Should You Focus On Conversion Rates Or Payouts?
The offer that will generate the most revenue may not simply be the one with the highest payout.
The question that is, has been, and probably will be on the minds of affiliates for years to come is “how high is the payout?” The higher the payout, the higher the profits seems logical enough. So, what’s all the fuss about? Well, let’s discuss the importance of conversion rates when choosing which offers to run and compare it to the importance of payout.
We can start with some definitions.
The conversion rate is the percentage of users who take a desired action. A typical example of conversion rate is the percentage of website visitors who buy something on the site. So, for example, if 100 people visit a site, and 5 of those people buy the product being sold on that site, the site has a 5% conversion rate.
Payout is simply what affiliates get paid. Using the above example, an affiliate might get paid $5 for every person they get to purchase a product. This example would then result in a $25 profit (5 People x $5 Payout) for the affiliate.
So, which is more important, conversion rate or payout? Affiliates tend to gravitate towards the offers with the highest payout because they are not looking at analytics (where they can find conversion rates). This may come as surprise to many, but conversion rate is more important than payout. We can do some math problems to prove this idea.
If you have one advertiser that will give you $5000 for every offer that converts, but the offer never converts, are you ever going to make that $5000? No, you will just be wasting time, running an offer that is not making you any money. On the other hand, if you have an advertiser that only offers a $5 payout, but has a 30% conversion rate, you will make $150 for every 100 people you send the offer to. That may not sound like a lot, but it adds up quickly. If you send the offer to 20,000 people, you would make $30,000. This is way more than you would ever make by sending out at $5000 offer that doesn’t convert.
Let’s do one more example using lower numbers with a smaller range. Since it may be difficult to tell which of the below offers is better just by looking at them, we will do some calculations to determine which offer is the better choice.
- Payout: $10
- Conversion rate: 5%
- Payout: $5
- Conversion rate: 15%
Let’s say that you mail to 10,000 people with both of these offers. Offer #1 looks promising with a $10 payout. After it’s all said and done, you would have generated 500 leads at $10 a piece for a total of $5,000. Not bad at all! Now let’s look at Offer #2. On Offer #2 you will generate 1,500 leads. At $5 a piece, those leads will earn you $7,500! That is $2,500 extra dollars in your pocket, a 50% increase over what you would have earned with Offer #1.
Now you can see how undeniably important it is for affiliates to be open to testing offers with lower payouts, and higher conversion rates.
Madrivo has some of the highest converting, proven offers that can generate significant revenues for affiliates and advertisers. We test all of our offers before making them available to our affiliates. We also share analytics on the offers so that affiliates have a clear picture of the offers they have the opportunity to run.