As a brand marketer, deciding where to allocate your marketing budget is no small task - especially when it comes to affiliate marketing.

With its incrementality often under scrutiny, affiliate marketing can feel like a gamble. Add the cost of hiring an affiliate agency to the mix, and the stakes get even higher. So, how do you determine if partnering with an affiliate agency is the right move to maximize this channel’s potential and deliver real value for your business?

There are three key criteria every brand should evaluate when assessing the value of affiliate marketing and the agencies that support it:

• Affiliate Marketing Incrementality
• Channel ROI
• ROI of an Affiliate Agency

As you can imagine, we have this conversation quite often with prospective clients. So, in this post we’ll reveal how to calculate these factors to help you answer whether investing in an agency’s affiliate marketing services is worth their costs.

How do you calculate the incrementality of affiliate marketing?

Let’s start with the affiliate channel. I wrote a separate post about how to measure affiliate’s incrementality; here are the CliffsNotes:

1. Use foundational measurement principles

Affiliate incrementality can’t be measured in isolation. You must evaluate how affiliates influence all conversions across channels, control for seasonality, and separate new and repeat customer acquisition. Without these guardrails, results will be misleading or outright inaccurate.

2. Reference a range of data sources

Effective incrementality measurement relies on multiple data sources: affiliate platforms for publisher paths, web analytics for assisted conversions, and third-party attribution tools for modeled lift. Using both platform and independent data enables cross-verification and reduces bias in conclusions.

3. Employ custom testing methods and analytical rigor

Incrementality requires customized testing, such as geo holdouts, audience splits, or suppression tests, to compare performance against control groups. Advanced approaches may apply weighting models or diminishing-returns curves. Whatever your approach, make sure it’s ongoing and iterative.

4. Use results to inform optimization

Incrementality findings typically drive publisher-level commission adjustments and channel-level budget reallocation. Underperforming publishers shouldn’t be cut immediately; test structural or commission changes first. At the channel level, tests often reveal bottom-funnel tactics are less incremental than last-click metrics suggest, so consider a strategy for determining how to reallocate funds from the bottom of the funnel.

5. Avoid common misconceptions

Low incrementality doesn’t mean a publisher lacks value; some assist conversions without driving net-new demand. Remember: ROAS is not incrementality, especially for last-click tactics. Keep in mind too, that incrementality isn’t binary. Publishers and channels exist on a spectrum that shifts over time.

How do you calculate the ROI of affiliate marketing?

There are a few ways we see our brand partners calculating ROI. Some consider just campaign revenue against commissions; some include their affiliate platform costs along with the commissions; and others include all costs – commissions, platform fees, and agency fees. Obviously, these will yield a decreasing ROI as you add more costs to the denominator of the ROI calculation, but it’s up to our partners to decide the best formula for ROI.

But when our brands are looking for reliable answers to questions surrounding ROI, we like to compare their affiliate channel performance to other paid marketing channels using the Advertising reporting functionality in Google Analytics. The “All Channels” Advertising report will show attributed revenue for affiliate alongside paid search, display, paid social, and any other paid channels being tracked, using GA’s data-driven attribution model (the most advanced model Google provides to arrive at accurate shared attribution).

Your reporting data won’t include affiliate campaign costs without taking the steps to integrate affiliate commissions into GA, but once you export this report you can drop in the commissions, as well as any other costs you want included in the ROI calculation, for the affiliate marketing channel.

It is interesting to note that almost every time we calculate return this way, affiliate has the top ROI of all paid channels, which isn’t surprising given the safeguards the affiliate model provides against a poor ROI.

How do you calculate the ROI of affiliate marketing agencies?

Calculating the ROI of an affiliate marketing agency involves more than just comparing performance before and after they take the reins of your affiliate campaigns. One key consideration is the cost savings from not having to hire in-house specialists - especially when factoring in whether those internal salaries are accounted for in your paid channel’s ROI.

Another critical factor is the agency’s expertise in evaluating affiliate value. While any marketer managing a specific channel will naturally want to present their efforts in the best light, the difference between hiring an in-house affiliate marketing team versus a seasoned external partner (like DMi Partners, for example) lies in the depth and breadth of experience.

With over 20 years in managing affiliate programs for hundreds of brands, we’ve seen it all. No matter the data sources at play, an experienced affiliate marketing agency will know how to piece together the right information to deliver your brand the clearest, most accurate answers to questions about incremental revenue and return on investment.

Working with us, clients gain access to account management expertise, an extensive publisher development team, our affiliate senior leadership, a full creative team, comprehensive analytics tools, and more. With this level of support, you can confidently get data-backed answers to your toughest questions and achieve greater performance at scale to meet your affiliate marketing goals.

We believe these questions are a great starting point for determining whether investing in an affiliate marketing agency is worthwhile for your brand. But if you have any additional questions or would like to learn more about what an experienced agency can offer your business, drop us a line at info@dmipartners.com to get the conversation started with no obligation. We love sharing what we know, and we’re very good at answering questions with straight talk.