on an install because the installation has a high likelihood of resulting in a return on investment. Install campaigns for many apps, games, browser extensions, and software lead users directly into the service. If a user downloads a game, they are likely to play it. By playing the game, the user is engaged and will likely be served ads or make in-app purchases. A game developer may determine that for every 100 installs they get a user who spends money in-app and therefore produces a return on the investment paid to an affiliate.
In our example, the user flow is much longer, and the final conversion point is based on an approved loan. If somehow a user didn’t qualify, and the only conversion point was an approved loan, then the affiliate would not be compensated for their efforts and having driven traffic. This may discourage affiliates from promoting a campaign.
When an advertiser looks as creating an affiliate program they must decide where to pay affiliates and how much. Regardless of the payout and conversion point, the advertiser must also determine how to measure success of the program. That measurement is the KPI.
What is a KPI?
KPI, or Key Performance Indicator, is how an advertiser determines the success of a marketing channel, in this case an affiliate marketing program. In SEO, the #1 KPI is search positioning, specifically the #1 position for the most desired keyword. In affiliate marketing, the KPI will vary across all programs.
For a CPS (Cost Per Sale) program, the KPI will be sales. A successful affiliate will drive user who make purchases. This is a low risk program for advertisers since no commission is given unless a sale is made. That commission typically does not exceed the profit. Though, for sales like subscription boxes this is not always the case. Subscription boxes often look at the LTV (Lifetime Value) of a customer in conjunction with the CPA (Cost Per Acquisition in this case).
For a CPI campaign, such as a game install, the KPI might be as simple as a login or as complicated as the user reaching a certain level or clicking on an offer. As previously mentioned, there’s not much value in a user who installs and never uses an app.
Is the KPI always a Conversion Point?
No, not always. There is so much flexibility in affiliate marketing and how campaigns can be set up. So, what’s an example of a KPI that’s not a conversion point? Free trials. An advertiser may offer a payout for users who try their product or service. Ultimately, the advertiser is looking for paying customers and they believe that users who try their product will purchase at the end of the trial. Although they payout on new users signing up for a free trial, they monitor performance based on how many convert to paid users.
Conversion Point vs KPI, What Matters Most?
Monitoring performance is key to success in business. Conversion points matter most to affiliates, since that’s how they get paid. However, KPIs matter most to the advertiser, since that’s how they stay profitable. There’s can be distinct difference between conversion points and KPIs, or they can overlap and be one-and-the-same.