Affiliate Programs are one of the easiest ways to start making money online. But what exactly is affiliate marketing and how does it all work?
If you are new to the whole concept, an affiliate program is a way for online businesses to promote their products through referrals. The great thing about it being online is that all the referrals can be tracked through unique links. This makes it very easy for both the product sellers and the referrer to know exactly who referred a sale, and who should get a comission.
The Product Seller/Vendor = Affiliate Program Owner
The affiliate program owner is the person or business, that is actually selling the products or services being promoted. Their affiliate program is set up using dedicated affiliate program software. The affiliate program software is used to track sales referred by each individual 'affiliate'. The program owner will usually set a pre-determinded commission percentage per sale, or an exact commission value per sale, depending on what they prefer.
They may choose to offer higher or lower commission levels on different products, depending on the level of profit they make per sale. They may also choose to pay individual referrers a higher rate of commission if they make more sales.
The Product Promoter/Referrer = The Affiliate
The 'Affiliate' is the person promoting the sellers products for a commission. When an affiliate registers to join an affiliate program, they are given their own unique referral link. This referral link is known as an 'Affiliate Link'. The affiliate uses the affiliate link in their advertising and when people click on their affiliate link, the referral is tracked by the companies' affiliate program tracking system. If the person they refer goes on to buy the product after clicking on the affiliate's link, the affiliate earns a commission.
Why Affiliate Programs Are a Win/Win?
For the product seller an affiliate program can be an extremely efficient and profitable way to make sales of their products. What's great for them, is that they only pay commission to the referring affiliate if a sale is made. So they can pretermine exactly how much it's going to cost them to make a sale.
For example, if they sell a product for $100 and offer 40% commission to affiliates, they know that they will make $60 gross profit per sale (minus their own product fullfilment costs).
With traditional forms of advertising product owners never know with certainty how much it will cost them to make a sale. Simply because the results of advertising can vary hugely from one source to the next. In some cases an ad campaign could produce no sales at all, but the company still has to pay for the ads. But with an affiliate program they know they'll only have to pay commission when a sale is made.
From an affiliates point of view the advantages are many...
- Virtually every market/niche has one or numerous affiliate programs to promote products for a commission. So as an affiliate you can pick and choose to promote products in almost any market.
- Commission ranges from around the 4% mark for some physical products, right up to 100% on some digitally downloadable products.
- As an affiliate you are not responsible for taking payment, product fulfillment or sales support, so you can literally run your business hands free.
- Because they are not tied to any particular product or market, an affiliate can be very flexible and move in and out of markets very quickly, to take advantage of fast moving trends and changes in the marketplace.
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