Affiliate Marketing – Definition & Importance

What Is Affiliate Marketing?

Affiliate marketing involves an association between two parties – 1) the Merchant (aka the advertiser, or partner), and 2) the Affiliate (sometimes called the publisher). If we think about the Affiliate Program as a whole, we must include a third party, the Customer, as well.

The Merchant offers the product for sale, and the Affiliate tries to sell that product for the merchant and/or drive traffic to the merchant’s website. In return, the Merchant pays the Affiliate a commission for sales and/or contracted results.

Commission Arrangements

Commission plans are typically performance-based (which effectively shifts some of the risk from the Merchant to the Affiliate) and arrangements are regularly structured as Pay Per Click (PPC), Pay Per Sale (PPS) and Pay Per Lead (PPL) – or some combination.

Affiliate Marketing Classes

If we look at affiliate marketing based on depth, we have three clear classifications:  1) single-tier, 2) two-tier and 3) multi-tier programs.

Single-Tier Affiliate Marketing

In a single-tier affiliate program, the Affiliates get the commission, only for driving visitors or sales to the merchant’s url. Pay/performance and pay/click fall within this category.

Two-Tier Affiliate Marketing

In Two-Tier Affiliate Marketing, the Affiliate gets a commission for every action performed by his direct referrals, plus he gets paid additional commission when one of the people he’s personally referred gets the commission.  Thus, he has a two-layer commission structure and the Affiliate gets paid both directly and indirectly.

Multi-Tier Affiliate Program

Multi-Tier Affiliate Program is very similar to Two-Tier Marketing, but here, the Affiliates get compensated for the sales made by their affiliated affiliates in multiple, unlimited, layers. 

Residual Income Program

In Residual Income Affiliate Marketing, the Affiliate is rewarded for every sale that is made by a person referred by him.

In Residual marketing, Affiliates get paid for every sale that his referral makes at the Merchant’s website. In order for this to work properly, the first time, the visitor must come from the Affiliate’s authorized affiliate link. Then, whenever that person visits the Merchant website (even without using the affiliate link), the Affiliate will be paid for every sale completed by the visitor.

Cookies are what make this strategy work.  A “cookie” is created on the first-time visitor’s computer. This cookie reflects the affiliate id of the Affiliate. Cookies typically expire after 3 months; however, some may be effective longer. 

Whenever a visitor visits the Merchant website, the visitor’s computer is checked for any previously created cookie. If a cookie is found, the affiliate id is retrieved from it and the Affiliate gets credited for any purchase made by the visitor.

Win-Win-Win

As long as the affiliate marketing relationship is well-planned and well-executed, everyone wins:

1. The Merchant gets increased market exposure and market penetration, attracting customers that would otherwise be outside the Merchant’s market reach.
2. The Affiliate earns a commission for online sales, without the hassles involved with establishing a full e-commerce site or having to manage product inventories.
3. The Customer obtains desireable and useful products that s/he would otherwise not find – at least not easily.

Properly done affiliate programs are Win-Win-Win situations.

If you like what you’ve just read, and would like to learn how to leverage your efforts, put your income on autopilot, and become a millionaire, get the FREE Infinite Income Plan report here. Follow me on Twitter: @MaxProMe.

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