Affiliate Marketing

Affiliate Marketing is the activity which happens as a result of a relationship between two players – 1) the Merchant (also known as the advertiser, or partner), and 2) the Affiliate (also known as the publisher). If we look at the Affiliate Program as a whole, we must bring in an additional entity, the Customer, as well.

The Merchant makes available the product for purchase, and the Affiliate tries to sell that product for the merchant and/or send traffic back to the merchant’s website. In return, the Merchant pays the Affiliate a commission for sales and/or agreed upon performance measures.

Payment Arrangements

Commission agreements are generally performance-based (which is a form of risk mitigation by the Merchant) and arrangements are commonly structured as Pay Per Click (PPC), Pay Per Sale (PPS) and Pay Per Lead (PPL) – or some mixture.

Affiliate Marketing Groupings

If we look at affiliate marketing in terms of depth, we have three distinct groupings: 1) single-tier, 2) two-tier and 3) multi-tier programs.

Single-Tier Affiliate Programs

In Single-Tier Affiliate Marketing, the Affiliates get the commission, only for driving visitors or sales to the merchant’s site. Pay/performance and pay/click are included in this category.

Two-Tier Affiliate Program

In Two-tier marketing, the Affiliate gets paid commission for every action performed by the people he’s referred directly, 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 earns both directly and indirectly.

Multi-Tier Affiliate Program

Multi-Tier Affiliate Marketing is very similar to Two-Tier Marketing, but here, the Affiliates get paid for the sales made by their downline in multiple, unlimited, tiers.

Residual Income Program

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

In Residual marketing, Affiliates get the commission for every sale that his referral makes at the Merchant’s site. The only requirement is that on the first time visit, the person should come from the Affiliate’s pre-defined affiliate link. Then, whenever the same person returns to the Merchant website (even without using the affiliate link), the Affiliate will be paid for every sale performed by the visitor.

Cookies make this strategy work. A “cookie” is stored on the first-time visitor’s computer. This cookie stores 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:

The Merchant gets greater market exposure and market penetration, attracting customers that would otherwise be outside the Merchant’s market reach.
The Affiliate earns a commission for online sales, without needing to establish a full e-commerce site or having to manage inventories and fulfill orders.
The Customer acquires desirable and useful products that s/he would otherwise not find – at least not easily.

Properly done Affiliate Marketing is a Win-Win-Win situation.