Guide To How Affiliate Marketing Works

Souvik Dey Souvik Dey
Jan 21, 2021 9 min read
Guide To How Affiliate Marketing Works

Affiliate marketing is the process by which an affiliate earns a commission for marketing another person’s or company’s products. An affiliate is a person or company that promotes products and/or services for a merchant. The sales are tracked via affiliate links from one website to another. Most of the time, affiliates are bloggers or other content makers. Growth of affiliate marketing has been growing rapidly in recent years.  Many people want to start affiliate marketing but don’t know how affiliate marketing works. The major online seller Amazon is a pioneer of affiliate marketing. Nowadays more and more companies have started their affiliate programs to efficiently acquire new customers. With the growing number of affiliate programs available on the Internet, content providers have a great variety to choose from.

Top 10 Affiliate Categories
Top 10 Affiliate Categories

Stats Related to Affiliate Marketing
Affiliate Marketing Terminologies
Types of Payment Terms
Tools of Affiliate Marketing
How Does Affiliate Marketing Work
Tracking Performance in Affiliate Marketing
Promote Affiliate Products
Benefits of Affiliate Marketing
Conclusion

Stats Related to Affiliate Marketing

  • 81% of brands and 84% of publishers leverage the power of affiliate marketing
  • In 2018, content marketing costs were gauged to be 62% of traditional marketing schemes and  16% of all orders made online can be attributed to the impact of affiliate marketing
  • In March of 2017, Amazon’s affiliate structure changed, offering rates of 1-10% of product revenue for creators, providing the opportunity for affiliates to dramatically increase their passive income
  • Affiliate marketing spending is bound to grow by 10% in the next few years
  • Well-crafted affiliate marketing programs can boost revenue by a staggering 30%.
  • A study from 2015 revealed that 18.70% of all affiliate marketers promote fashion products and services. Sports and outdoor activities follow with 14.60%,while health and wellness marketers account for 11.10%.
  • Users clicked more than 5 billion times and the affiliate marketing networks carried out more than 170 million transactions worldwide.
  • About 48.36%of affiliate marketers are earning $20k per year while only 3%are earning over $150k per year
  • 84% of bloggers use affiliate marketing to grow the audience.
  • 84% of publishers use affiliate marketing.
  • 80% of brands use affiliate marketing to generate leads.
  • 40% of marketers think that affiliate marketing is a crucial skill to have.
  • 73% of the merchants reported that their affiliate revenue met their needs.
  • The affiliate marketer’s content pool has grown by 175%.
  • 67.32% of affiliate marketers connect with customers using social media.
  • 64.48% of the affiliate marketers blog to generate traffic
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Affiliate Marketing Terminologies

  • Affiliate: This is the person or company that promotes products and/or services for a merchant.
  • Affiliate Link: This is a special link given to the affiliate by the merchant that is embedded with a unique tracking code. This enables the merchant to track the sales or leads the affiliate has generated.
  • Affiliate Program: The affiliate program details the specifics of the arrangement between the merchant and their affiliates, how much commission is given, exit conditions, and other important terms.
  • Commission: This is the percentage or amount a merchant pays an affiliate for generating a sale or a lead. The exact percentage or amount is agreed upon in the affiliate program terms.
  • Merchant: A store owner or company that runs the affiliate program the affiliate is participating in.
  • Niche: A specific topic or business area.
  • Commission Rate: A merchant will set a specific commission rate for their products. This is the portion of the revenue that you receive as an affiliate. Commission rates can range from as low as single digits to more than 50%.
  • Clickthrough Rate (CTR): The number of clicks your link or links get divided by the number of times they were viewed (impressions).
  • Earnings per 100 Clicks (EPC): Sometimes called EPHC, this metric gives you an idea of what other affiliates are earning through this program.
  • Average Order Value (AOV): The average order value is the total of all orders divided by the number of orders.
  • Reversal Rate (RR): The percentage of transactions that get reversed by the merchant.
  • Conversion Rate (CR): This metric is the most exciting to track. It may be a click-to-sale CR or a click-to-lead CR, depending on the program. The conversion rate is calculated by the number of visitors who clicked through the site offering the product/service and made a successful purchase (or converted).
  • Payment mode: Different affiliate programs offer different methods of payment. Example: Cheque, wire transfer, PayPal, and others.

Types of Payment Terms

Affiliate programs can use different payment terms. You need to be familiar with the three main types to get a better idea of how commissions work.

  • Pay per Sale: These programs pay you a percentage of the product sale price whenever a purchase is completed.
  • Pay per Click: You get paid depending on the number of visitors you redirect from your affiliate site to the merchant’s website, regardless of whether a sale is made.
  • Pay per Lead: In this program, you get paid every time a visitor fills out a contact form and provides their information.
Places to find great products
Places to find great products

Tools of Affiliate Marketing

1. A Steady Web Hosting Service

Your blog’s files and the database will reside at a company called a web host. Web hosting companies provide space on their servers for people to rent for a small monthly cost. There are some free web hosts like WordPress .com, Wix or Blogger. Sometimes they also place ads on your blog to recoup some revenue from the visitors landing on your site.

2. Niche or Product to Promote

Knowing what products you’re promoting will give you an idea of how to design your website, write your content, and market them to potential buyers. Make sure you know about your niche. If you don’t, then invest time to research more about it

3. Content Management System (CMS)

Among the most popular content management systems is WordPress. WordPress itself is free and is designed to be very user-friendly for amateurs. You can edit a lot of things with just a few clicks. There are tons of free themes that will give your site a unique look and lots of plugins to provide any functionality you like. Setting up a website might seem like hard work but the WordPress community is very DIY driven and there are heaps of guides and friendly people around in the WordPress community. It’s also important that you know how to do-it-yourself so that you don’t have to pay for a developer every time you need something changed on your website.

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4. Search Engine Optimization or SEO

There’s a lot to learn and you’ll find out that SEO experts don’t always agree with each other’s opinions on what the best practices are. If you’d like to let a professional take care of the heavy-lifting, you also have the option of hiring an SEO expert.

5. Email Service and Autoresponder

Email marketing is one of the most effective online marketing strategies. People who buy products marketed through email spend 138% more than those who do not receive email offers. Email marketing has an ROI (returns on investment)of 4400%.

Affiliate link management software is technically optional, however, if you want to be successful as an affiliate marketer it’s a smart investment in your time. It’s very time consuming to manage even a modest number of affiliate links across your website without tools. Additionally, visitors will avoid clicking long confusing looking URLs that affiliate links appear like.

How Does Affiliate Marketing Work

  • Affiliate partner promotes a brand’s products or services on their site.
  • Consumer clicks on brand’s promotion on the affiliate’s site and a cookie are then stored on the consumer’s browser, it makes it possible for the affiliate network or SaaS platform to track the consumer’s progress from the affiliate’s website through to the brand’s shopping cart.
  • The consumer is redirected to the brand’s website.
  • Consumer purchases a product/service from the brand.
  • The network or SaaS platform then automatically pays out a commission to the affiliate (based on the rules set by the brand) for completing that sale.

Tracking Performance in Affiliate Marketing

Affiliate Marketing uses tracking cookies and a pixel placed on the brand’s site to track and measure their partners’ marketing activity. It can lead to a highly reliable ROI calculation for the brand.

It includes the following points:

  • Registrations, email sign-ups, giveaway entries
  • Sales, orders, subscriptions
  • Conversion Rate
  • New vs Returning customer
  • Average Order Value
  • Cost Per Action (CPA)
  • Customer Lifetime Value (CLV)

Promote Affiliate Products

1. Social Media Campaigns

Social media is one of the most powerful tools you can use for increasing your blog’s visibility and promote affiliate products.

2. Use Search Engine Optimization

There’s no better time to do SEO for your site than now. Both SEO and affiliate marketing have the same goal of driving relevant, high-quality traffic to a site so that those visits eventually turn into sales.

3. Blogging

Content creation is considered a core activity of online marketing and it can help you promote products in more ways than you might initially think. You can post product reviews, create infographics, create how-to blog posts that your readers can share, videos such as unboxing videos or how-to videos demonstrating the product, podcast mentions, and much more.

4. Regular Emails or Newsletters

Emails are a personal communication medium. It’s a great way to engage with people one-on-one and introduce the products you are promoting. It’s good to keep regular contact with your subscribers so start sending a monthly (or even weekly/fortnightly) email newsletter. One very effective way to attract subscribers is to offer something in exchange for their email.

5.Create Helpful Videos

Nowadays, people prefer to watch a video instead of reading a long article. Even on social networking sites, video content has been becoming quite popular. According to WordStream, around 82% of users on Twitter watch video content. Around 50% of people watch videos related to a product or service before making a purchase.

6. Add Banners and Buttons to Your Site

Using banner ads, you can introduce a strong visual aspect to your marketing. These ads enable you to display information engagingly, while also promoting your brand. Banner ads draw attention to your products and services more effectively than text-based ads. They can also be used across various platforms, including websites, blogs, social media, and emails.

7. Offer Promos, Incentives, Coupons, or Loyalty Rewards

Everybody loves a great deal. They are a powerful customer segmentation tool and can help you drive sales where and when you need them.

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Benefits of Affiliate Marketing

  • Affiliate marketing is performance-based
  • It helps broaden your audience
  • It’s a low-cost business opportunity
  • Affiliates can rapidly scale your traffic (and sales)
  • Growing in popularity
  • Low risk
  • It’s good as a supplementary source of income
  • No need to come up with your marketing kit
  • The techniques and strategies you can choose from are limitless
  • No location restriction
  • No time restriction
  • Broader product market
  • No sales staff required
  • Real-time tracking

Conclusion

Affiliate marketing works as promoting other’s business. Affiliate marketing can be learned and get starts at any time. Affiliate marketing is a good source of earning money. To do affiliate marketing you need to choose the products wisely. There should be the right blend of products and variations which can be acceptable to a different audience. Affiliate marketing is an advertising campaign. Nearly all businesses are providing affiliate advertising services to grow their brand. An internet affiliate marketing website is an internet business that you set up to sell products or services which were created by others.

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