Affiliate Programs - Additional Revenue Streams For the Online Businesses

What Is Affiliate Marketing?

Affiliate marketing is the activity which happens as a result of a business relationship between two parties - 1) the Merchant (sometimes called the advertiser, or partner), and 2) the Affiliate (sometimes called the publisher). If we consider the Affiliate Program in its entirety, we must include an additional actor, the Customer, as well.

The Merchant gives the product for sale, and the Affiliate works to sell that product for the merchant and/or refer visitors to the merchant's site. In return, the Merchant agrees to pay the Affiliate a commission for sales and/or specified activities.

Commission Arrangements

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

Affiliate Marketing Types

If we evaluate affiliate programs in terms of depth, we have three separate classifications: 1) single-tier, 2) two-tier and 3) multi-tier programs.

Single-Tier Affiliate Marketing Programs

In Single-Tier Affiliate Marketing, the Affiliates get paid commissions, but only for the visitor's traffic or sales to the merchant's url.

Two-Tier Affiliate Marketing Program

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

Multi-Tier Affiliate Marketing Program

The multi-tier marketing 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 Marketing Program

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

In Residual marketing, Affiliates get rewarded for every sale that his referral makes at the Merchant's website. In order for this to work properly, the first time, the person should come from the Affiliate's pre-defined affiliate link. Then, whenever that person visits the Merchant website (even without using the affiliate link), the Affiliate will be paid for every sale made 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 commonly expire after 3 months; however, some may persist beyond three months.

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

When the affiliate marketing relationship is well-planned and well-executed, everyone wins:

1. The Merchant gets increased visibility and market penetration, finding 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 learns about, and can readily access desirable and useful products that s/he would otherwise not find - at least not easily.

Good Affiliate Marketing is a Win-Win-Win situation.