How Affiliate Programs Work

 

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You hear a lot about affiliate marketing and affiliate programs, but do you know what they are and what it’s all about?  Hopefully, this page will get you in the loop on how the affiliate programs work.  

The Affiliate Program Transaction


Basically, you have three parties involved in an affiliate transaction.  The merchant, the affiliate site and the customer.  When the affiliate site writes a blog that brings the customer to his site to read, the affiliate has hopes the customer will click on links he has on his site that will send him to the merchant’s site.  Once that happens and the customer buys something from the merchant, the merchant will send the affiliate a commission. This commission is based on a prior agreement between the merchant and the affiliate.  Commissions can be paid on products or sometimes just for clicks that send the customer to the merchant.  Amazon.com is an example of a merchant who uses affiliates.

Types of Payments


There are three basic types of payment arrangements.  These are Pay-per-sale, Pay-per-click and Pay-per-lead.  On the Pay-per-sale, the affiliate is paid when they send a th-98customer to the merchants site and that customer makes a purchase.  Some pay a fixed amount and some pay a percentage of the sale.
The Pay-per-click arrangement is when the merchant pays the affiliate for the number of customers that come to their site by clicking on links placed on the affiliate site.  The customer does not have to buy anything for the affiliate to get paid.
With the Pay-per-lead, the merchant pays the affiliate when someone signs up as a lead.  Generally, the merchant will request that the visitor fill out some info at their site that they’ll use as a sales lead.  Once this is done, the affiliate will get paid for each lead.

How the Program Works


Okay, so the affiliate site sends a visitor to the merchant and the visitor makes a purchase on the merchant site.  The affiliate then gets his commission.  But, how does the merchant know who sent the visitor and how does the affiliate know the visitor went to the merchants site, let alone made a purchase?  This is actually simple.  When you join a merchant as an affiliate for their website, you are given an affiliate  ID.  This is also your affiliate link that you can use to send a customer to the merchant.  If you use banners from that merchant, your ID is already imbedded in the banner, so if someone clicks on the banner or the link, your ID shows up to the merchant and they know you sent the visitor and they know who to pay.  The affiliate can go to the affiliate section of the merchant’s website and see his stats results at anytime.  It will show how many clicks he got on his link and how many sells were made along with the commission total.  Their are also plug-ins like SlimStat or Google Analytics that the affiliate can install on his own website that tells him how many clicks he got on his link.

How To Choose The Affiliate Program


There are a lot of factors in choosing an affiliate program and I will be posting about these th-95in future blogs.  Here, I am going with the assumption that you know your niche, you’ve done your research on your competitors and keywords and have settled on the type of affiliate program you want.  Now, how to choose which affiliate program if you have multiple choices which you will more than not.  First and foremost, you should always check out the reputation of the merchant and make sure the products are good.  You definitely want to know they are reliable in making pay and backing up their products.

Commissions

You may think you should always choose the one who pays higher commissions.  Not true. If conversions are the same, then yes, maybe.  But, if they are not the same then do a little figuring.  If one merchant converts at 5% and pays $10 but another merchant converts at 1% and pays $30, then who do you go with?  The $10 dollar one.  Why?  Because out of 100 visitors, five bought and that’s $50 to you.  The other merchant’s 100 visitors only brought one sell and you made $30.  So, be sure and look at their converting rate.

Website

Of course, be sure to check out their website.  Make sure you can navigate easily and find what you’re looking for.  Check out their shipping and handling charges.  Some will sock it to the customer in that area and that will hurt conversions.  Just make sure the website is overall inviting and you’d be comfortable buying from them.

A Few More Things

Cookie duration is a biggie for me.  30 day cookie duration means if someone clicks on the merchant link from your site, then, you will get commissions if that person goes back and th-100buys at anytime within 30 days.  Some do 60 days and a few do 90 days but they’re not easily found.  Of course, the longer the better.  If you can find out their average order value, this would be good to compare.  Again, the higher the better.  And another biggie is to make sure they allow deep linking.  This means that you can send your visitor to the exact page the product is on and not just the home page and then leave them on their own to find the product.  You’re wanting to always make it as easy as possible for your visitor to buy!

Wrap Up


Hopefully, I’ve enlightened you on affiliate marketing and how it works and how to choose the best affiliate program.  I plan to go more in depth on this subject in future blogs so, please revisit my site or subscribe to get alerts of new blogs!

To learn more about affiliate marketing and building your own website and becoming an affiliate, read my review of a program that can lead you to success in this field.  Click here.

 

13 Replies to “How Affiliate Programs Work”

  1. Affiliate marketing is probably the best way to make money from your site if you are new in online marketing. For many blogs affiliate marketing is their main source of income .

  2. Hi,
    Well explained and in fairly simple terms. It took me a while to get to grips with affiliate marketing because every so called internet guru made it sound so complicated.
    Great to see it put in terms that everyone can understand.
    I would say that your best advice here is for anyone to make sure that you do your homework on any affiliate programme before joining. If a customer gets a bad deal when buying something, they will remember that it was your site they came through.
    Have you any tips on how people can find the best affiliate programmes to join?
    Regards,
    Eddie

  3. Hi Grant,
    I agree with you when choosing an affiliate program one must do their homework and factor in conversion. You don’t want to waist your time on programs that offer huge commissions, but you cant convert them. You can make a lot more money converting smaller commissions over and over than waiting for the big home run.

    1. Thanks Josh. This is correct, although, there are exceptions if you have a very specialized niche that has big ticket items. But, again, you need to do you’re research to make these worth your while!

  4. Hi Grant, This was a great article for me to read. And I learned something new. I had no idea about cookie duration and this is something that I will be on the lookout for.

    Many thanks

    Sean

    1. Glad to contribute to your learning! The longer the cookie duration, the greater chance you have of getting credit for the sale. It’s good to look at this aspect when choosing an affiliate.

  5. Hey Grant,

    Thanks for putting up this post. I really like the way that you have taken a very complicated concept and made it easy to understand.

    I also have to agree with you that it’s very important to make certain you choose a good niche right out of the gate, as it can be extremely frustrating to realize further down the road that you’ve picked a dud after spending hours creating your site.

    Thanks again for the great post. I’ll be looking for more in the future.

  6. Excellent post here. Affiliate marketing can be a very lucrative business.To do well in marketing, both traffic and the purpose of serving for the internet users are the main priority. For traffic wise, one can possibly sell their website for 5 figures if their websites are receiving a high amount of traffic just by investing in that website with a low cost. Additionally, one could receive high commisions for every referrals they make.

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