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Affiliate Marketing Understanding The Business Concept

Updated on March 14, 2013

Why It's Important To Understand How It All Works

Getting started in affiliate marketing today requires time and patience.

Hi and welcome my name is Ron and I am a 12 year veteran of affiliate marketing.

You need to know what the best platform is to launch your business as well as what products and services to promote.

So how to do find these products and services to sell?

How do you know what the right platform is to get started?

Having the right information before you start is crucial with affiliate marketing. This information will allow you to set up a site and be earning money 24/7. what you need to do first is just learn a little about affiliate marketing then everything else will fall into place.

With so many strategies and opinions in the affiliate marketing industry it can be confusing as well as frustrating to any new entrepreneur, understanding the concept and the basics will give you a huge head start.

So What Is Affiliate Marketing All About

In basic terms affiliate marketing is where you are selling some one else's product or service for a percentage of the sale sale price.

There are different ways to accomplish this by either writing articles, reviews or through banner or text link ads placed on your affiliate website.

Once a visitor clicks on those links and performs the required action like purchasing a product or entering specific details you will earn a commission. Affiliate marketing is the most effective way for vendors to advertise their products or services, as the affiliate will only receive compensation after a specific action has been completed.

How Does Affiliate Marketing Work?

Affiliate marketing needs to be treated just like any other business, if it's not then the chances of success are reduced greatly.

This means that you need to start with your own hosting and domain name not a free site.

Then you need to find a suitable product or service to product through one of the many affiliate networks available, we will talk about affiliate networks further down the page.

For example, you need to create a website around a selected niche. Lets say it is on baby showers, where you are planning to promote an eBook that helps people host a baby shower party. You now need to start adding content to your site about baby showers so you can add links and banners to that product so you can make a commission.

Depending on the terms associated with that product each time someone buys the eBook you will receive a percentage of the sale price.


What Were Some Of The Earliest Companies That Used Affiliate Marketing?

It is said but not really confirmed that the first instances of affiliate marketing were used in the Adult Entertainment industry which was a cost per click campaign, much like CPA marketing.

Following their success with this marketing model other companies such as BuyWeb and CDNOW adopted this marketing strategy as well.

The first of the more known companies to use this marketing strategy was Amazon in July 1994 where it launched its own in-house affiliate program. Even though the commissions are very low in comparison to other companies after all this time Amazon is still a very popular choose for many affiliates today.

Amazon works the same way that every other affiliate program works where the visitor clicks a tracked link on your site performs an action such as a purchase and you as the owner of the affiliate account receive a payment.

Do All Online Business Use Affiliate Marketing?

The quick answer here is NO.

This is more or less the decision of the company and its marketing team to decide. A rule of thumb is this, most bigger companies will have some form of affiliate marketing associated with the marketing strategy. Those companies that are smaller or have no real marketing resources will be the ones that do not use this marketing technique.

You will also find that the small websites that are really only one man operations will also not have affiliate programs. The reasons for this are many but the main one would be a lack of understanding about how powerful this marketing model can to their business success.

Why Does Affiliate Marketing Only Seem To Be An Online Marketing Technique?

As an outsider looking in you would assume that affiliate marketing is nothing more than a Multi Level Marketing scheme, however you would be wrong.

To first clear up this misconception about affiliate marketing you need to understand that MLM relies on getting people to join the network where affiliate marketing relies and making sales.

And with more and more people turning to the internet it all makes sense.

The online companies that use affiliate marketing do it for one simple reason. That is to attract as much targeted traffic as possible to their offer, being a product or service.

To do this with a traditional store it just would not work, there is no way to track who is referring who and people would not openly tell you who referred them so in a traditional business environment affiliate marketing just does not work.


Should You Use A Blog Or A Traditional HTML Website?

Traditional or what you would call a static website are fast becoming obsolete, more and more businesses online are realizing the power of blogging.

Blogs such as Wordpress, which by the way is the preferred platform for nearly all affiliates are the most popular methods to launch an affiliate business. The reason for this is simple, first they are easy to use and add another level of interaction where you can actually communicate with your website visitors helping to build trust and credibility.

They are also very easy when building social influence online using the social networks.

The power of the blog makes it very easy to get indexed, you simply need to set yourself a schedule and then start writing related content to place on the blog, however to make sure you are providing quality the content needs to be unique just like any information you place hear on Hubpages.

Another very positive aspect of blogging is the amount of free tools available for marketing a site in the way of WP Plugins there are literally thousands of them to choose from.


What Are The Commission Rates Used In Affiliate Marketing

There are many different commission leaves and ways to make commission with affiliate marketing from pay per sale to cost per acquisition just to name a few.

The concept goes like this, if some buys a product or performs an action via your affiliate link you will be given a percentage of the sale or a predetermined amount of commission depending on the affiliate program you are participating in. This also works when we speak of another form of affiliate marketing which is Pay Per Lead, for every lead you send to a company you will receive some form of compensation.

The third common way is a pay per click campaign. This method generally pays the least amount. You get paid when someone clicks the ad on your page.

The percentage rates can vary from affiliate program to the next and in some cases such as Clickbank the commission rate can be as high as 75% this is set by the vendor. In my experience the two lowest paying affiliate programs are Commission Junction and Amazon. This is not to say however that they are not worth pursuing as an additional income stream.

What Is the Difference Between Flat Rate Commissions and Multi-Tiered?

This is another aspect of affiliate marketing you need to consider. As we discussed above there are different levels of commission payable depending on the affiliate program you join.

There is also another option which allows you to recruit affiliates in a mult-tier structure where you can also receive commissions whenever they make a sale from there affiliate links.

The commission rate is much lower simply because the primary affiliate being the one that made the actual sale needs to be compensated first at the agreed percentage rate and then you will receive a small payment usually around 3 to 5 percent of the sale.

This type of marketing has been very successful for some and can lead to long term affiliate income depending on the effectiveness of the affiliates you have recruited.

As A Business Owner Should You Have Your Own In-House Affiliate Program

As a business owner there is no better way to have a business virally marketed across the internet. First however, you need to consider your budget and whether or not this is a viable exercise to undertake.

You will need to supply your affiliates with creatives in the way of email newsletters, banner ads and even different landing pages for split testing. Some vendors even supply a series of articles that can be used in the marketing of the affiliate product.

If you are completely new to the internet and have only just started an online business then maybe it is not wish to jump into affiliate marketing straight away. Take the time to do some research first and put a side a budget so that you can support the affiliates when you do decide to launch an affiliate program.

If you go with the more widely known affiliate websites such as Commission Junction, ShareaSale, JVZoo or even ClickBank, you will be able to use their affiliate program structure and still reap the benefits of having an army of affiliates working for your business.

So it really comes down to the size of your company and of course the budget.

What Are Some Of The Popular Affiliate Networks

There are actually some very widely known affiliate programs that are open to all website owners. One of the biggest and probably the most well-known is of course

However you can also find affiliate programs available for Walmart, Barnes and Noble, and also specialized affiliate companies that you can find through an affiliate network. Some of the most common affiliate networks are Commission Junction and Clickbank however others that are gaining momentum with affiliate marketers include ShareaSale and JVZoo..

Have You Tried Your Hand At Affiliate Marketing?

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