Affiliate Marketing is a form of marketing developed in the 1990s which pays commission to a third party or affiliate for bringing customers to you the retailer. This can be done through a variety of methods and can be extremely cost-effective.
The main participants - In its simplest form the system of affiliate marketing consists of four parts. It comprises the retailer, the network, the affiliate and the customer. The affiliate will use their website to direct customers to the retailer who will pay the affiliate for that contact.
How it works - The affiliate is a kind of third party in the relationship between customer and retailer. They use all the same online marketing strategies of businesses which sell products and services directly but because they are not directly dependent on the success of one business affiliates are able to avoid many of the risks faced by the business itself. Affiliates use their website to move internet traffic onto that of one of their partners. They may also use other more creative methods of advertising such as writing and publishing reviews of a product. Payment takes place usually as a result of a sale, known as revenue sharing. Sometimes payment may be through pay per click whereby the affiliate is paid a kind of commission each time the advert is clicked.
Advantages and Disadvantages - Apart from any initial fees, the retailer incurs no cost unless there is a successful sale so from that point of view it can be very effective. The incentive is also with the affiliate to make the connections and move customers to a business which means that they will only make money if they are successful. It can be a very good way of exploiting markets which your business would not otherwise reach, affiliates can explore new ground. There is, however less capacity to expand rapidly should the business start to take off and you would have to turn to other forms of marketing should you wish to scale up your business. Affiliates rely on a relationship between the retailer and the affiliate and the best results are achieved when the retailer is monitoring the success of the affiliate and also where the affiliate believes in the product or service. If the affiliate is inspired and excited by the product then their efforts will be that much stronger and more effective.
Affiliate methods - Affiliates use a variety of websites to promote their partners’ businesses such as comparison websites and coupon websites (where there is an emphasis on special offers). They also use other forms of contact such as directories, weblogs, niche websites and e-mail lists. They may also have their own websites which they use to advertise and promote their partners’ goods and services. It is quite possible for any website to become an affiliate for a business if a financial agreement can be made which keeps both sides happy.
There are companies which offer affiliate management services. If you use a number of affiliates it can be difficult to monitor their activities effectively. Affiliate management companies can help to ensure that your business is being actively advertised, improve design quality and can help you to plan a dedicated affiliate campaign.
