Affiliate marketing refers to the marketing model of companies paying others to sell for them. Stated another way, if you sell a product, and I refer buyers to you, then you would pay me a commission for those buyers.
This works out good for you, since you only pay me if a sale occurs.
This works out good for me because I don’t need to develop the product, store the product, ship the product, handle customer care, nor do all the other things that are associated with selling products.
If I do a good job for you, you may receive a considerable amount of sales from me. If you have a number of affiliates like myself, then you could have a very good business established.
However, if someone else sells another product than yours, and if that company provides a higher commission, then many of your affiliates may direct their promotional efforts towards the other company to benefit from the higher commission.
Or, if another company pays the same commission as you, but does a better job of servicing their customers, resulting in lower dissatisfaction among customer (and fewer returns), affiliates will move their promotional efforts to that other company. (Affiliates may lose commissions when a customer requests a refund).
Since this is all done online, another way to think of this is by considering the idea of sales websites pushing customers to other product websites.
It’s big business online.
In addition to you (the merchant or publisher) and myself (the affiliate), there is also an affiliate network that facilitates a connection between each of us, as well as the customers.
Affiliate networks provide value to merchants and brands (you) by helping to develop affiliate programs, advertisements and payout pricing.
After an affiliate network has worked out a suitable arrangement with you (the merchant or publisher), they turn around and provide affiliates like myself, with your offers we can promote. Affiliate networks also provide us with support, and tracking tools. Additionally, they handle the payments between you and I.
Affiliates, such as myself, and others who would be driving customers to your business (and other businesses) are usually able to join affiliate networks for free. However, more often than not, you as a merchant, will typically pay a fee. Affiliate networks will also charge you a percentage of the commissions paid to your affiliates.
A Few Affiliate Networks:
• CommissionJunction.com (CJ.com)
Affiliate Networks That Specialize in Electronic Products:
Think of these last two networks as providers of ebooks (electronic products) on any subject you can imagine.
By the way, not all affiliate programs require an actual purchase to pay out a commission. Other common affiliate payouts can be based upon:
• Pay Per Impression (an ad, or page view)
• Pay Per Click
• Pay Per Lead/Call
• As well as the Pay Per Sale model featured in this article
In each of these cases the merchant (yourself) is determining what is in their best interests.
Paying for a sale would be the most common affiliate relationship.
However, some products/services may be too complex to expect an affiliate to generate a completed sale, so some type of lead generation opportunity may be in your best interests. Or, simply paying to display advertisements on other websites (Pay Per Impression) may best serve your marketing needs.