Affiliate Marketing Definition
Affiliate Marketing creates a connection between two parties – 1) the Merchant (sometimes called the advertiser, or partner), and 2) the Affiliate (aka the publisher). If we look at the Affiliate Program as a whole, we must include an additional entity, the Customer, as well.
The Merchant makes available the product for purchase, and the Affiliate works to sell that product for the merchant and/or send traffic back to the merchant’s website. In return, the Merchant pays the Affiliate a commission for sales and/or contracted actions.
Commission Arrangements
Commission plans are generally performance-based (shifts some of the Merchant’s risk to the Affiliate) and arrangements are commonly structured as Pay Per Click (PPC), Pay Per Sale (PPS) and Pay Per Lead (PPL) – or some combination.
Affiliate Marketing Groupings
If we separate affiliate marketing in terms of depth, we have three clear groupings: 1) single-tier, 2) two-tier and 3) multi-tier programs.
Single-Tier Affiliate Programs
In a single-tier affiliate program, the Affiliates get the commission, only for sending visitors or sales to the merchant’s website. Pay/performance and pay/click fall within this category.
Two-Tier Affiliate Marketing
In Two-Tier Affiliate Marketing, the Affiliate gets a commission for every action performed by his direct referrals, plus he gets the commission when one of the people he’s personally referred gets paid. Thus, there are two levels to his commission plan and the Affiliate gets paid both directly and indirectly.
Multi-Tier Affiliate Marketing
The multi-tier marketing is very similar to Two-Tier Marketing, but here, the Affiliates get compensated for the sales made by their downline in multiple, unlimited, layers.
Residual Income Marketing
In Residual Income Marketing, the Affiliate marketer is paid for every sale that is made by any of his referrals.
In Residual marketing, Affiliates get paid for every sale that his referral makes on the Merchant’s url. The only requirement is that on the first time visit, the person should come from the Affiliate’s pre-defined affiliate link. Then, whenever the same person visits the Merchant website (even without using the affiliate link), the Affiliate will get paid for every sale made by the visitor.
Cookies are what make this strategy work. A “cookie” is stored on the first-time visitor’s computer. This cookie stores the affiliate id of the Affiliate. Cookies ordinarily expire after 3 months; however, some may be effective longer.
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
When the affiliate marketing relationship is well-planned and well-executed, everyone wins:
The Merchant gets greater market exposure and market penetration, attracting customers that would otherwise be outside the Merchant’s market reach.
The Affiliate earns a commission for online sales, without the hassles involved with establishing a full e-commerce site or having to manage product inventories.
The Customer obtains desirable and useful products that s/he would otherwise not find – at least not easily.
Good Affiliate Marketing is a Win-Win-Win situation.
If you like "Affiliate Marketing – How Does It Work?,"
please consider linking to this page:
