Affiliate marketing has become one of the most effective ways to advertise online. It is also one way for anyone with a website to make a profit online.
Affiliate marketing is an agreement between a merchant and a website owner (affiliate — and that's you!). You allow the use of your site for the promotion of the merchant's products by linking to the merchant's website. In exchange, the merchant pays a commission or fixed fee to you on all sales and/or leads generated by referrals from your site.
Affiliate marketing programs are described as a win-win situation. There are many benefits on the merchant's side. The merchant gets a wider market in which to advertise a product or service. Affiliate marketing will give the product or service the maximum exposure that it may not get with other traditional advertising techniques. The more affiliate sites a merchant has, the higher the traffic, which can convert to sales. Affiliate marketing is the equivalent of having an army of salespeople who will do the advertising for the merchant.
All those benefits are good for the merchant, but what about for you? What's your benefit in becoming an affiliate marketer?
- It is a fairly easy way to make some money. You can earn by having an ad or link to the merchant's website, which prospective customers will hopefully click and make a purchase. As soon as customers click on the ad on your website, they are redirected to the merchant's website and you get paid for the click or the purchase. The more referrals there are, the more profit for you.
- Affiliate marketing is an excellent way to earn money while at home. There are virtually no production costs. The product is already developed and proven by the merchant, and all you have to do is find as many prospects as you can to refer and who will purchase the product (your target market).
- Affiliate programs are usually free to join, so you don't have to worry about start-up costs. There are thousands of products and services you can choose from. You can find affiliate programs for every product under the sun. Surely, there is a product or service out there that is relevant to your website.
- In addition, the simplicity of affiliate marketing allows you to be an affiliate marketer at the least cost and the most comfort; there is absolutely no sales experience necessary and no inventory, order processing or product shipping worries. Most merchants provide the customer service support and some provide marketing materials.
- Another benefit of being an affiliate marketer is the minimal risk involved. If the product you are advertising is not making money, then you can drop it and simply choose another. There are no long-term binding contracts tying you to products that are not making money.
As an affiliate marketer, the opportunity is there to increase your income; and you can make a profit even if affiliate marketing is only a sideline business. Affiliate marketing is indeed one of the most effective business opportunities on the Web today.
The Different Types of Affiliate Marketing
Affiliate marketing programs have never been as popular as they are today. Why? The most probable reason could be the fact that today, both the merchants and the affiliate (that's you!) can see clearly that this type of marketing can work.
No longer is affiliate marketing considered an alternative method for the merchant. The merchant sees affiliate marketing as the chance to advertise products at a much lower cost. Affiliates see this type of marketing as an opportunity to earn profits online without having the typical start-up costs (like creating or getting products, inventory, fulfillment). For merchants and affiliates alike, affiliate marketing is now considered a main source of advertising and revenues.
So the question now is what type of affiliate marketing will work best for you? Are all affiliate marketing programs the same? Are the benefits the same? Are there affiliate marketing programs that work better than the others?
There are actually different types or classes of affiliate marketing. The most basic affiliate marketing programs fall under two categories: pay per click (PPC) and pay per performance (PPP). There are also tier-level affiliate marketing programs.
Pay Per Click (PPC)
PPC is the most popular type of affiliate marketing for you if you have a small website, and probably the easiest way for you to earn money. In this affiliate marketing type, the merchant pays you whenever a visitor is referred to the merchant's site, that is… whenever someone clicks through the merchant's banner or text ads, you get paid a certain amount even if the visitor you referred does not purchase anything from the merchant's site. However, typical payments (fees) for PPC affiliate programs are small, usually not exceeding a dollar for every click.
Pay Per Performance (PPP)
PPP affiliate marketing is the most popular among merchants and is also the most lucrative type for you. In this type of affiliate program, the merchant pays you only when your referral translates into an action, that is… whenever the visitor you have referred actually buys something from the merchant's site. This type of affiliate marketing can become one of the most lucrative types for the dedicated affiliate. Commissions in PPP affiliate marketing usually range from 15% to 20% of the actual product sales.
Pay-per-performance affiliate marketing can be further classified into two popular types: pay per sale (PPS) and pay per lead (PPL).
Pay Per Sale (PPS)
In a pay-per-sale type of affiliate marketing, the merchant pays you a certain fee whenever the visitor you referred actually buys something from the merchant's site. You are often paid on a commission basis, although some merchants would opt to pay a fixed fee. But no matter what the basis of the fee, it is generally higher than in a pay-per-click affiliate program.
Pay Per Lead (PPL)
The pay-per-lead type of affiliate marketing is a slight variation of the PPS type and is often used by insurance and finance companies and other companies who rely on leads for their company to grow.
In this type of affiliate marketing, you get paid whenever the visitor you referred to the merchant's site fills out an application form or any similar form related to the business of the company. Compensation for this type of affiliate marketing is based on a fixed fee determined by the merchant.
Single-Tier, Two-Tier, and Multi-Tier Affiliate Marketing
These types of affiliate marketing are based on the different levels or tiers in the affiliate network by which payments are made. In a single-tier affiliate marketing program, you are paid based only on the direct sales or traffic you have referred to the merchant. All the previously mentioned affiliate marketing types (PPS, PPL, and PPC) fall under the single-tier classification.
In a two-tier affiliate marketing program, you are paid for the direct traffic or sales that you refer to the merchant's site as well as any traffic or sales referred by other affiliates who joined that merchant's affiliate program through your recommendation.
Multi-tier affiliate marketing works the same way, and you get additional commission for a wider number of affiliates in different tiers in the affiliate network.
Residual Income Affiliate Marketing
In residual income affiliate marketing, you get paid for every customer you referred and who purchased something from the merchant's site. But… you also get paid whenever that same customer returns to the merchant's site and purchases something else. Compensation for this type of affiliate marketing is based on sales percentage, commission, or a fixed-fee basis.
Which type or types of affiliate marketing will work best for you? Now that you know the differences, only you can choose which ones will suit your goals. It's time to start affiliating!