Affiliate Programs & Internet Marketing

August 19th, 2009 by posting

Definition of Affiliate Marketing

Affiliate marketing involves a connection between two players – 1) the Merchant (also known as the advertiser, or partner), and 2) the Affiliate (sometimes called the publisher). If we consider the Affiliate Program in its entirety, we must include another entity, the Customer, as well.

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

Payment Arrangements

Payment arrangements are normally performance-based (which effectively shifts some of the risk from the Merchant to the Affiliate) and arrangements are frequently structured as Pay Per Click (PPC), Pay Per Sale (PPS) and Pay Per Lead (PPL) – or some blend.

Affiliate Marketing Classifications

If we look at affiliate marketing in terms of depth, we have three different classes: 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 the visitor’s traffic or sales to the merchant’s website. Pay/performance and pay/click fall under this category.

Two-Tier Affiliate Marketing Program

In Two-tier marketing, the Affiliate gets a 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 the commission. Thus, he has a two-layer commission structure and the Affiliate earns a commission both directly and indirectly.

Multi-Tier Affiliate Program

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

Residual Income Marketing Program

In Residual Income Marketing, the Affiliate is rewarded for every sale that is made by any of his referrals.

In Residual marketing, Affiliates get the commission for every sale that his referral makes on the Merchant’s site. The only requirement is that on the first time visit, the person should come from the Affiliate’s pre-defined affiliate link. Then, whenever that person returns to the Merchant website (even without using the affiliate link), the Affiliate will be paid for every sale completed by the visitor.

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

When a visitor hits the Merchant’s site, his computer is checked to see if there is a 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 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 desireable and useful products that s/he would otherwise not find – at least not easily.

Effective affiliate marketing is a Win-Win-Win situation.

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