What is affiliate marketing, and why is it worth doing?
Simply put, affiliate marketing is a way of sharing revenue between a company and its affiliate based on performance measures. The affiliate is not employed by the company, but there is an agreement in place that allows them to promote the company’s products and to get rewarded for that in a specific way. Affiliate marketing is huge on the internet. The benefits are many, as we will see.
Let’s use an example that everyone is familiar with: Amazon.com. Now you might ask, why would a company as huge and successful as Amazon need or want an affiliate marketing program? Why would they want to share their revenue? Well plain and simple, it saves them a lot of work. Amazon has setup an arrangement whereby nearly anyone can sign up as an affiliate to promote their products. The affiliate is then given tools and specially coded hyperlinks which they use to promote products for sale on Amazon’s website. They drive traffic to Amazon.com, which hopefully converts into sales. If the affiliate refers someone who actually buys something, then Amazon will give the affiliate a set percentage of that sale.
What’s in it for them?
The benefit to Amazon is that they get a veritable army of affiliates promoting their products in all sorts of ways all over the internet. They end up with very good marketing coverage this way. You have to remember that in order to get advertising and links plastered all over the internet, in every nook and cranny, Amazon would have to spend a ton of money. Either they would outsource this lucrative contract to some large firm, or they would hire a whole bunch of advertising experts in-house. Instead, they are able to contract with affiliates who go out and advertise all over the place, and – here’s the best part – Amazon only pays when a sale is generated! Amazon can then go and confidently plan around the fact that their affiliate related marketing will cost them 4% of sales, or whatever the number is. None of this pay $100 million and I’m sure we’ll get some good coverage! They only pay for advertising that generates cold hard cash!
What’s in it for you?
So, sounds like a great deal for Amazon right? But is the affiliate marketer getting a bad deal? Not at all. So what makes this a good deal for the affiliate? Well there are a lot of people out there with websites, resources, and expertise to successfully market products; however they don’t have any products of their own! The affiliate arrangement puts a product in the hands of the marketers, without them having to deal with inventory, handle transactions, tech support, returns, suppliers, importing, shipping etc. The barriers to entry are negligible for an affiliate marketer, compared to the owner of the web store.
Marketers also benefit from having the guaranteed terms of a contract. They know exactly what they need to achieve to get a paycheck of X dollars. Affiliate marketers then create websites, pay-per-click ads, email campaigns, banner ads, social marketing campaigns and all kinds of other things in order to drive highly targeted traffic to Amazon.
Most affiliate programs have a sliding incentive scale of some sort. For instance, for the first $1000 of sales an affiliate refers within a given period, they might get 4%. For the next $1000 they might get 5%. In this way companies are able to reward for performance and the best affiliates will be even more motivated to continue on their promotion.
Affiliate marketing can work for nearly any kind of product out there on the internet right now. Think of it as a referral fee. Some of the products I promote don’t even involve sales; the client doesn’t actually purchase anything. In these cases the company pays for “leads,” that is, qualified people who fill out an application form. So all I need to do is get people to fill out the form, and I get paid! They don’t even have to spend a cent! Good deal for me right?
If you have a website, affiliate marketing is a great place to get your feet wet making money on the internet. Find an affiliate program for a product that is complementary to the interests of your site’s visitors, and promote it on your site. If you’re feeling more aggressive and you find a good product to promote, try paying for advertising on the internet! You’d be surprised how easy it can be to get going!
All the best in your ad.ventures!