What is an Affiliate Marketing

What is an Affiliate Marketing 

By John Philip Espiloy | 19 March 2022

Affiliate marketing is a very effective online sales tactic. It lets a product or service increase sales by allowing others to target the same audience. You’ll earn a commission each time someone purchases through the unique link associated with your recommendation. 

You may share your recommendation through a website, blogs, ads, or other popular social media platforms. This simple diagram below shows how an affiliate marketing business works.

Affiliate Marketing

Commission rates vary depending on the company whom you’ll partner with. One person was featured back in 2017 that made more than $1M (PHP 50M) in the affiliate marketing business in that year alone. 

But before you dive in, be sure you understand how it works. You also need to be wary of the common misconception perceived by many in this business. So, let’s get going.

What is Affiliate Marketing and How it Works?

Affiliate marketing is an advertising tactic that promotes other companies’ products or services in return for a commission for each sale.

The merchant or the company compensates third-party publishers or the “affiliate marketer” that promotes their product or services whenever they made a sale. The commission fee incentivizes them to find ways to promote the company’s products or services.

Companies typically pay the affiliate marketers per sale made while some are still through the number of clicks or impressions made.

Amazon popularized affiliate marketing by allowing websites and bloggers to link their posting to the Amazon page for their reviewed or recommended product or services. When a purchase is made, a corresponding commission shall be received by the affiliate marketer.

You may consider that affiliate marketing is a pay-for-performance marketing program where the act of selling is outsourced across a vast network.

While affiliate marketing existed even before the Internet, the advancement in digital marketing, analytics, and cookies made it into a multiple billion-dollar industry. A company’s affiliate marketing program can track the links that bring in leads and see how many are converted into sales.

A merchant wanting to reach a wider base of internet users and shoppers may hire an affiliate marketer. On the other hand, an affiliate marketer may partner through the merchant’s affiliate marketing program.

Some affiliates have multiple websites or email marketing lists that they use to promote the products. The affiliates do this by running ads or links on their website or sending emails to prospects. 

They do this by using advertisements in the form of articles, videos, and images to draw traffic to a product or service.

The prospect who clicked the ads or links is redirected to the merchant site. If a purchase of the product or service is made, the merchant credits the affiliate’s account with the agreed-upon commission, which could range from 5% up to as high as 50% of the sales price.

The advancement internet and technologies are making the affiliate marketing business easier to implement. Companies have improved how they track and pay commissions on qualified leads. Being better able to track leads and sales contributes to how they can improve or better position their products.

Overall, affiliate marketing is a low-cost and effective way of advertising products and services while increasing brand awareness, and expanding a consumer base.

 

Actors in an Affiliate Marketing Business

There are different actors that interact and play important roles to complete the business processes. Let’s get to know each one of them.

The Merchant

Sometimes also known as the company, the manufacturer, or the vendor. This is the party that creates the product.

It can be a big company like GoDaddy which provides web hosting services or a single individual like Riley Bradly who offers online courses on social media marketing.

From SMEs to massive Fortune 500 companies, any merchant may offer an affiliate marketing program. They only need a product or services to sell.

The Affiliate Marketers

 These are the third-party publishers and advertisers. Anyone can become an affiliate. It can range from single individuals to companies. Depending on the affiliate marketer’s expertise and niche, they can earn commissions ranging from a few hundred dollars to tens of millions of dollars.

An affiliate marketer promotes one or multiple affiliate products or services and tries to convince potential customers of the value of the merchant’s product so that they end up buying it.

This can be achieved by running a review blog of the merchant’s products, banner ads, text ads, videos or a website dedicated to finding cool products related to a certain topic.

The Customer

The customer is the center of the affiliate marketing business. They are the ones who purchase the product and convert the affiliate marketer’s efforts to sales. Without sales, there will be no commissions to be given nor revenue to be shared.

Thus, an affiliate marketer will try to convince the customer through whatever channel they see fit, whether that’s a social network, digital billboards or through a search engine using content marketing on a blog.

With regards to the price of the merchant’s products or services, the customer will not pay the additional costs to the affiliate marketer as the commission is already included in the merchant’s retail price. 

 

The Affiliate Network

While some consider the network is part of the affiliate marketing equation, I believe that an affiliate marketing guide needs to include networks.

Some of the merchants, in many cases, prefer to outsource to an affiliate network to manage their affiliate marketing program. They act as an intermediary between the affiliate marketer and the merchant.

An affiliate network may also serve as a database of products on which an affiliate marketer can choose which to promote.

In case you want to promote consumer products like baby toys, tools, books, household items, the largest affiliate network is Amazon. Amazon Associates is their affiliate marketing program that lets an affiliate marketer promote any item that is sold on their website.

Anyone can sign up with Amazon Associates and generate an affiliate link to Amazon products. You may post these links to your website, blog, social media and if someone purchases through your link, you earn a commission.

There are two sides when building an affiliate marketing business (if you’re not going to do an affiliate network). First, if you want to be an affiliate marketing merchant, you need a product or a service. 

Rather than thinking of new products, you may need to look that there are products and services out there that battle to be on top. Think of the common flaws based on reviews of their customers and you’ll be able to narrow down what product that solves these flaws then promote it.

John Philip Espiloy

John Philip Espiloy is a researcher, writer, speaker, lecturer  and an author of several scientific and engineering journals.  He is now a  full-time writer  together with his partner. 

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