What Is Affiliate Marketing And Does It Work?

By   May 31, 2016

What is affiliate marketing and does it workAffiliate marketing is one of the most popular ways to start an online business and its popularity growing steadily. Mainly, it because its benefits become obvious to people who want to work from home or to run their own business from any place they are feeling comfortable to do it from. And the number of these people is growing. But what exactly Affiliate Marketing is and how does it work?

What is Affiliate Marketing and does it really work?

Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts. The industry has four core players: the merchant (also known as ‘retailer’ or ‘brand’), the network (that contains offers for the affiliate to choose from and also takes care of the payments), the publisher (also known as ‘the affiliate’), and the customer. Wiki

As you can see from this definition, Affiliate Marketing is the type of business where affiliate (or publisher) is getting rewarded by merchant (or vendor, or retailer) for presenting their products or services to a potential customer and causing him to take a specific action ( usually, to buy the product or service) by following their affiliate link. In other words, when you click on “Buy Now!” button with an affiliate link embedded your browser receives a cookie that lets merchant know who has referred you to him. Don’t worry, this is not increasing your cost of that product, the affiliate commission is paid with the money that otherwise would be paid for other types of advertising.

This situation is obviously beneficial for all parties involved.

Merchant is happy to save money and time on marketing. To promote his product or service he otherwise needs to hire marketing team and train them. He also needs to pay for advertisements. When he decides to delegate marketing efforts to affiliate he can pay just a fraction of these expenses for affiliate’s commission.

Affiliate is happy because he is getting the opportunity to make money by selling someone else’s product or service that is already in demand without investing much money in his own business.

The customer is happy because he is buying a product, the cost of which is often lower than regular retail cost. Also, in most of the cases, he is learning valuable information about the product he buys before spending money.

I will explain practical ways to make money with affiliate marketing later in this article.

Types of affiliate marketing.

Two most popular types of affiliate marketing compensation are PPC (Pay Per Click, sometimes called CPC- Cost Per Click, from merchant’s point of view ) and PPA ( Pay Per Action).

 

  • PPC.

 

This is the most popular type of affiliate marketing for affiliates with limited internet traffic. It is because this is the easiest way to make money for those whose websites are not attracting hundreds and thousands of visitors per day yet.

In this type of marketing, the affiliate receives his commission from merchant whenever referred visitor clicks on affiliate link even in the case when he doesn’t buy anything. The compensation amount in these cases are small and measured in cents per click, rarely exceeding one dollar. But because it is a proven way to start affiliate’s career it is quite popular.

 

  • PPA.

 

As the abbreviation suggests, the affiliate gets compensated when the visitor who clicks on his link takes a specific action, usually makes a purchase. Some other actions may include visitor leaving his information or otherwise engaging with merchant’s website. The compensation amount, in this case, is higher than in a case with PPC but it happens less frequently thus it is not automatically transferred in higher revenue. However, it may become an attractive compensation type for an affiliate with serious intentions who is aiming to achieve a higher income.

This method is favored also by merchants because they prefer to receive the result they can cash out or otherwise monetize on.

PPA can be split up into two separate types of compensation- Pay Per Sale or PPS, and Pay Per Lead or PPL.

In PPS merchant pays affiliate the commission, usually measured in percent from the total sale amount when the visitor actually commits to the purchase. This commission varies from merchant to merchant  but it may reach 20%-30 % and higher.

In PPL affiliate’s compensation is paid when the visitor leaves a lead for a merchant that can be used in the future to contact this person on the regular basis, providing him with merchants offers. In most of the cases, the visitor is presented to fill up the form, providing some of his personal information, such as the name and the email address.

Why choose affiliate marketing for your online business?What is affiliate marketing and does it work 2

There are certain benefits of becoming an affiliate marketer and some of them were already mentioned above. Let’s review just a few of these benefits:

  • You don’t need a lot of money for initial investment to start your business;
  • You don’t have to create and/ or manufacture your product;
  • You are promoting products that are already in demand;
  • You don’t need to rent or lease office (you can work from your home);
  • You don’t have to deal with customers ( merchant does);
  • You don’t have to deal with stocking and shipping;
  • Once you’ve set your business up properly you can earn money 24/7 365 days a year ( do not understand it- “by doing nothing”.)

Affiliate marketing is a legit type of business and some people, like Pat Flynn, are making six and seven figure per year. But it takes time and proper training to master required skills and many beginners are making same critical mistakes that prevent some of them from seeing any income at all.

Make a note- in 2014-2015 retail sales period, online sales accounted US $1.3 TRILLIONS in total sales which is equal 6% of the world’s retail sales. This number is expected to grow to 9% equal to $2.5Trill by 2018.

Take this numbers into consideration.

Different ways to earn money with Affiliate Marketing.

Affiliate marketing can be implemented in various ways. There is a different approach in each way and all of them have their pros and cons.

  • The first major way is to present your affiliate links to people via any advertising platform, free or paid. You can choose multiple advertising channels in hope that someone will click through your link and this brings you a commission.

This way attracts many affiliates because this way they don’t have to spend time on building a website and gaining the trust and authority some other methods require. Some people are afraid that they won’t be able to create a profitable blog or website, don’t have skills or the time and will to learn.

This model is not a business model at all. You don’t build your business this way. This is the hard, continuous work and there are extremely little potentials to grow.

Another  downside of this way of making your affiliate money is that there is a risk of your advertising expenses to exceed your commission earned and you’ll begin to lose money instead of making them. Of course, there are plenty of free advertising platforms, like Classified Ads but not all of them allow affiliate links posting and the level of exposure with free platforms is lower than with paid ones.

  • The second major way is to place affiliate links on your online property, whether it is a blog, website or a fan page. In this way, you have an established online presence related to your affiliate niche and an audience you’ve built trust with.

An example of this approach is when you run a blog about, let’s say, computers and ways to handle them. You place affiliate links for Best Buy products, computer tutorials and other types of gadgets on your site’s sidebar, footer and through the texts in the form of banners or Call To Action buttons.

Because you have a site and you have an authority your audience will trust your decision to place the ad there and you can expect a much higher level of your visitors’ engagement.

  • The third way to run your affiliate marketing business is to promote products and services you’re actually using or have an experience with not through affiliate banners but through your content explaining benefits of these products and services in a natural way as a part of your story.

Your level of engagement with this product makes it even more attractable for your audience but, at the same time, it is raising the level of your responsibility for the qualities of product or service you recommend.

It makes this type of affiliate marketing the most preferable both for responsible marketers and for customers. Being honest and providing quality content the marketer builds the ground for his long- term business to bring him a profit for years to come. And customers are getting the valuable and interesting information they know they can rely on.

This method is quite the opposite to the first method when customers don’t even suspect that you exist and to using money in order to make money. This is about using your authority and trust to convince others to follow your recommendations and engage in the transaction you will benefit from.

Can affiliate marketing bring you a residual income?

 

“Residual income is when you continue to get paid after the work is done…Residual income comes from building an asset that continues to pay you after the work has been done.”- Life Hack.

An affiliate can build his residual income getting paid not just once when customer engaged with merchant’s website. In some situations affiliate also gets paid when the customer he has referred returns to merchant’s site and commits to another transaction. Or, as another example customer can purchase a subscription for which an affiliate will continue receiving his commission as long as customer retains the subscription. How long do you stay with your wireless service provider? I was staying with the same provider for 15 years. Imagine if you were the guy who sold me my subscription? That is nice to know that all these years you will be receiving your commission on the regular basis.

What type of marketing would be right for you?

All types of affiliate marketing require the different approach and have their own pros and cons. Anyone must choose the right type of marketing that meets his particular qualities and situation as well as the current trend in the industry in a whole.

Most of top earning online marketers are tending to use the third way which includes involvement with the product and providing a quality content related to that product. They understand the long- term benefits of building an authority and trust with their audience and that the time spent on achieving it will pay back well.

“Ok,” you will say, “I’m interested in starting my affiliate marketing business. But how do I find products to promote?”.

Actually, there are plenty of products you may sign up for as affiliate to promote. Practically any product around you needs to be promoted. You just need to take a creative approach to searching for affiliate programs and hundreds if not thousands will pop out.

  • You may think of your favorite products and services you are already using. Go to the manufacturing company’s website and look for “Affiliate”, or “Affiliate program”, or “Work with us” which are usually located at the bottom of the page;
  • Open your Internet browser and type “(product name)+ affiliate” into the search box. It will display names of affiliate programs for named product and you just need to research which one of them will fit you;
  • While surfing the Web take a note of promotional banners and links on pages you’re visiting. Look for ones that you feel you might be able to promote, follow these links and find the source page. Look for “Affiliate program” links;
  • And finally, you can join one or more affiliate networks and choose from hundreds and thousands of affiliate campaigns they offer to you. Affiliate networks are middleman companies that connect merchants with affiliates. They provide a great place to look for affiliate products to promote because there are various campaigns available and your choice is practically unlimited. Some companies like Amazon have founded affiliate programs of their own offering multiple products to promote.

How to start?

Well, if you feel that affiliate marketing is worth your shot, you may want to try it for yourself. And the right way to start the new business would be to get an adequate training.

There are thousands affiliate marketing training programs available around the Web. most of them will charge you a fee, whether a one-time or in the form of subscription.

To my opinion, a one- time fee can present a better deal in case if you already have a solid knowledge and skills and know exactly what you need to improve them.

On the other hand, if you are only to establish your business the ongoing subscription would be a better choice because it will usually lower your one- time payments and allow you to receive an ongoing support and training relevant to your starting level.

I may recommend you to take a look at Wealthy Affiliate University program- the program I’ve chosen after trying many other programs. One of the advantages Wealthy Affiliate University offers is the FREE Starter Membership, which is really completely free and it is the permanent membership (not a limited time trial) and they won’t even ask you for your credit card information. Read my review and choose which program is right for you by yourself.

I hope I was able to answer the question we’ve asked at the beginning of this article- What is Affiliate Marketing and does it work? If you have any question regarding an information in this article ar would like to share your opinion I encourage you to do so in the “Comments” section below this post. Thank you for reading and have a great day!

12 Comments on “What Is Affiliate Marketing And Does It Work?

  1. Brian

    Great content here this is hat everyone needs to know if your not an affiliate of a solution that benefits you personally yet you need t get on it.

    1. Kirill Post author

      Hi, Brian! Yes, affiliate marketing can be beneficial to all parties involved if it delivers a solution to someone’s problems. Otherwise, it is another instance of a push- sale, which, unfortunately, is not going to go away anytime soon.
      Thank you for sharing.

  2. Sam

    Whoa, very informative post with tons of great information. I actually learned about affilaite marketing things I didnt know before, thanks a lot for this post.

    I am a believer that with the right dedication and consistency a full time income can come from affiliate marketing.

    Thanks again.

    1. Kirill Post author

      Sam, you’re absolutely right- the right dedication and consistency can make anything working. In most cases when people fail to reach a profitable state in their affiliate marketing business, they do not treat it seriously enough- I mean that you need to learn it like you need to learn any other new trade- consistently and with dedication. Hoping it will work “on autopilot” like some people promise won’t do a trick.
      Thank you for sharing with us.

  3. larry

    Great information! The get rich quick plans that are advertised do not work. A solid Affiliate Marketing business takes time and patience to build. Your article was well thought out and explained. Thank you.

    1. Kirill Post author

      Get rich schemes work for some people- the ones who build them. and even then, it takes them years of experience to learn how to build these schemes. Thank you, Larry, for sharing.

  4. carl

    I would like to start affiliate marketing but I am unsure of which type of product to promote.

    How can I decide what product to promote?

    Any ideas?

    1. Kirill Post author

      The best way to start choosing the product to promote is to find an area you/re very familiar with and have an extensive knowledge about. This will allow you to create your content freely and make it the most interesting and valuable for your audience, making this part of your job much easier for you. And to select the particular product you need to get familiar with affiliate networks (Clickbank, Commission Junction etc) and look for products matching your criteria. Check my other article for more details on choosing your niche http://yoursmartincomesource.com/how-to-find-a-niche-market-for-your-online-store. Hope it will answer your question, if not- return here and I will elaborate on your question in deeper details.
      Thank you.

  5. Joana

    Hi Kirill,
    This a great article. I am new to affiliate marketing, and you gave me a lot of clarity in explaining how it works. I did not know the difference about PPC and PPA. I kind of thought there is only the pay per sale comission.
    That 3% jump from 6 % to 9% in the world retail sales is a quiet a big jump, meaning that everyone should learn how to do it. Thank you for sharing, looking forward into more information. I have read the other blog post about the mistakes as well. Thank you for it’s educational value.

    1. Kirill Post author

      Hi, Joana. I’m glad you’ve learned new important info. There is lot more about an affiliate marketing that wasn’t covered in this article. Stay tuned and I’ sure you’ll find more valuable new info here that will help you in making your business decisions. Especially, as you’ve noted, the online sales are on the rise and that’s very promising news for affiliate marketers 🙂

  6. Jenny

    Really good article about affiliate marketing!! If you are a beginner, this helps a lot to understand what it is. Thanks for sharing! I will definitely come back to check it again.

    1. Kirill Post author

      Thank you, Jenny! You’re always welcome to visit my blog and I hope you won’t be disappointed at any single time!

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