There is a high chance that you’ve read our previous posts and already know what affiliate marketing is. However, there is as much chance that you’re a newcomer to our website who’s hoping to learn something new without having to scroll all the way back to our introductory blogposts. Well, rookie, this article is mainly for you. That’s not to say that a regular visitor can’t benefit from a refresher about the basic principles of affiliate marketing.
So, without further ado, let’s get into it.
What is affiliate marketing?
In simple words, affiliate marketing is when a business promotes its product or service on another business’ platform. In return for this promotion or sale, the host business earns a commission.
Patt Flynn, an affiliate marketing guru, defines affiliate marketing in the following way:
Affiliate marketing is the process of earning a commission by promoting other people’s (or company’s) products.
Reports are claiming that the global affiliate marketing industry is worth $6.5 billion across various sectors such as travel, retail, real estate, education, finance, forex, gaming, and many more.
Affiliate marketing consists of three key participants; the merchant, the publisher, and the customer.
The merchant is also known as the seller, the vendor, the advertiser, or the retailer. It is the person or business whose products or services need to be promoted.
The publisher is also known as the affiliate. The publisher is the person, business, or which will promote the merchant’s services.
The consumer is the most important participant. Without the consumer, neither the merchant nor the publisher would be making money.
How do these three participants work together?
Generally, the idea behind marketing is that it accumulates prospective customers and then converts them into paying customers. Affiliate marketing is no exception.
Let’s say that you are the merchant and you have a product but no platform or not enough traffic on your platform. As a result, you look for an affiliate to help you. An affiliate is a person or a company that has a popular platform. The platform can be a website, a blog, a podcast, a social media page, or anything else. All that matters is that the platform has a cult following. The affiliate places your advert/widget/link/ etc. on their platform and directs its followers to visit your site and/or purchase your product. Every time a click or a sale takes place, the affiliate charges you a commission fee.
Clear-cut and simple. All that’s necessary is a good product and an affiliate who has an extensive loyal audience.
Why is affiliate marketing beneficial?
From the merchant’s perspective, affiliate marketing is an excellent tool because you only have to spend money after making a sale or gaining a new prospective customer. This is especially important for new and/or small business which have limited resources.
From the publisher’s perspective, they get a cut from helping you make a sale without having to do much. After all, it is you (the merchant) who must create the product, the advertising content, and so on. The affiliate works hard on building its following by posting good and relevant content.
It’s a win-win situation.
Is this a new trend?
Today, marketing is everywhere. Literally, in every single place you look, you will find at least a dollop of marketing. It will probably surprise you that the model for affiliate marketing as we know it today began only 4 years after the invention of the World Wide Web.
Affiliate marketing began in the ‘90s in the US; however, it wasn’t until 1996, when Amazon launched its associate program, that it became widely known. Amazon’s model included a banner or a direct link to Amazon’s website and served as a model for all subsequent affiliate marketing programs.
What are the payment methods?
Primarily, affiliate marketing is based on a structure called revenue sharing. Revenue sharing is suitable for affiliates who have tier-one traffic. The idea behind this structure is that the affiliate’s commission grows with every action that the referrals take.
However, there are multiple payment models in affiliate marketing, and the affiliate can sometimes get a kickback even if the referral doesn’t purchase anything. Quantifying how much the affiliate had to do with the sales depends on the agreement that was made.
Here are some examples:
- Pay-per-Click (PPC) involves a pay-out when the affiliate successfully redirects people to the merchant’s site and causes an increase in the merchant’s web traffic.
- Pay-per-Lead (PPL) requires the referrals to fill in a registration form or sign up for something. As soon as it is authenticated and verified, the payment is made.
- Pay-per-Sale (PPS) is the most common structure, and it involves paying the affiliate when a sale takes place as a result of the affiliate’s strategies.
Affiliate marketing is an excellent tool to generate income for the affiliates and an equally useful method for merchants to advertise their products and services. You can read find more in-depth materials here.
In this COVID-19 era, affiliate marketing has become ever more prominent because most people see the ads on their digital screens rather than billboards. It is a multi-billion-dollar industry that has yet to reach its full potential and therefore continues to stretch and grow with new and innovative ideas.