-
Description
- Affiliate programs reward site owners for referring
customers to their businesses. They operate on a
pay-by-results basis. This means that merchants pay only after
the affiliate has successfully referred a buying customer to
the merchant web site. Basically affiliate marketing presents
a win-win situation for both the merchant and the affiliate.
- The affiliate's only task is to drive traffic to the
merchant site. It is up to the merchant to take care of
customer orders, credit card processing, customer service,
inventory and shipping
- Merchants benefit because hundreds or thousands of
partnering affiliate sites send them traffic, each paid only
after they have generated a sale. This performance based
marketing method is completely risk free for the merchant.
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Effectiveness
- Forrester Research recently conducted a survey which showed
the relative effectiveness of various forms of internet
marketing. Affiliate marketing is one of the most effective
marketing methods. Most businesses report that affiliate
marketing drives between 10%-30% of their total on-line sales
|
Rank |
Method |
Usage |
Effectiveness |
|
1 |
Affiliate Marketing |
17% |
4.3 |
|
2 |
Customer E-mail |
77% |
4.3 |
|
3 |
Public Relations |
45% |
4.1 |
|
4 |
Television |
30% |
4.0 |
|
5 |
Outdoor |
17% |
3.7 |
|
6 |
E-mail (opt-in) |
23% |
3.5 |
|
7 |
Magazines |
34% |
3.4 |
|
8 |
Radio |
32% |
3.4 |
|
9 |
Direct Mail |
30% |
3.4 |
|
10 |
Sponsorships |
34% |
2.3 |
|
11 |
Buttons |
55% |
2.8 |
|
12 |
Banners |
89% |
2.8 |
Source:
Forrester Research (April '99) Effectiveness rating (5) good
(1) poor
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Types of Affiliate Programs
- Depending on the nature of the affiliate program affiliates
can receive commissions on sales or leads which they generate
and any traffic that they send to the merchant site
- Pay Per Sale (PPS)
This is by far the most popular affiliate program type.
Affiliates place text, banner or product links to the merchant
site and are paid a percentage or flat rate commission once
visitors follow the links and make purchases.
- Pay Per Click (PPC)
Affiliates are paid commissions every time a visitor clicks
through their site to a merchant site. The visitor does not
need to buy anything in order for the affiliate to receive
credit.
- Pay Per Lead (PPL)
Affiliates receive credit whenever they refer visitors who
fill out a form, survey, get a price quote etc.
-
How They Work
- Affiliates are assigned an affiliate code/ID once they sign
up. This code is used to identify them and is placed in the
links which they are given to place on their web pages. This
code can be placed in banner links, text links and product
links. Whenever a visitor follows a link from an affiliate
site to the merchant site the affiliate code is tracked and
credit is given to the appropriate affiliate. Depending on the
affiliate program, the affiliate is paid by check usually on a
monthly basis. Most programs allow their affiliates to view on-line
commission reports so that they can see how much traffic they
are sending and how much commission they are owed. Many
affiliate programs pre-screen their affiliates and allow only
certain web sites to participate in their programs. Others
allow everyone to sign up even if they don't have a web site.
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Two- Tier Affiliate Programs
- These are becoming an integral part of a lot of affiliate
programs. They allow merchants to expand their affiliate base
and they allow affiliates to make extra income from affiliates
who sign up under them . Basically two-tier income refers to
the income which an affiliate receives once he/she has
successfully referred another affiliate to an affiliate
program. Whenever the referred affiliate makes a sale the
referring affiliate will also receive commission. Even though
two tier commissions are very low they provide a way to make
some extra money without lifting a finger. Affiliates just
have to place links on their web sites which lead to the sign
up page of the affiliate program. Merchants can cheaply
advertise their affiliate program by using the two tier
commission structure as an incentive. All they have to do is
sign up webmasters as affiliates and let them know that they
will receive a bonus/commission on every sale which the
affiliates under them make.
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Third Party Tracking Networks
-
Third party affiliate tracking networks act as to
facilitate transactions between merchant affiliate programs
and affiliate web sites. They administer merchant affiliate
programs by pre-screening affiliate applications, tracking
commissions and providing on-line commission reports. Third
party networks such as Commission
Junction and LinkShare
have state of the art affiliate tracking software and the
affiliate is virtually assured of payment. They allow
merchants to outsource their affiliate programs and provide
them with a pool of pre-screened affiliates which are eligible
to join their program.
