How Does Affiliate Marketing Work?

how affiliate marketing works
Most people have heard of the term ‘affiliate marketing’ but few are actually sure how it works.

It is easy to end up with a mixed or confused understanding of what this type of marketing is.

Lets figure out togetherm what affiliate marketing is actually all about.

What Is Affiliate Marketing?

So, let’s start at the very beginning: just what is affiliate marketing? Now, there are quite a few definitions out there but let’s keep it simple.

In short, affiliate marketing is when you earn a commission for promoting other people’s products. All of this takes place online, across websites.

The commission for doing such a job can differ, depending on your agreement with the product owner. Some people are only paid when the product owner actually makes a sale. Others may be rewarded for simply increasing traffic to a certain website or even for recommending a product.

The Key Players in Affiliate Marketing

Now that you have a basic understanding of what affiliate marketing is, let’s move onto who the main players in this are:

The Merchant

The merchant is the product owner and might be an individual or a company. It is this agent that takes on all the costs of creating the product. Therefore, the main percentage of the sales will go to this agency or person. It is the merchant that hires the affiliate to conduct marketing on its behalf.

The Affiliate

The affiliate, like the merchant, may either be a single individual or a larger agency. An affiliate’s goal is to introduce its visitors, readers, or other consumers to the merchant’s products. Apart from this, the affiliate isn’t actually involved in the product in any way. When the affiliate makes a sale (or reaches another goal), he or she is paid a commission by the merchant.

The Network

The network is the intermediary between the merchant and the affiliate. It is the network that is responsible for tracking the movements of a consumer once an affiliate has promoted a product. This is often done with the help of cookies and similar mechanisms. In many cases, it is also the network that is responsible for paying an affiliate, once a product has been purchased on the merchant’s site.

How Affiliate Marketers Are Paid

There are a few ways to get paid. This depends mostly on the network, the niche or the negotiation.

Lets see what ways of compensation there are, with examples for each:

  • CPA (Cost-per-action): For example for every visitor that makes a purchase, you get $20.
  • CPL (Cost-per-lead): For example for every visitor that signs up to the merchant’s website (but doesn’t necessarily buy anything), you get $5.
  • Revenue Share: If your referral generates $100 to the merchant, you get 35%.
  • CPC (Cost-per-click): For every visitor that comes to your site and clicks on your ads, you get $0.30 per click
  • CPM (Cost-per-mile): Get paid for every 1000 impressions of an ad.

CPA is usually the highest paying but also the hardest to fulfill.

Pros and Cons of Affiliate Marketing

As with any venture, there are pros and cons associated with affiliate marketing. Here are the top elements you should know about:

Advantages:

  • No Manufacturing Required: the great thing about affiliate marketing is that you don’t have to create or construct a product. Instead, all your efforts will be focused on marketing a product. Due to this, you don’t have to be involved in any business-related decisions.
  • Low Starting Costs: since you aren’t creating anything, the cost of being involved in affiliate marketing is very low. At most, you will have to pay to be included in an affiliate program. After that, it is up to you to promote a product by using very little of your own money.
  • Can Work from Anywhere: all you really need to be engaged in this type of marketing is a laptop and internet connection. So, you can manage it at any time and from virtually anywhere.

Disadvantages:

  • Results Take Time: since affiliate marketing takes place online, you will need time to build up your marketing approach and connections. Furthermore, it will also take a while before you are able to increase your traffic to the point where it is profitable.
  • No Control Over Business: since you don’t own any aspect of the business or the product, you have no control over the direction of these elements. Instead, you simply have to go along, regardless of how they will be proceeding.
  • Competition: affiliate marketing keeps growing by leaps and bounds. As such, you will have to deal with quite a bit of competition along the way. To stay ahead, you need to be creative and figure out what tactics are best.

Making Money with Affiliate Marketing

When people finally realize what affiliate marketing is all about, their next thought is income. After all, is this form of marketing a profitable venture for the average person? The short answer to this question would be, yes. Nevertheless, there are a few more aspects to be aware of.

For one thing, when you are an affiliate, you are paid on commission. This means two things for you. First, you need to be a good salesperson. As such, you need to have a proper marketing strategy in place or be the owner of a good blog or social media profile. After all, it is only by persuading consumers to make a purchase that you can make money.

The second thing to take away from being paid a commission is that you are only receiving a small portion of the total price of a product or price that you have recommended. Therefore, to make real money, you are going to need to convince a significant number of people to purchase a particular item. It is only then that you will be able to make a real profit.

While this may seem like a dissuasive argument, it isn’t so. It is possible for you to make a considerable amount of money with affiliate marketing. To do so, however, you need to be aware of the right avenues and techniques.

How to Be Successful At Affiliate Marketing

It is relatively simple to be successful at affiliate marketing, as long as you know how to go about it the right way. To start with, only align yourself with legitimate merchants and affiliate programs. It can also help if you choose a quality product that preferably, you believe in. Finally, you will need to be relentless (yet subtle) in the way you market to your consumers. It is only by doing this that you will be able to make a notable profit.

These are the top things you need to know about affiliate marketing and how it works. Focus on this information and you should be able to handle this form of marketing quite well.

Page Updated: February 7, 2019

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