Definition of Affiliate Marketing

Affiliate marketing creates a connection between multiple actors:

1) the Merchant (aka the Advertiser, or Partner),

2) the Affiliate (aka the Publisher), and

3) the Customer – If we consider the Affiliate Program in its entirety, we must include another actor as well.

The Merchant makes available the product or service for sale, and the Affiliate attempts to sell that product for the merchant and/or refer visitors to the merchant’s website. As a result, the Merchant gives the Affiliate a commission for sales and/or contracted results.

Commission Arrangements

Commission agreements are generally performance-based (which is a form of risk mitigation by the Merchant) and arrangements are often structured as Pay Per Click (PPC), Pay Per Sale (PPS) and Pay Per Lead (PPL) – or some mixture.

Affiliate Marketing Groupings

If we divide affiliate marketing in terms of levels, we have 4 different classifications:

1. single-tier,
2. dual tier,
3. multiple tier, and
4. residual income programs

Single-Tier Affiliate Programs

In Single-Tier Affiliate Program, the Affiliates receive the commission, only for driving visitors or revenue to the merchant’s site. Pay/performance and pay/click fall within this level.

Two-Tier Affiliate Program

In Two-Tier Affiliate Program, the Affiliate receives a commission for every action performed by the people he’s referred directly, plus he gets the commission when one of those people he’s personally referred gets paid.  Thus, there are two levels to his commission plan and the Affiliate gets paid both directly and indirectly.

Multi-Tier Affiliate Marketing Program

Multi-Tier Affiliate Program is very similar to Two-Tier Marketing, but here, the Affiliates get paid for the sales made by their affiliated affiliates in multiple, unlimited, levels.

Residual Income Marketing Program

With Residual Income Affiliate Marketing, the Affiliate marketer is paid for every sale that is made by a person referred by him. In this type of marketing, Affiliates get the commission for every sale that his referral makes on the Merchant’s website.

The only requirement is that on the first time visit, the visitor must come from the Affiliate’s authorized affiliate link. Then, when that person visits the Merchant website (even without using the affiliate link), the Affiliate will be paid for every sale completed by the individual.

Cookies are what make this strategy work.

A “cookie” is stored on the first-time visitor’s computer. This cookie reflects the affiliate id of the Affiliate. Cookies typically cease to be valid after three 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 and the Affiliate gets credit for any anything the visitor buys.

Everybody Wins

Once the affiliate marketing relationship is designed well and executed well, everybody comes out ahead:

1. The Merchant receives increased visibility and market share, attracting customers that would normally be beyond the Merchant’s existing market segment.
2. The Affiliate earns a commission for internet sales, without needing to establish a full B2B or B2C site or needing to manage product inventories.
3. The Customer acquires needed products that s/he would otherwise not find – at least not easily.

Good affiliate marketing is a Win-Win-Win situation.

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