What Is Affiliate Marketing and How Does It Work – Complete Guide

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Affiliate marketing is a fantastic way to make money online. It’s been around since the mid-nineties and US affiliate marketing spend is expected to increase to $6.8 billion by 2020. Tens of thousands of companies have affiliate programs including household names like Amazon, Apple, eBay, and Microsoft.

What Is Affiliate Marketing?

Affiliate marketing: any revenue-sharing program in which a publisher receives a commission for generating an online action (such as a sale or lead) for an advertiser; also called performance-based marketing, partner marketing, CPA, associate program, or pay-for-performance program.

Affiliate marketing is a performance-based marketing activity. An affiliate or publisher promotes a product or service online and is compensated for achieving a specific objective or action. A merchant or advertiser specifies the action, which is usually a valid sale. For example, a merchant will pay an affiliate a 30 percent sales commission. Some merchants have pay per lead programs that pay affiliates for getting prospects. For instance, an advertiser pays one dollar for each person who establishes an account.

Affiliate marketing differs from network marketing, also known as referral marketing and multilevel marketing, in that activities are conducted only online. Secondly, it doesn’t seek to leverage a person’s network, and affiliates don’t need to sell directly to anyone. Ninety-nine percent of affiliate programs are free to join and don’t require an investment or startup fee.

How Does Affiliate Marketing Work?

Affiliate marketing consists of a series of steps from program development to creating links for affiliates to use.

Program Development, Terms, and Recruitment

Suppose a company wants to offer an affiliate program. They can create and fill an affiliate manager position or outsource duties to a third-party. They can manage their program in-house, through an affiliate network, or both. There are pros and cons to each approach, which is why most companies choose one or the other.

Program terms form the agreement and relationship between parties and specify commission rates, search and marketing policies, and any bonus incentives. A common practice of companies is to protect/restrict keywords for search engine marketing (SEM). Also, they may disqualify certain types of websites from joining their program, for example, sites promoting racism and hate speech.

The merchant must consider how it will recruit affiliates, for example, adding an “Affiliate Program” menu option to its website and a sign-up page containing program details. An affiliate manager might recruit top content creators to join and spread the word.

Cookies and Tracking

Hand-clickCookie window, conversion window, or action referral period is the period during which merchants allow their cookies to remain active to credit publishers for their referrals. Thirty to sixty days is standard. A cookie is a small file stored on a consumer’s computer that records information about that consumer. In affiliate marketing, cookies are used to track the link or ad the consumer clicks from a publisher’s site to an advertiser’s. A cookie will store the date and time of a click to credit or discredit a conversion.

Affiliate URLs, Links, and Creative Assets

Affiliate programs provide URLs, links, and creative assets such as banners and images to affiliates. URLs are unique to each marketer and typically include an identification or tag, for instance, amazon.com?aff/chadtennant3u43b. Publishers can retrieve their links and assets from a company’s affiliate portal and affiliate network.

How Affiliate Marketing Works

BoomHost Affiliate Program (Example)

A fictitious company called BoomHost sells web hosting. They have sales people but want another business development channel to acquire customers. They launch an affiliate program and will pay publishers $50 for each customer who purchases an annual hosting plan (which is much cheaper than training and hiring more salespeople). BoomHost could manage their affiliate program in-house with affiliate tracking software, but they decide to use the ShareASale affiliate network.

BoomHost wants its program to be efficient and profitable for affiliates and themselves. They stipulate that affiliates can’t use the following keywords in SEM; “BoomHost,” “Boom Bee,” “BoomHost.com,” “BoomHost hosting.” By disallowing these keywords, BoomHost avoids competing with affiliates and potentially paying more for bids. BoomHost sets a cookie window of 30 days. Websites featuring porn, rebates, and hate speech are ineligible to join their program. Lastly, cookie stuffing and website redirects are not permitted.

Jane wants to promote BoomHost. She searches and finds their program in ShareASale in which she is already a member. She clicks on “Join Program” and two days later is approved. Jane publishes a post about different types of hosting plans and adds her BoomHost affiliate link, which she retrieved from ShareASale. Two months later, Jane has received 157 clicks on her BoomHost link and one sales conversion. BoomHost will issue a payment of $50 to Jane. The money will be directly deposited into Jane’s bank account through ShareASale.

How to Become an Affiliate Marketer

Now that you know what affiliate marketing is and how it works, let’s explore how to get started.

  1. Understand the task at hand.
  2. Decide where you’ll deploy affiliate links.
  3. Create a marketing plan to get traffic.
  4. Choose what to promote.
  5. Join programs and networks.
  6. Keep going and improving.

Understand the task at hand. Affiliate marketing is about marketing goods and services, not selling them. Marketing is the act of creating awareness for products, services, and brands whereas selling is converting awareness and prospects into customers. Affiliates spend most of their time building awareness and may do some soft selling by influencing and persuading people to buy. Publishers are not responsible for transacting sales or closing deals, that’s up to merchants. If selling is more to your liking, then e-commerce, drop shipping, and freelancing might be a better fit.

Decide where you’ll deploy affiliate links. Affiliate marketing and digital media/content go hand and hand. Many bloggers create content and monetize their blogs using affiliate links. YouTubers might add links to their channels and videos. Some people promote products and services on social media while others create online courses and email autoresponse sequences. Affiliate marketers often use a combination of digital channels to get clicks and conversions. Some channels are better than others for influencing and link placement.

SearchCreate a marketing plan to get traffic. Traffic in marketing circles equates to the number of visitors and users to a site. For example, Mark gets 1,000 site visits a month. Affiliate marketing is a numbers game so the more traffic you can get, the better your chances for clicks and conversions. There are many ways to get traffic such as search engine optimization (SEO), pay-per-click (PPC), content marketing, email marketing, social media marketing, and so on. Most affiliate marketers use a combination of strategies and techniques to get traffic. You shouldn’t rule out any marketing activity or limit yourself. Be open-minded and experiment to find what works for you. Furthermore, your marketing plan and strategies will continuously evolve.

Choose what to promote. The top affiliate marketing networks have more than thirty product/service categories like automotive, clothing, computers, education, business, travel, and more. Also, thousands of merchants offer affiliate programs. You’ll want to promote items that relate to your niche and audience. A niche market is a focused, targetable segment or group of people who share one or more common characteristics. I target online workers, entrepreneurs, freelancers, self-employed persons, marketers, digital nomads, and so forth. I have years of experience in this segment and enjoy discussing these topics.

Join programs and networks that are in your niche. Start by joining a few networks and programs like 10 to 20 programs. Once you get the hang of things, join as many programs as you can manage efficiently. But wait! Having a website makes getting accepted into programs a lot easier for four reasons.

  1. A website ties a person to a digital asset and an online presence.
  2. A site creates a level of accountability and credibility.
  3. Affiliate managers can accurately track and analyze data from affiliate sites.
  4. A site can be reviewed for compliance.

Many affiliate managers check to see if applicants have websites. They do this as a safety measure to weed out bad actors. If you don’t have a site, you don’t exist in the minds of most affiliate managers. While social media profiles are valuable, they’re not equivalent to having a website.

Your website can be basic and even contain just a few standard pages, but a domain that belongs to you is critical. I recommend self-hosting your site and using the free software from WordPress.org, which is what I use. WordPress powers 31 percent of all the websites on the Internet, and nearly 60 percent for content management systems (CMS). A shared hosting plan is all you need to start, and these reputable hosting companies offer discounts. Most hosting companies enable WordPress installation in a few clicks. If you need help, many freelancers are available to assist you on Fiverr. Alternatively, WordPress.com bundles hosting and software together.

An affiliate manager can decline your request to join his or her program. You want to ensure it’s not because you don’t have a website. Reasons for declines vary, and you can follow up by emailing the affiliate manager for more details.

Keep going and improving. Cookie windows and payment thresholds create lags in the process but are necessary and become irrelevant once you get things going. Successful affiliates keep creating fantastic content, deploying links, marketing, joining programs, forming partnerships, and experimenting. By contrast, you won’t meet your income goals with a few posts and insufficient traffic.

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Frequently Asked Questions

How do affiliates make money?

Affiliates promote products and services. When their marketing activities convert to sales and leads, they’ll be eligible to receive commissions. Commissions are usually one-time payments, but many recurring affiliate programs exist. Most programs and affiliate networks have minimum payment thresholds, for example, fifty dollars. Payment options typically include direct deposit, check, and PayPal.

How much can affiliates earn?

Most affiliate programs don’t cap commissions. In fact, most will incentivize affiliates with higher commissions and bonuses for more sales. Unlike most jobs, an affiliate’s earning potential is unlimited because of its similarity to commission-based positions.

Is affiliate marketing profitable?

Yes. Offering an affiliate marketing program should be a no-brainer for many businesses. It’s a cost-efficient, zero overhead way to recruit marketers and pay them for their performance. For affiliates, it’s cost-efficient too since no direct investment or inventory is required. An affiliate marketing business—primarily a website—and a few marketing/business tools will cost less than $50 a month to operate.

Is affiliate marketing legit?

Yes. Affiliate marketing is perfectly legal and an excellent way for businesses and individuals to work toward common goals. However, affiliate marketing is not without its share of bad actors and tricksters. These folks attempt to game the system like schemers in other areas of business and life. The Federal Trade Commission (FTC), a United States government agency, provides guidelines for affiliates to follow. The FTC’s guidelines support transparency, consumer education, and fair dealings. If you play by the rules, act in good faith, and implement proper disclosures, you’ll be fine.

Can you do affiliate marketing without a website?

Yes. Having a website isn’t mandatory, but it does help with joining reputable affiliate programs. Some affiliates focus exclusively on social media platforms like Facebook, YouTube, and Twitter while others use landing pages hosted by third-parties. A better question is, what percentage of high earning affiliates operate without a website? Probably a low percentage in the single digits.

Are affiliate marketing courses and training available?

EducationYes, but be wise. There are hundreds of overpriced affiliate marketing courses available. Owners of these programs claim to teach a “system” for success, but their goals are to attract suckers who believe in the surefire system fairytale.

Success in affiliate marketing boils down to getting sufficient traffic (marketing strategy) and clicks. Success also depends on your effort, platform and content strategy, and program terms and selection. ClickFunnels, LeadPages, and Shopify (within their affiliate portal) offer free training. Plenty of free resources are available online and on YouTube. Finally, I write about affiliate marketing frequently, so visit my site often for tips and insights.

 

About this Post

I use affiliate links on my website, but my opinion isn’t for sale. I may earn a commission if you click on an affiliate link, but it won’t cost you extra. I only recommend what I use, have used or vetted in the best interest of my readers. For more details, see chadtennant.com/privacy-policy.

 
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