What Is Affiliate Marketing & How Does It Work?

W

Do you know 369,000 people search “Affiliate Marketing” on the Google every month?

Do you also know that people are making thousands of dollars in profits by just selling other businesses’ stuff without creating any one on their own?

This is all possible through affiliate marketing. But what actually is affiliate marketing?


What is Affiliate Marketing?

To put it in simple terms, affiliate marketing is the process where an individual or a company (online) earns commission from an external website for selling or promoting other people’s products. The product you promote can belong to any niche/category. By simply promoting it to others and making a sale, you can earn a commission. The commission may vary from $1 to $100,000 or even more depending on the product being promoted. Affiliate marketing follows the simple principle of earning more by selling more.


How Does Affiliate Marketing Work?

For Affiliate marketing, three different parties are involved but some people consider it to have four parties.

  1. The seller or product creators
  2. The affiliate
  3. The consumer
  4. The network

Let’s look into the four parties in detail.

1- The Seller or Product Creators

The seller in affiliate marketing can either be a vendor, product creator, merchant or a retailer who has a product that needs to be marketed. Now, the product can be in a physical form like office furniture, household goods, or it can be a service like home tuition or makeup tutorials.

The seller can also be the marketer and profit from the income sharing linked with affiliate marketing. An example of a seller is Chicco that manufactures baby strollers. Similarly, web hosting is an example of services being offered by a business/ seller that will give you a virtual location and provide you the tools to build our website. Bluehost is one such company that offers web hosting services for all.


2- The Affiliate

The affiliate can be an individual or a company that promotes or markets one or multiple affiliate products/services to potential customers. The affiliate has an audience which can be either relevant or irrelevant to the product. Higher the relevance, higher the income.

The marketing process is done in an appealing manner such that customers get attracted to make a purchase. Various channels may be used in the marketing process to generate an income, like, SEO, Content Marketing, Social Media Marketing, Video Marketing, YouTube tutorials, email marketing, AdWords etc.

If the customer ends up buying a product, the affiliate earns a part of the revenue made or in other words earns a commission. The commission of the affiliate and seller are already included in the retail price.


3- The Consumer

The core of affiliate marketing is the consumer. Without the consumer, there would be no sales and no sales mean no revenue sharing.
The affiliate shares the product and services over a variety of platforms like blogs, websites, social media etc. and if the consumer purchases the product, the seller and the affiliate share the profit.

It is entirely up to the affiliate whether to inform the customer or not about being a part of affiliate marketing and receiving a commission from the sales. Though, it is a good practice to always put a disclaimer on your site stating that “the site contains affiliate links and if you buy something from this website, I might get an affiliate commission”.


4- The Network

Affiliate networks primarily handle the tracking, reporting and payment involved in affiliate marketing. Basically they work as an intermediary between the seller and the affiliate by providing check and balance as a third party. Some popular networks are Clickbank, Share Sale and Commission Junction.


How Affiliate Marketing Works?

When starting affiliate marketing, the first thing that you need to do is to choose a profitable and a targeted niche. After selecting a niche, choose products that match your niche. The third step is to research the best affiliate programs through which affiliates can get paid their commission from the businesses. Once you’ve decided on a niche, the products and the affiliate program, it’s time to build an online presence. This platform could be in any form like a blog, a website or on social media. The promotion of the affiliate products depends on the content created by you. The sales will largely depend on it. After covering these basics of affiliate marketing, you can easily start promoting affiliate products.

The intricacies of affiliate marketing are not that difficult either. After signing up for an affiliate program which is free of cost you’ll get a special URL or affiliate link specifically allotted to you. This link will contain you username or ID of the affiliate. When you will create your content around any product, you will use this link to send the consumer to the seller’s website. You must be wondering what happens after this and how does a company track an affiliates commission?

When a potential customer clicks on an affiliate link, a cookie is dropped into their browser to track the customer. If the customer makes a purchase from the company, the company gets notified that a certain affiliate link brought this customer to them. The company then gives that affiliate their share of the sale. The commission payouts depend on the program’s terms and conditions. Payments can be made on a weekly basis or even on a monthly basis.

In affiliate marketing one is paid on the basis of performance. It is not always necessary that a consumer buys a product for an affiliate to make a sale. Depending on the type of program selected, the contribution on behalf of the affiliate will be measured differently for a seller’s sale. There are various models that can be implemented. The most common affiliate marketing models are:

  • Pay per click. (PPC)
  • Pay per lead. (PPL)
  • Pay per sales. (PPS)

Pay Per Click

In this program, an affiliate gets paid for all the valid clicks made irrespective if sales or leads were made or not. The affiliate engages the customer to such an extent that he/she moves from the affiliate’s website to the merchant’s / seller’s site. The payment depends on the amount of web traffic the affiliate directs towards the seller’s site. Commission Junction, Bidvertiser, Market Health, and ShareASale are a few programs that offer pay per click occasionally.

Pay Per Lead

This method of payment relies on conversion leads. The affiliate convinces the consumer to visit the merchant’s site and complete a said action which can either be some installation, sign up for a free trial or a newsletter or it could be an online form submission. A few examples of the Pay per click model are ClickFunnels and Affiliate Manager.

Pay Per Sale

Pay per sale is the standard affiliate marketing structure used. In this program, after the consumer purchases a product through the affiliate, the affiliate gets a percentage of the sale price of the product from the seller / merchant. In other words, the affiliate must persuade the consumer to invest in the product to make sales. The percentage share is already agreed upon by the company. Amazon associates, is the most common pay per sale program where affiliates can earn up to 10% depending on the products.


5 Simple Steps to Start Affiliate Marketing

Affiliate marketing doesn’t take up a huge investment of money or time. These simple steps will explain how affiliate marketing works. Just to give a recap of the roles of the four parties, once you become an affiliate, promote products of a company. Then, when a sale is made to a consumer, the merchant/company has to handle the fulfillment of the order and the shipping as well. In return, you get paid a certain commission for the sale made.

Here are the six simple steps to start an affiliate marketing in 2021.

  1. Choose a niche
  2. Choose a product
  3. Research of affiliate programs
  4. Build an online presence
  5. Start promoting affiliate products

1- Choose a Niche

Choosing a niche is one of the most important part of affiliate marketing. Your whole affiliate work revolves around your niche. To define niche, it is a focused part of any market that has an audience with certain specific problems. I’ll later cover the topic on how to find a profitable niche.

Narrowing down your niche area will give you an advantage over other competitors. A niche will allow you to target a certain group of people. Now, you may think that this way you won’t be able to connect with many people but it’s actually quite the opposite. Working on a niche means that you’re focusing on a part of a larger audience and approaching them from a unique angle as compared to other content creators.

For example, there is a large number of people searching for baby strollers. A more targeted approach would be baby strollers for twins. The more targeted the niche, the more the chances are that a certain segment of audience will come to your content to look for a product.

2- Choose a Product

Once, you’ve decided on a niche, you can start choosing the products that you want to market to the audience. It is important to choose products that match your niche. If your products don’t match the niche you’re promoting, the audience will feel disconnected and won’t find relevant items. Researching the products is just an important criteria even if you have had prior experience with the product or company before. Secondly, it is wise to partner with companies that have a good reputation and those with which you can stand behind. Lastly, being honest with your audience when writing a product review, will earn you extra points and people will deem you as a reliable and trustworthy source.

3- Research of Affiliate Programs

First off, what is an affiliate program? An affiliate program is an agreement through which a business pays the affiliate a commission for making sales and sending traffic their way. This can be done in two ways. One way is to search for companies (related to your niche) that offer an affiliate program. The other method is to look for multi-brand affiliate programs. This allows you to take advantage of multiple affiliate programs through their service. Multi-brand affiliate programs makes marketing of multiple items at one time easy. Each brand offers different commission rates within the affiliate program. 

4- Build an Online Presence

After you have decided on a niche and selected the products you want to promote, you’ll need a platform to promote these products. This could be in any form, like a blog, a website and even on social media through Facebook or Instagram. Many affiliates start off their affiliate marketing over social media but the social media platform can only work to an extent. Creating a blog or a website, that showcases your products, builds a home base for your content. Your website will serve as a central hub to interact with your audience. While your social media account might disappear tomorrow, leaving you empty handed. After having developed your website or blog, you can use social media to promote and drive traffic to your blog or website. Content that you post on your website, will be crucial in determining the sales you make. 

5- Start Promoting Affiliate Products

All the basic steps of starting affiliate marketing have been discussed. The only step left is to implement them and use various platforms to promote your affiliate products. Making the right use of different platforms will help you increase your sales significantly. The promotion or advertisement of the products can be done via different channels.

There are bloggers who write reviews about products or services and give compelling reviews. They also have the ability to rank in search engine queries which means that they have a higher chance of gaining traffic and sales. Paid search focused micro-sites are another way of earning an audience.

Basically, these sites are promoted within a partner site or on the sponsored listing in a search engine. They are relatively different from the main site and follow a straightforward call to action and lead to increased conversions. Another channel for affiliate marketing is email. Some affiliates use their email lists to promote their products while some make use of newsletters with hyperlinks to products to make sales. Large media websites that already have an audience of millions make use of banners and contextual affiliate links for conversions.


How to Find a Profitable Niche For Affiliate Marketing

As I mentioned earlier, selecting a niche is a pivotal part of affiliate marketing. So how does one decide on a niche that would be profitable too? I’ve listed down seven easy steps to go about selecting a profitable niche.

  1. Identify your passion
  2. The niche market
  3. Analyze the trends
  4. Determine the problem
  5. Look for products to sell
  6. Check out the competition
  7. Online advertising

1- Identify Your Passion

Selecting a niche that goes alongside a passion of yours, will help you in earning huge profits as you’ll already be knowing about the ins and outs. If you work on something you care about, it is more likely that you will fare well. Since, you already know the market, it will not be difficult to make big profits. Plus, since you have a passion for the niche, you would definitely now a lot of communities and groups related to this niche. This will make it even easier for you to make content and to post it timely. For example, if you love rock climbing and hiking and you know what type of gear would be the best for enthusiasts, you can easily make content to attract the audience to a product through you.

2- The Niche Market

Before deciding on a niche, you should research the market value of that niche whether it’s profitable or not. You do not want to enter into a niche that has no data available and is of no worth. For instance, if you’re thinking of going into the niche of kitchen appliances, the market value of global household appliances was valued at $501,532 million in 2017 and is projected to reach $763,451 million by 2025, growing at a CAGR of 5.4% from 2018 to 2025. This data will allow you to make a decision with confidence.

Having a look at the ongoing trend, is always a good idea. Google trends allows you to do just that. You can simply search your niche over Google trend and find out how that particular niche has fared in the past and what the trend would looks like currently. Stability is the factor that you need to look for here.

4- Determine the Problem

Every niche has a problem that needs to be solved. You have to figure that problem out. Once you’ve established the problem and figured out a relevant solution, you can make a good amount of income.

5- Look for Products to Sell

There are different ways to find products to sell online. This can be done by going to the Amazon best sellers page and finding products related to your niche. You’ll find plenty of products that can be promoted easily. Another way to find products is to see the product review blogs. Reviews let you figure out the trending products. Facebook and Instagram also give information about trending products. The views, likes and comments on an item will let you know which product is trending and people are purchasing. For example, a necklace which has 3000 likes within a span of 12 hours, can be termed as a good product to market.

6- Check out the competition

When selecting a niche, it is good to check out the competition. The competitor websites can be analyzed based on a factor called Domain Rating (DR). Domain rating, developed by ahrefs, shows the strength of a website’s backlink profile and is compared to others on a scale of 100. The higher the DR, the stronger the website and the more chances the website has to appear higher up in the search. When searching for competitive websites related to a niche, if you don’t find websites with small or medium domain rating, it will be difficult to rank higher due to the tough competition.

7- Online advertising

One important aspect of finding a niche, is to find out whether companies are willing to advertise products of that particular niche or not. If you see advertisements against search queries, you can think of it as a profitable niche.


What are Affiliate Networks And Their Role in Affiliate Marketing?

Affiliate network works with the publishers and the merchants. Basically affiliate networks are the middlemen between the two. The publishers are the bloggers or entrepreneurs that attract customers. While the merchants are the companies creating the products. The affiliate networks builds a link between the two.

Affiliate networks are generally free for the publishers to take part in, however, that’s not the case for the companies. They would be charged an initiation fee and monthly charges for their tools and services. A small share of the payments to an affiliate site is given to affiliate networks too.

Affiliate networks provide easy account management and end to end tracking all in one place. Also, payment and reporting options are inclusive as well. Through affiliate networks, a company’s product is only advertised by approved publishers. The publishers have to go through an approval process to be a part of an affiliate program. Not to mention, affiliate networks provide a rapid rate of investment too.

Here’s a list of affiliate networks:

  1. Amazon Associates
  2. ShareASale
  3. CJ Affiliate (Formerly Commission Junction)
  4. Awin (Formerly Affiliate Window)
  5. ClickBank
  6. FlexOffers

AMAZON ASSOCIATES

Amazon associates is ideal for those looking to promote physical products on their website. An appealing part of amazon associates is that you can earn a commission on anything that a customer purchases through your link. To explain it in a simpler manner, if your link is for a 5$ hair brush but the consumer ends up buying a $500 laptop, you’ll get a commission for that too. The commission rate of Amazon is a flat rate structure where a set percentage is paid on a category. 

Anything and everything is sold over Amazon.it has a massive collection of products. The average commission rate ranges from 1% to 10% depending on the category. The cookie duration of Amazon is for 24 hrs. Amazon associates is eligible for people in more than 100 countries worldwide including Netherlands, Turkey, and Egypt etc.


SHAREASALE

Founded in 2000, ShareASale has over 3900 affiliate programs in a number of categories. It sends you money on the 20th of each month, as long as you have $50 as your balance. ShareASale opts for an option for payment like via checks, wire transfer or direct deposit. ShareASale has both, physical and digital products. There are over 1000 merchants at ShareASale that only work with ShareASale.

The cookie duration for ShareASale is 45 days which allows you to get a commission if your customer purchases within 45 days. ShareASale offers its affiliate programs to more countries than Amazon Associates which includes Bangladesh, Indonesia, Ireland, South Korea, Hungary, Japan, Spain, Italy etc. ShareASale also offers acceptance of countries not listed but only in special cases. 


CJ AFFILIATE

CJ affiliate was previously known as Commission Junction. It brings thousands of merchants together under one roof, pretty much like ShareASale. Some digital and physical companies using CJ are officedepot, Overstock. Lowes, Priceline and GoPro. 

The cookie duration for CJ Affiliate is 30 days. CJ Affiliate pays on a monthly basis through direct deposits or checks. It does not offer payments via PayPal. 


FLEX OFFERS

One of the newest affiliate networks on the block, Flex Offers has a growing list of opportunities. It has 12,000+ merchants in over 25 categories. Even though Flex Offers doesn’t have a rating with BBB (Better Business Bureau), it also does not show any sort of complaints either. Its cookie duration is of 30 days. With a 30 day payment system, you only have to meet the minimum balance of $50. It’s also possible to receive your payment within 7 days if you’re a top performer. They offer payment via check, direct deposit and also PayPal. FlexOffers is unique in a way that it provides a dedicated affiliate manager to help at every step of the way in affiliate marketing. It’s great to use for both newbies and experts alike. 


CLICKBANK

ClickBank has made its name offering digital products. Unlike ShareASale and Awin, that have big companies, ClickBank is more towards the smaller side of the merchants. On one end, you can find great products to promote but at the same some maybe subpar products. The average commission depends on the merchant you sign up with but it is usually very high (more than $100/sale). Also they offer payments weekly via wire transfer, checks and Payoneer as well.

The cookie duration for ClickBank is 60 days, that is if a visitor does not purchase something on the first visit and comes back within 60 days and makes a purchase, you will get a commission. ClickBank offers its services to many countries like Pakistan, Fiji, Denmark, China, Canada, Namibia etc.


What is an Affiliate Link and its Role in Affiliate Marketing?

An affiliate link is a specific URL assigned to a single affiliate. It contains the affiliate’s ID and username. When affiliates sign up with a merchant, they are provided with a link. When a potential buyer clicks on that link, he or she is diverted to the merchant’s site and the affiliate might earn a commission if a sale is made. Affiliate links provide the advantage of tracking sales and offer an opportunity to those interested in selling other people’s products. 

Affiliate links work like any other link with the difference that when you click on an affiliate link, a cookie will be saved on your web browser and computer. A cookie is a small piece of data, stored in the user’s browser, sent by the website.

This cookie stores some information and alerts the site to record from which link this customer came from. Also the next time you visit that site, the cookie lets the site know about it. These cookies usually remain active for 24 hours, 7 day, 30 day or even more (depends upon advertiser or a network)

So basically, when someone clicks on an affiliate link, it is tracked by the cookie. In this way, when someone makes a purchase, you’ll get credited.


How Much Money I Can Make With Affiliate Marketing?

Statista reports that affiliate marketing started off with a sending of $1.6 billion in 2016 to $5 billion in 2017. It has now been predicted that spending on affiliate marketing in the US only will reach $8.2 billion by 2022. That’s how much is being spent on affiliate marketing. Now wonder how much can be earned. 

According to VigLink, 9% of affiliates made more than $50,000 in income in 2016. A large part of merchants 65%- stated that they were making between 5% and 20% of their annual revenue from affiliate marketing. Making an income through affiliate relies greatly on the traffic to your website. And traffic is generated with fresh quality content. Keeping up with the standards and competition, you can make a good amount in earning.


10 Ways to Start Affiliate Marketing Without a Website

If you’re not of the type to build website and do affiliate marketing here’s a list of ways to go about doing affiliate marketing without a website:

  • Email marketing
  • Solo ads
  • E-books
  • Facebook Ads
  • Post on forums and online communities
  • YouTube channel
  • Adwords
  • Retargeting
  • Content publishing platforms
  • Mobile marketing

CONCLUSION:

Affiliate marketing is not only the rising trend but it is also the way to make great earnings. Though it takes effort and hard work, eventually you’ll be able to make it work. The year 2021 is expected to be a big year for affiliate marketing.

Affiliate marketing is approximately worth $12 billion and growing with each passing day. Affiliate marketing makes use of all the digital platforms and gives an overwhelming return if used properly.

Latest stories

Your sidebar area is currently empty. Hurry up and add some widgets.