Introduction – by offering the proportion of the margin of your product or service to a large number of affiliates, you can dramatically boost sales albeit at a lower overall margin rate. By sharing the profits of a sale with other websites, it is possible for webmasters to generate higher sales volumes. By devising an attractive affiliate scheme and promoting and implementing that scheme in a professional manner, it is possible to generate thousands of website visitors using an affiliate of channel online. Search engines become less relevant if affiliates are sending your website the bulk of its traffic. Amazon.com is one of the pioneers of this business model selling million of books via ten’s of thousand’s of Amazon affiliates. Today, affiliate marketing is a very well established method of selling online. The main advantage of affiliate marketing is high sales volume with nominal sales effort at an extremely low cost. The main disadvantage is much lower margins, (as affiliates need paying commission to remain motivated).
What is an Affiliate Program? – an affiliate program is a contractual arrangement between the owner of a product or service (the Merchant) and a separate ‘Affiliate’ organisation, to pay a commission, in exchange for promotion of its goods and services. Typically, this entails an affiliate website adding advertisements (in the form of banners, buttons links and other textual material) promoting the Merchants offering. There are literally thousands of different affiliate programs in existence on the Internet today. It is usually the responsibility of the affiliate to redirect visitors to their website to the merchant’s website. At that point any customer service issues (such as ordering a product, dealing with customers on telephone delivering issues) are dealt with by the Merchant.
Affiliate schemes are normally automated and structured. Affiliates must pre-agree to abide by the merchant’s terms and conditions when signing up before entitled to promote anything. For instance, Merchants make it a condition that affiliates do not alter the Merchant sales copy to avoid any potential accidental or deliberate misrepresentation (and ultimately customer dissatisfaction). Affiliates usually have a unique tracking ID associated to their registration or website. By adding this html code to their site, Merchants can track where each individual sale came from. The tracking html is usually combined with a cookie or CGI script to allow the Merchants Affiliate Tracking system to collate a database of visitors and sales. It is normal that affiliates get paid one month in arrears and have an access to a monthly report outlining leads, sales and conversions. Affiliates are primarily motivated by money and so they are usually very interested in knowing the conversion rate of the Merchant.
Merchants benefit hugely from an affiliate marketing model as there is a virtual unlimited supply of keen entrepreneurs seeking out business opportunities to make money (in exchange for promoting an online business idea). Most affiliate schemes operate in a commission scheme based on payments monthly in arrears, payable from the merchant to the affiliate of either via PayPal or an alternative independent escrow service, or check in the post. Some merchants exclude or reject applications from prospective affiliates who do not meet their guidelines for type of website, physical location or regulatory approvals (particularly in Financial Services). The main benefit of an electronic affiliate business model is that it is completely scalable – it is possible to recruit an unlimited number of affiliates to promote your product and the cost of doing so can be negligible.