Affiliate Marketing Explained

There are many terms being thrown around the marketing world. Here we will help define one of them: “Affiliate Marketing” (Image Source MarketingSystemBluePrints.com)

What Is Affiliate Marketing?

DISCLAIMER: This article is not an endorsement of Affiliate Marketing. It was written to define and explain Affiliate Marketing as a practice.

Affiliate Marketing is a popular method of promoting web businesses, in which an affiliate is rewarded for every visitor, subscriber and/or customer provided through his efforts. It is a modern variation of the practice of paying finder’s-fees for the introduction of new clients to a business. Compensation may be made based on a certain value for each visit (Pay-per-click), registrants (Pay-per-lead), or a commission for each customer or sale (Pay-per-Sale). SOURCE:

Affiliate Marketing as a term, is used to distinguish a type of performance based marketing or advertising.

  • “Performance-Based Advertising”: A form of advertising which sees payment by the purchaser only upon clear measurable results. Performance-based advertising has become common with the advent of mainstream electronic media including the internet, which allows easier and more accurate measurement of user actions resulting from advertisement.

Affiliate Marketing has several moving parts. (Image Source: KidNamedCrazy.deviantart.com)

How It Operates:

With Affiliate Marketing, you only pay for the advertising when it gets converted (pay-per-click, pay-per-lead, pay-per-sale etc.). This means you will earn less for each sale, yet the increase in sales generally makes up for this. The most common way to operate an Affiliate Marketing program is by providing each Affiliate a link with an embedded code that is unique to them. This code is then tracked and measures conversions in their various forms.

In laymen’s terms, you are hiring “sales” people to, using the various means and methods available, wrangle potential customers into a specific per-determined action. These actions could be: visiting a site, viewing content, signing up for something or making a purchase. You pay these “sales” people (Affiliates) per action for each action that meets the contractual description.

Affiliate Marketing rewards one or many affiliates for each individual visitors or customer driven to their business by the affiliates independent marketing efforts.  So what is an Affiliate?

  • “Affiliate (Commercial)”: A commercial entity possessing a relationship with a peer or a larger entity. A corporation may be referred to as an affiliate of another when related, yet not strictly controlled, by it (similar to subsidiary relationship), or when it is desired to avoid the appearance of control, as with companies that need to avoid restrictive laws (or negative public opinion) on foreign ownership.

In many respects Affiliate Marketing is similar to other Internet marketing methods. Affiliates will often operate via traditional advertising methods, including:

  • Organic Search Engine Optimization (SEO).
  • Paid Search Engine Marketing (PPC or Pay Per Click).
  • E-mail marketing.
  • Display Advertising.

While traditional methods are more common, Affiliates have been known to use any number of unorthodox methods (to mixed results). These methods may include publishing reviews of products or services offered by a partner or directly engaging consumers on their behalf.

Affiliate Marketing holds many similarities to Referral Marketing in that both use third parties to push sales to the retailer.  Note should be made that Referral Marketing & Affiliate Marketing are two separate and distinct forms of marketing.

  1. Affiliate Marketing relies purely on financial motivations to drive sales.
  2. Referral Marketing relies on trust and personal relationships to drive sales.

Origins of Affiliate Marketing:

Affiliate Marketing got its start on the Internet when William J. Tobin (founder of PC Flowers & Gifts) created, patented and implemented it via the Prodigy Network.

“Launched on the Prodigy Network in 1989, PC Flowers & Gifts remained on the service until 1996. By 1993, PC Flowers & Gifts generated sales in excess of $6 million per year on the Prodigy service. In 1998, PC Flowers and Gifts developed the business model of paying a commission on sales to The Prodigy network” SOURCE & MORE ON ORIGINS HERE:

The four key players in Affiliate Marketing (Image Source: webseoservices.org)

Who Is Involved?

There are four core players involved in Affiliate Marketing:

  1. The Merchant (or retailer/brand).
  2. The Network (possessing offers for the affiliate to choose from – the Network also handles payments).
  3. The Publisher (aka the Affiliate).
  4. The Customer.

Additional players may include “Affiliate Management Agencies”, “Super-Affiliates” and various specialized third-party vendors.

Examples of websites that have successfully implemented Affiliate Marketing into their business model are:

  1. Any search affiliates utilizing pay-per-click search engines to promote the advertisers’ offers.
  2. Comparison shopping websites and directories
  3. Loyalty websites, or those sites that offer a reward system for purchases (points system, rebate system etc).
  4. CRM sites that offer charitable donations.
  5. Sites offering coupons or rebates based around sales promotions.
  6. Specialized (Niche) marketing sites. These may include sites dedicated to product or service reviews.
  7. Many personal websites.
  8. Weblogs and website syndication feeds.
  9. Email list affiliates, defined as  owners of large opt-in -mail lists that will often utilize e-mail drip marketing).
  10. Newsletter list affiliates (often more content-heavy).
  11. Registration path or co-registration affiliates who include offers from other merchants during the registration process on their own website
  12. Shopping directories which provide lists of merchants by categories, but do not provide coupons, price comparisons etc. (due to the high level of maintenance required by information that changes frequently).
  13. Cost per action networks or top-tier affiliates. Those that expose offers from the advertiser with which they are affiliated, to their own network of affiliates
  14. Websites using adbars (Example: Adsense) to display context-sensitive and relevant advertising.
  15. Virtual Currency: A publisher (Affiliate) utilizing social media conjoin an advertiser’s offer with a handout of “virtual currency” via game or virtual interface platforms.
  16. Video Blog: Video content that allows viewers to click on and purchase products related to the video’s subject.
  17. File-Sharing Sites: Literally any site hosting file directories (including music, movies, games etc.) that allow users to upload content and post descriptions of the material or links. Payment is issued to these Uploaders based on the number of times their files are downloaded. In addition the file-hosting sites may sell premium download access to files not available to the general public. The web sites that host the directory services sell advertising and do not host the files themselves.

Is Affiliate Marketing for you? We recommend taking time to look into it. There are definite pro’s & con’s.

In Conclusion.

Affiliate Marketing has often been overlooked by advertisers. Search Engines, E-mail, and Website Syndication are typically favored by online retailers and Affiliate Marketing is certainly more low profile. Yet  Affiliate Marketing is on the move and increasing in popularity as a tool. Several brands have cited it for their success.

  1. Epinions 
  2. Shopping.com (An Alexa top 500 site).
  3. Bankrate

Is Affiliate Marketing for you? We recommend understanding the Pro’s & Con’s of it before making a decision. A clear understanding of the past and present issues related to Affiliate Marketing is also suggested. It works for some, however is not a mainstream practice. This article was written to define and explain it and not to endorse it.

Other articles you may find useful on this subject are as follows:

“Maybe Affiliate Marketing Isn’t Such A Good Idea” – Intuitive.com

“Examples Of Affiliate Branding” – SugarRae.com

“What Is Affiliate Marketing?” – Problogger.com

“Protecting Your Brand In Affiliate Marketing” – Revenews.com

“What Is Affiliate Marketing – Video” – AskJoelComm.com

“The Truth About Affiliate Marketing Scams – Video – LadyLuckMedia

Transition Marketing Services. Our passion is educating and equipping small business owners with the tools and strategies to succeed. We have made it our priority to know Specialized Marketing. We keep up to date on what is new, what is available and what makes the most sense for businesses of all sizes and backgrounds. We recognize that every Small Business is unique, and their Marketing needs to be as well. Visit us at our website and let us know how were doing or if you have any questions. TRANSITION MARKETING SERVICES – Small Business Marketing Specialists.

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