AFFILIATE MARKETING EXPLAINED
This is an article I wrote a few years back when I first started doing affiliate marketing. I read through many sourcesnamely Wikipedia, internet marketing, home business blogs, article marketing reviews and searches in directories, all with the assistance of the big Google
Affiliate Marketing is a marketing practice in which a business operator and merchant pays a certain amount of fee or commission to a publisher or affiliate for each visitor or customer brought about by the affiliate’s own marketing efforts. This is a partnership where you as the publisher or website owner promotes another Company or Merchant’s products on your website for a fee or commission. Commision rates vary with each merchant or product and can be as high as up to 80% of the selling price of the product.
In a conventional system we have the producer manufacturer, then we have the trader wholeseller and finally down the chain the retailers or shop operator. This is basically an offline marketing program where both parties meet to complete their transaction. A manufacturer or merchant makes a product and sells it to the wholeseller or trader who buys the product in bulk, stores it, repacks, labels and later redistribute it to stockist, shop operator or the retailer to sell the product to the customer whether having a shop or not. Affiliates can be online or offline depending on your products.
Affiliate Marketing is a new program in marketing which dates back to the 90s. The concept of paying commission or sharing of the profits for refering a business to another however predates ‘affiliate marketing’ or the internet marketing. With the coming of the Internet, the usage of the World Wide Web for data communications and information technology a new frontier in Marketing was developed. This internet program expanded into many areas of usage like e-commerce with advertising, marketing and remote businesses now forming the bulk. Only in the last 10 years we saw increase usage of such services or marketing traffic in gambling, entertainment, adult, file sharing sites and mobile communications like social networking.
The e-commerce website, in the beginning viewed as a marketing toy in the early days of the Internet was later integrated into a part of the overall business plan. It grew and grew into a bigger business entity than offline business, creating vast opportunities both for merchants and publishers. Affiliates worldwide now earned rewards and commissions from a variety of sources in retail, personal finance, gaming and gambling, travel, services, telecom, education, publishing, etc. We now have free advertising services and many other forms of paid sales or lead generation upto programs taking advantage of others like contextual advertising. The negative aspect of this popularity is, it created a new generation of what is now called spam, flooding genuine businesses with unnecesary advertising.
Its popularity as an e-commerce website tool increased tremendously as almost every business can now sell their products to any part of the world. This tool, short of walking to your neighbourly store, selecting and paying for your goods became so popular that it is generating sales into the $billions and creating may affiliates and super affiliates in the process.
AFFILIATE MARKETING OR ADVERTISING
Affiliate Marketing has since grown quickly since its inception. I would safely say affiliate marketing is a form of advertising but done through affiliates who used their websites to promote a third party product to earn money besides marketing their own goods. In addition to earning monetary commissions, we now have rewards sites, where users are rewarded with cash or gifts, for the completion of an offer, and the referral of others to the site. The industry has four core players namely the merchant or producer (also known as ‘retailer’ or ‘brand’), the network – ISP, the publisher or seller (also known as ‘the affiliate’), and the customer buyer. The market has grown in complexity to warrant a secondary tier of players, including affiliate management agencies, super-affiliates, specialized third party vendors, traffic generators, SEOs, Domain names, Hosting companies, data collection, management and email marketing companies.
Affiliate marketing overlaps with other Internet marketing methods to some degree, because affiliates also uses regular advertising methods like Google, Yahoo, Bing and now Facebook for social marketing. These methods includes search engine optimization – SEO, paid search engine marketing, e-mail marketing, and in some way the traditional display advertising. On the other hand, affiliates sometimes use less orthodox techniques, such as publishing reviews of products or services offered by a partner or merchant. Affiliates now extend their scope by offering opinions and reviews on the product which they are promoting, writing articles, creating contents and these methods would definitely garner a definite advantage compared to just promoting the product. Buyers needs convincing to make their purchase and when you advertise that you have used the product it is good advertising coming from the enduser.
As explained in my earlier post Affiliate marketing uses your website to drive traffic to another with the objective of completing a sale when the viewer buyer makes a purchase from the original merchant through your link. When the sale is completed you get a percentage of the sale in the form of commission because of your advertisement.
AM is a form of online marketing, where the network of Affiliates operating in the internet covers a far more wider territory compared to normal advertisers who are mostly territorial (ie. language usage). While search engines, e-mail, and website syndication capture much of the attention of online retailers, affiliate marketing carries a much lower profile. Still, affiliates with their might online continues to play a significant role in online merchants marketing strategies. Back then we have Amazon.com calling them – associates for putting up their text links or banners on their site, where, when the clicks would lead them back to the Amazon main site. The Amazon program of paying commisions to their associates through the internet link referral system for their products was granted a patent back then, were the first to be widely known and was subsequently used as a model for all other internet companies in their affiliate programs.
Further changes now with Web 2.0 and newer services in the media, social networks and mobile broadband communication sectors has allowed merchants to forge a closer contact between providers and users for the development of product marketing with the inputs of their affiliates.
PRODUCTS IN AFFILIATE MARKETING
When you sign up for an affiliate account with a Merchant you do not have a product, as an affiliate, your job is only to promote whatever products the merchant has and you have to choose the product that you want to sell, particularly for a niche product that your website represents. You must choose a product that is in demand and fits your dormain name or website to increase your presence in the search engine environment. There are several keyword search programs to find your name, Google has its own and many are also free to use. By this way you rely on the keywords from your website that is relevant to the product for promoting in the internet thereby assisting search engines – Search Engine Optimised in leading customers to your website. Driving searches is like getting traffic to website. Your keyword is advertising. Bear in mind keywords are like fashion crazes and may loose its lusture after some time when there is no more demand.
In promoting affiliate products you don’t have to find, create, purchase, store or deliver the product when a sale is transacted through your website. You need only to find a product that your website represents targetted to the market and after that find the traffic
or drive internet search buyers to come to your site by clicking the links provided. Your job would include advertising and convincing the buyers to check out your goods. The final part of delivery and payment collection will be completed by the merchant. As
an affiliate you will be given an ID or affiliate ID and URL or code where the transaction will be tracked and recorded each time somebody clicks on your link and completes the sale. You will get your commission once the sale comes trhough, normally payable on a monthly basis unless you leave specific instructions on how you want to be paid.
Affiliate Marketing includes the usage of banner links (code) where you place in your website and published especially in Word Press. Other types of link can be in text only, some only pictures or both text and pictures, depending how you would like to advertise and promote. Pictures normally would be more attractive and off late we see sites with videos (youtube) or embebbed videos or flash. Another way is you can have a writeup page with the appropriate links inserted so buyers reads about the product and make their decision later. Affiliates don’t need to have products but it would be better if you can have your own product to sell if you want to expand your business. This will increase your “presence” and an upgrade to be a merchant. It can be an internet product like eBook, Software program, Application, Articles publishing , eZine, guides and or services. The buyer only downloads it from your server like Clickbank.net after making the appropriate payment. Clickbank is a 24/7 service where you store your e-products and to help you deliver the product and also collects the money for you, well for a small fee for the account. As your business grow you will need dedicated hosting instead of a normal website and you will need 24/7 service with your own servers. Well, if you also operate an online store then maybe you will also have an outlet or office to keep your products or goods yourself, do your own collection and also deliver the product to your customer. This would be like expanding your business and affiliate marketing maybe one of your many businesses.
GETTING PAID KNOWHOW WITH AFFILIATE MARKETING
More than eighty percent of affiliate programs today use revenue sharing or pay per sale (PPS) as a compensation method. The balance of the other programs uses cost per action (CPA), PPC, PPA or other methods such as cost per click (CPC) or cost per mille (CPM).
The Internet market is getting matured now and less than one percent of traditional affiliate marketing programs today use cost per click and cost per mille. However, these compensation methods are still used heavily in display advertising and paid searches.
Cost per mille requires only that the publisher to make the advertising available on his website and display it to his visitors in order to receive a commission. Pay per click requires one additional step in the conversion process to generate revenue for the publisher: A visitor must not only be made aware of the advertisement, but must also click on the advertisement to visit the advertiser’s website.
Usage of cost per click is now slowly reduced due to click fraud issues and has recently created similar click fraud issues in modern search engines. Google has taken this threat seriously with implementation of certain rules and even banning sites from their search engines because of spammers and frauds.
The actual process of Affiliate marketing would encompass you promoting a product for a merchant and getting paid a commission when there is a sale and transaction completed. Merchants can use Clickbank and payments will be made through Paypal, Credit cards or Debitcards. For e-products, once the payment transaction is approved and completed by your Bank you will be redirected to a site link where you can download the product. The Affiliate will then be paid by Clickbank. The payment schedule will normally be on a monthly basis and the minimum payment amounts is set based on your preference at the billing/payment settings page with Clickbank. (If you use Clickbank). There are also many other providers but Clickbank is still the best as they have more than 70,000 products available online.
We also have another type of affiliate program. This is a contextual advertising program. Such programs are not considered in the statistics due to diminished use of cost per click, as it is uncertain if contextual advertising can be considered affiliate marketing.
While these models have diminished in matured e-commerce and online advertising markets they are still prevalent in some developing industries. China is one example where Affiliate Marketing does not overtly resemble the same model in the West. With many affiliates being paid a flat “Cost Per Day” with some networks offering simple Cost Per Click or CPM types of payment.
YOUR MARKETING PERFORMANCE
Nowadays publishers are not concerned about a visitor being a member of the audience that the advertiser tries to attract and is able to convert into a buyer. In CPC advertising, when a viewer CLICKs on the advertisement, the publisher will earn his commission irrespective of whether the sale is successfully concluded or not. In this sort of marketing condition it leaves the greater, in case of cost per mille, the full risk and loss (if the visitor can not be converted) to the advertiser. Note that Publishers are affiliates who put up ads in their website.
However in Cost per action/sale methods it requires that referred visitors must do more than visit the advertiser’s website before the affiliate receives commission. The advertiser must convert that visitor first. It is in the best interest for the affiliate to send the most closely targeted traffic to the advertiser as possible to increase the chance of a conversion. Here the risk and loss is shared between the affiliate and the advertiser.
In this sort of condition affiliate marketing is also called “performance marketing”, in reference to how in an actual traditional market, where sales employees are typically being compensated. Sales employees are typically paid a commission for each sale they close, and sometimes are paid performance bonus incentives for exceeding their targets. Affiliates are not employed by the advertiser whose products or services they promote, but the compensation models applied to affiliate marketing are very similar to the ones used for staffs in the sales department of the Advertiser, the offline marketing method. Affiliates are not staffs of the advertisers business. They do not have any influence onto the business or product development of the advertiser nor the prospects of converting the prospects to buy the product. Affiliates only drive the prospects to the advertisers website and “hope” his/her efforts are fruitful. The rest of the work belongs to the advertiser’s sales team and they are the actual source who have control and influence as to when and where they sign up the contract hence completing the purchase.
Affiliates do not do much except on how to drive such prospects to the advertiser. They can use various methods. Basically it is traffic generation or building links of people who surf or search the internet for things to buy or need. How we build our links or by generating traffic will be another subject which requires much discussion and I will be writing it further in another article later.
Thanks for reading