Affiliate marketing is a model of Internet marketing where authors, sellers or distributors of products and services (merchants) pay commissions to affiliates who successfully make sales to customers on behalf of the merchant, or help the customer to form a commercial relationship with the merchant by way of referral. Conceptually it’s a bit similar to the way a door to door sales person selling vacuums gets a commission for offloading the latest model Hoover, only in our case it usually takes place online and doesn’t yet have the stigma which detracts from some other forms of sales marketing. To be paid for referrals or sales we usually have to sign on as an affiliate to the merchant to be eligible to receive a commission.

There are three main types of affiliate programs:

1. Pay per sale

2. Pay per click

3. Pay per lead

Pay Per Sale

In this case, affiliates promote a particular product or service and receive a commission or percentage for each sale made to prospects on behalf of the merchant or service provider. For example, if you promoted an ebook on ‘avoiding panic attacks’ and the value of the book was $90, you might receive upwards of $45 for each sale made. The precise level of commission  paid depends on the nature of the product or service, but for information products, 50% commission is typical.

Pay Per Click

This model involves we as affiliates encouraging prospects to click on a link which directs the prospect to a merchants web site. The commission for each individual click is usually very small, but the cumulative effect of multiple clicks can still generate significant income for affiliates who have the ability to generate high levels of traffic which can be redirected to the merchant.

Pay Per Lead

This model involves an affiliate being paid for generating client leads for the merchant. This is distinguished from Pay Per Click in that frequently a higher level of commitment is required from the prospect to the merchant before the affiliate receives payment. For example, a prospect might need to sign up for a three month trial of a merchant’s program before an affiliate will receive a commission for having generated the lead for the merchant. However, some Pay Per Lead affiliate programs can provide quite generous commissions per lead.

Affiliate Marketing – The Benefits To Merchant

1. You leverage the work of your affiliates and only pay commission once a sale has been made.

2. You can cut down on overheads customarily associated with advertising by encouraging others to undertake the promotion for you. Higher commission levels for affiliates has the effect that they are to promote your product or service.

3. Greater exposure and increased traffic (visitors or prospects).

Affiliate Marketing – Benefits to Affiliates

1. Can be undertaken without our own product, and does away with the need for customer support.

2. Can be utilised by both beginners and experts alike.

3. There are almost no limits as to what sort of product or service we can promote…there is an affiliate program for almost any market.

4. We can utilise our pre-existing or new web site to generate an income stream.

Affiliate Marketing Model

So how does affiliate marketing work on a practical level?  The classic model of affiliate marketing is as follows:

• The affiliate does something to capture the attention of the prospect.

• The affiliate then forwards the prospect to the merchant’s website (usually to a sales page).

• It is the merchant’s job to ensure their sales message “converts” the prospects into a customer (ie. Convinces them to buy stuff); and

• The affiliate and merchant take a share of the money earned from the sale.

Affiliate marketing can be a rewarding exercise and establish leveraged income from our initial exertions if done correctly.  This is what makes novice affiliate marketing a particularly attractive proposition.