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Affiliate Marketing Basics

by NicoleD, Former Moderator

  • Created: June 4, 2010, 11:51 am
  • Updated: December 22, 2011, 12:55 pm
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14 comments

One of the more popular advertising techniques for online retailers is affiliate marketing. Affiliate marketing is a commission-based referral partnership, typically between a website owner and an online retailer who wants to promote their product.

In most affiliate agreements, a website owner puts links or ads on their site that promotes the retaile;s product to the visitors of the site, ideally potential customers for the retailer. In exchange for the promotion, the retailer agrees to share a percentage of the profit with the website owner (or affiliate), if the transaction generates a lead.

Commission Methods

Depending on the agreement, affiliates can earn commission each time a visitor clicks the ad, registers for more information, or completes an online purchase, for example. Commissions can vary depending on the nature of the transaction. Retailers generally pay a higher commission for transactions that result in sales as opposed to a page views or completed surveys. Commissions are usually paid as either a percentage of the sale or as flat fixed price.

Types of Affiliates

There's no black-and-white definition of what constitutes an affiliate site, but common examples are:

  • Coupon or discount websites
  • Shopping directories
  • Search affiliates
  • Personal blogs
  • Niche product/services sites

 

Benefits for Retailers

Retailers that are not web savvy or do-t have a lot of time to invest in online promotions can outsource their promotion activity to take advantage of expanded audiences that affiliate marketing offers.

Affiliate marketing is also popular among retailers with tight advertising budgets because you can tailor your affiliate agreement to only pay for the promotions that result in sales.

Benefits for Affiliates

Website owners who are looking to earn some extra income find that affiliate marketing offers them the opportunity to make money online without a lot of extra effort, since their websites are already up and running. Affiliates who earn their primary income off marketing tend to spend much more time both researching new partnership opportunities and making their sites more desirable to potential advertisers' usually by increasing site traffic and building a good online reputation.

Common Concerns

While it sounds easy, affiliate marketing is not a guaranteed success for retailers or affiliates. As affiliate marketing has become more popular over the last few years, websites have become oversaturated with ads. Successful affiliate and retailer relationships are more likely to be found in relevant partnerships where visitors trust both the product and site where they view the ads.

Affiliate marketing is a fairly new practice, so industry standards and regulations are not fully established. Recently though, the Federal Trade Commission enacted new rules for affiliates regarding solicitations obtained through transactions, credit reports, or third-party sources.

Currently, certifications and training resources are mostly offered on personal or commercial websites specializing in e-commerce activities.

Related Resources

  • Making Money Online' When Are You a Business?
    Affiliate marketing is comparable to being a commissioned sales person, and as a result the money paid to you must be reported on your taxes as income.
  • Google Ad Words Explained
    Explains pay-per-click advertising based on the Google AdWords model' including how it works, ways for determining if it's right for your business, and lessons learned from other small business owners.
  • Small Business Guide to Online Advertising Law
    If you plan to advertise online -- whether you're buying ads on search engines or direct marketing through e-mail -- you'll need to understand some basic rules.
Tags: Community Blogs, Business Law Advisor

Comments

boris559 | Window Shopper | 8/16/2012 - 10:58 pm

I found this article interesting and gave me info I did
not know about the affiliate system
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RbaMoney | Performer | 1/18/2011 - 8:26 am

Hi Nicole, Good article introducing Affiliate Marketing. The main benefit to the business or retailer offering an affiliate program is that they will get sales through affiliates which they would never have got before. For these additional sales they are willing to pay a commission to the affiliates. The commissions can range from anywhere between 5%- 70% depending on products and industry. Generally speaking there is less commission as a percentage in physical products and more for informational products. To find an affiliate program to join just search on Google with the words 'Affiliate Program' after the product name. If you have further questions I am happy to be of help cheers Rob $500 a Day from profit instruments ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.

margotuul | Window Shopper | 12/3/2010 - 4:27 am

Hi Nicole. Thanks for sharing this with other. I'm sure there's many new marketers out there, who don't know how affiliate marketing works exactly. You blog post will clear things up for sure

Relevant | Performer | 11/5/2010 - 3:39 pm

I have been monetizing websites with affiliate promotions for a few years. Those thinking of getting into it need to keep a few things in mind.   Cookie Placements. Most affiliates use this method to track sales. Some only place a 1 day cookie and some have 30 days and more. Be sure and check the length of this before committing to placements. According to Google Webmaster Guidelines and most ad networks state you must have a privacy policy that says you place these cookies on a users browser.   Not all affiliate programs will pay you. I know this sounds unbelievable, but never the less its true. Some programs have so many hoops to jump through to make a valid sale, they hope you eventually give up. Make sure you read agreements thoroughly. If a network wants sales from 3 different countries and 3 different types of payments before you get paid you may want to pass.   Affiliates come and go. Try to remember affiliates and affiliate networks come and go everyday. It is unwise to depend on any one program. A couple ways to protect yourself are to have your sites set up to change easily and be flexible. The only thing that doesn't change about affiliate marketing is constant change.   Find programs run by trusted authorities and do lots of research about who you are dealing with.   Hope that helps some
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wpbrennan | Window Shopper | 9/1/2010 - 5:33 pm

When I was in a career in corporate America, we were always looking to expand our reach with low cost, performance-based sales people.  I believe affiliate marketers certainly fit the performance-based model.   I recently sold my consulting biz to pursue an online biz.  I have been researching the web for useful marketing tools that I could sell as an affiliate and provide good value to small business who couldn't afford marketing support otherwise,   Thx Will Brennan

imrichwith | Window Shopper | 7/28/2010 - 5:08 am

I've done pretty well with affiliate marketing. I'd say the best thing about it is all of your work is behind the scenes. You're just a middle man - find people and collect commission. The downside is, most of the time there is no residual income. ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.

EricHendrix | Performer | 7/26/2010 - 7:19 am

Nicole, I like your articles and find them very informative. A little something I'd like to add is when getting started in Affiliate marketing you may wish to add the use of a squeeze page. This allows you to gather additional information about those who are interested in what you are promoting and save that information into an autoresponder. Not going into a long explination as to what an autoresponder is, let's leave it to say it allows you to build your own list and not someone elses to promote other products to. More information can be found at online-marketing.net

fasteasysuccess | Window Shopper | 7/26/2010 - 6:03 am

Great info and I think one important thing that people miss and I tell my clients in the >seo firm side of my business and the marketing side that they should also focus on the ideal customer or client versus broad. By targeting online and or offline you will be able to spend more time with qualified leads or prospects versus shifting through and dealing with non interested parties. ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.

Chunkypaul | Performer | 7/21/2010 - 4:51 am

Affiliate Marketing is great because as an affiliate you are simply the sales person. You never worry about shipping products or returns. It's only your job to create good content for the web that will lead to customers. By creating good content, you are also making the search engines a better place because you are offering what they want, unique information. Of course ther are always people who break the rules and kill it for everyone else. Ionic Foot Bath ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.
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