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What is Affiliate Marketing?

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“Affiliate marketing has made businesses millions and ordinary people millionaires,” Bo Bennett, YearToSuccess.com

Affiliate marketing is a popular way of promoting online businesses, where an affiliate is rewarded for every visitor, subscriber, customer, or sale that they refer to the online business.

It works through a network of website owners, known as affiliates, being sourced by an online business wishing to increase its traffic and sales, known as the merchant. These affiliates work to generate traffic and refer it to the merchant’s website. The merchant then rewards these affiliates with a commission for a desired action taken by each referral, which is in general one or more of the following:

  • Pay per Lead – payment made for each registration
  • Pay per Sale – payment for each confirmed sale
  • Pay per Click – payment for each visitor referred to the merchant’s site

E-consultancy estimates that the value of UK sales generated from the affiliate channel was £2.16 billion for 2006, rising from around £1.35 billion in 2005. Commissions and fees paid out to affiliate networks (covering payments for both networks and affiliates) amounted to an estimated £83 million in 2005, and it is forecast that this figure will have risen to £133m million by the end of this year.

Therefore affiliate marketing is a huge marketing channel and for many online businesses it has become the key growth driver.

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Why set up an Affiliate Marketing Programme?

Risk Free

Merchants only pay for results, such as confirmed registrations or sales. Therefore it’s an ideal way to generate new business – if affiliate marketing doesn’t generate any leads or sales then you don’t pay anything.

Affiliate marketing can be seen as a form of online advertising but it shouldn’t be confused with the nature of advertising because affiliate marketing is risk-free in that you know how much you will have to pay out per click, lead or customer.

Excellent for Brand Awareness

If you decide to only make payouts for concluded sales the awareness levels of your site can improve hugely for very little cost, as affiliates promote your site to their membership base.

Reach More People

Many affiliates own niche websites, containing people that would be interested in your product or business but would otherwise be extremely hard to reach. Affiliate marketing is an excellent way of reaching them.

Quality Traffic

Your adverts are shown on sites where the owners themselves feel that your business may be of interest to their members and visitors. This leads to higher conversion rates.

“Affiliate programs are one of the most powerful marketing tools available. Basically, it moves advertising from being an expense to being more akin to a cost of goods sold. In other words, rather than paying out a lot of money and hoping that it works, you’re only paying out money when you know that it has worked,” Steven Rothberg, CEO and founder of CollegeRecruiter.com.”

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