Affiliate Program or Affiliate Marketing
Affiliate Program or Affiliate Marketing is a type of performance-based or pay for performance marketing or advertisement, where a business rewards one or more associates for each customer. In other words, it is an automated marketing program where a Web advertiser (or merchant) generally employs a webmaster (or affiliate) for managing the website and place his or her ads on the webmaster’s own website. These webmasters or Admins of the hosted website receives a commission from the net sales when a customer has clicked on the link to carry out their desired actions (either to make a purchase or to fill out a form, etc.).
Structure of the program
This trade consists of four major troupes:
- The advertiser = one who is renting out the website (or product).
- The network = the program through which the marketing process takes place and means of payment for the associate.
- The affiliate = one who is being employed by the advertiser to rent out their product for the marketing purposes.
- The customer = the end user of the product being marketed (or the website).
An affiliate can choose from different schemes available and as provided by the advertiser over the network. There are three major types of payment schemes available so far an affiliate can choose to work from. These are as follows:
- pay per sale
- pay per lead
- pay per click
These are discussed below:
The merchant or advertiser pays the affiliate based on, the conversion rate (percentage of people who takes the desired action) of sales. Simply put, if a customer follows the affiliate link and carries out the desired action in accordance with the affiliate agreement (terms of service between the advertiser and affiliate), then only the affiliate is paid and this payment is totally based on the conversion rate of sales that is fixed in the agreement (it may change over time). The commission earned is higher but the conversion rate is the least in this case.
Here, the conversion of leads (such as downloading a file, completion of a newsletter sign-up procedure, or any other desired action) is the basis on which the merchant or advertiser pays the affiliate. Just like before, the affiliate is paid when the customer follows the link to the merchant’s site to complete the desired action as per the affiliate agreement. Once again, the payment conversion rate is fixed, in the agreement beforehand and is subject to change as per market trends.
In this case, the affiliate is paid the agreed upon pay-per-click rate whenever a customer clicks on the link regardless if a purchase (sale) is made or not. Internet publishers (affiliates) use it to price online ads. The merchant, typically, bids on a keyword so that the PPC rate changes. The site Admin or affiliate usually sets a fixed rate per click is known as the cost-per-click (CPC).
How does an affiliate program work?
Affiliate marketing is best for those who own a website or blog and is looking for a way to earn revenue from it.
Generally, affiliate marketing offers some revenue sharing plans to affiliates such that it lets the affiliates place the merchant’s advertisement on their own websites or blogs and in return earns commission from the plans or schemes offered by the merchants. I have already discussed these plans above and they are pay-per-sale, pay-per-lead, and pay-per-click.
These ads can be banner ads, buttons or any other form of advertising media. Affiliates receive the commission when a customer follows the affiliate link to access the merchant’s site and carries out the desired action that is drafted in the affiliate agreement (terms of service between the advertiser and the affiliate). These actions can range from purchasing a product to filling out a newsletter form or a feedback mechanism.
Some plans enable the affiliates to place hyperlinks (both image and text or anyone at a time) to a site, whereas others allow affiliates to set-up a shopping or store page offering products related to the ad’s content. Others still, allows only for placing banner ads or buttons on the sites.
The affiliate payout also varies from scheme to scheme as different schemes pay different conversion rate like the conversion rate of sales for the pay-per-sale scheme. Similarly, for the pay-per-lead scheme, the conversion rate of leads decide the payout in that scheme and cost per click calculate the payout for the pay-per-click scheme.
These rates are fixed at the beginning of the affiliate agreement. However, these are subject to change based on the current market trend and demand.