Affiliate Marketing – What Is It & Why Should I Care?

Affiliate Marketing – What Is It & Why Should I Care?

Affiliate Marketing Definition

Affiliate marketing involves a relationship between two actors – 1) the Merchant (also known as the advertiser, or partner), and 2) the Affiliate (also known as the publisher). If we think about the Affiliate Program as a whole, we must take account of a third entity, the Customer, as well.

The Merchant offers the product for sale, and the Affiliate acts to sell that product for the merchant and/or refer visitors to the merchant’s website. In return, the Merchant agrees to pay the Affiliate a commission for sales and/or contracted results.

Commission Arrangements

Payment arrangements are typically performance-based (which is a form of risk mitigation by the Merchant) and arrangements are normally structured as Pay Per Click (PPC), Pay Per Sale (PPS) and Pay Per Lead (PPL) – or some blend.

Affiliate Marketing Classes

If we look at affiliate marketing based on depth, we have three separate groupings: 1) single-tier, 2) two-tier and 3) multi-tier programs.

Single-Tier Affiliate Programs

In Single-Tier Affiliate Marketing, the Affiliates get the commission, only for driving visitors or sales to the merchant’s site. Pay/performance and pay/click are included in this category.

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Two-Tier Affiliate Marketing Program

In Two-tier marketing, the Affiliate gets paid commission for every action performed by the people he’s referred directly, plus he gets additional commission when one of those people he’s personally referred gets paid. Thus, he has a two-tier commission plan and the Affiliate earns a commission both directly and indirectly.

Multi-Tier Affiliate Marketing Program

The multi-tier marketing is very similar to Two-Tier Marketing, but here, the Affiliates get compensated for the sales made by their affiliated affiliates in multiple, unlimited, tiers.

Residual Income Program

In Residual Income Affiliate Marketing, the Affiliate is compensated for every sale that is made by a person referred by him.

In Residual marketing, Affiliates get compensated for every sale that his referral makes at the Merchant’s url. In order for this to work properly, the first time, the person should come from the Affiliate’s pre-defined affiliate link. Then, whenever that person visits the Merchant website (even without using the affiliate link), the Affiliate will get paid for every sale performed by the visitor.

Cookies are what make this strategy work. A “cookie” is stored on the first-time visitor’s computer. This cookie identifies the affiliate id of the Affiliate. Cookies ordinarily expire after 3 months; however, some may persist beyond three months.

Whenever a visitor visits the Merchant website, the visitor’s computer is checked for any previously created cookie. If a cookie is found, the affiliate id is retrieved from it and the Affiliate gets credited for any purchase made by the visitor.

Win-Win-Win

As long as the affiliate marketing relationship is well-planned and well-executed, everyone wins:

The Merchant gets increased visibility and market penetration, attracting customers that would otherwise be outside the Merchant’s market reach.

The Affiliate earns a commission for online sales, without needing to establish a full e-commerce site or having to manage product inventories.

The Customer acquires desirable and useful products that s/he would otherwise not find – at least not easily.

Properly done Affiliate Marketing is a Win-Win-Win situation.

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Author: jolande

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