About Affiliate Marketing
In a nutshell, affiliate marketing is the name of an online business model wherein one particular website owner (named as the affiliate) allows the use of his site for the promotion of business (products) of another merchant by linking to that merchant’s website. In exchange, the first merchant pays a commission to the affiliate for every generated sale. In affiliate marketing, both merchants help each other earn.
This arrangement is one of the most popular among website owners and is often referred to as a win-win situation. For the first merchant, his advertising arm gets wider and longer with affiliate sites all over the net. These affiliates, on the other hand, do not need to produce any product to sell and do not need to pay anything at all for the privilege of being an affiliate.
In a shorter version, the merchant has his profits, the affiliate has his commission and the customer gets the merchandise he wants.
Affiliate benefits
The affiliate merchant’s main benefit is the amount of commission he gets. Since he can be doing affiliate businesses with other merchants (selling other products), selling merchants vying for the services of the affiliates usually include juicy sweeteners into their arrangements (hefty commission percentages, bonuses, and other perks).
The affiliate merchant can also earn by the direct ad placements on their site by direct merchants or another affiliate merchant. There is also the other business of product reviews and pay-per-click methods of selling.
These (and any combinations thereof) usually perk the interest of prospective customer-visitors of the site. As soon as the customer clicks on the ad on the affiliate’s site, he is redirected to the merchant’s website for his purchases, if he so decides.
Once a conversion is made (a consummated sale), the affiliate merchant gets his big cut in the sales pie. The more referrals there are, the more profit goes to the affiliate.
Seller benefits
Affiliate marketing is popular on either ends of selling – that of the main merchant (selling partner) and the affiliate. For the online merchant who has the products to sell (which he may or may not have produced himself), the conditions are also lucrative.
With a bunch of affiliate merchants connected to his site, the main merchant enjoys the privilege of free and wider advertising reach which he (through his site) can never hope to reach alone. The main point is that he enjoys advertising and exposure (which are very expensive in the real world) with the least expenses.
Ad spending
He plows them back into his advertising efforts by adding more amounts into the commission and bonus packages to his affiliates. This effort prods the affiliates to work some more into their own efforts to expose the main merchant’s product in the hope of more sales (and more commissions for them).
This is not so much of a sacrifice for the main merchant because his merchandise is mostly digital products. In today’s technically-driven world, the production costs of these digital products are very minimal (mainly man-hours spent on programming, design, etc.) compared to say, manufacturing a car and selling it.
Lowered ad costs
The ad costs of the main merchant go further down if his affiliate network gets bigger and the number of his affiliates goes up. This would mean more and more advertisers and bigger and bigger exposure online.
The other point in affiliate marketing is that the affiliate marketers are, in effect, shouldering the advertising and promotions cost of the seller merchant’s products. This is of no concern again because of the massive commissions and bonus packages the seller-merchant offers to his affiliates.
Another aspect of the seller advantage can be gleaned if we compare the arrangement with the old door-to-door selling technique before. Affiliate marketing does it better because unlike the old salesmen who only do the selling, today’s online affiliates of the seller-merchant also handle, in effect, their product’s advertising and promotion.
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