What Is Affiliate Program?
Affiliate marketing creates a connection between two parties – 1) the Merchant (also known as the advertiser, or partner), and 2) the Affiliate (aka the publisher). If we look at the Affiliate Program in its entirety, we must include another party, 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 website. In return, the Merchant pays the Affiliate a commission for sales and/or agreed upon results.
Commission Arrangements
Payment plans are normally performance-based (which effectively shifts some of the risk from the Merchant to the Affiliate) and arrangements are commonly 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 distinct classifications: 1) single-tier, 2) two-tier and 3) multi-tier programs.
Single-Tier Affiliate Programs
In Single-Tier Affiliate Program, the Affiliates get the commission, only for sending visitors or sales to the merchant’s website. Pay/performance and pay/click fall under this category.
Two-Tier Affiliate Marketing
In Two-Tier Marketing, the Affiliate gets a commission for every action performed by the people he’s referred directly, plus he gets paid the commission when one of the people he’s personally referred gets compensated. Thus, there are two levels to his commission plan and the Affiliate gets paid both directly and indirectly.
Multi-Tier Affiliate Marketing
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, levels.
Residual Income Program
In Residual Income Marketing, the Affiliate marketer is compensated for every sale that is made by a person referred by him.
In this type of marketing, Affiliates get rewarded for every sale that his referral makes on the Merchant’s site. In order for this to work properly, the first time, the visitor must come from the Affiliate’s authorized affiliate link. Then, whenever the same person returns to the Merchant website (even without using the affiliate link), the Affiliate will get paid for every sale performed by the visitor.
Cookies 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 commonly expire after 3 months; however, some may be effective longer.
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 increased visibility and market penetration, locating 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 acquires desireable and useful products that s/he would otherwise not find – at least not easily.
Good affiliate programs are Win-Win-Win situations.
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