Affiliate Programs: What Are They and How Do They Work?
Benefits of Affiliate Programs
Affiliate Programs Payment Types
Residual/Recurring Affiliate Programs
Click Here To Join Our Recurring Affiliate Program
What Are Affiliate Programs
Affiliate programs typically have three parties involved in a transaction. The parties are:
- The affiliate website – can have links and marketing pages for one or many merchants
- The merchant site – can have an unlimited number of affiliates promoting their products
- The customer
Affiliate programs are agreements in which an internet merchant’s website pays affiliate websites a commission for delivering web traffic and/or web sales to them. Some affiliate programs require a purchase from the merchant website to earn a commission. Each affiliate website that links to the merchant website is compensated according to a predetermined agreement. The agreement can be pay per sale, pay per click, and even pay per impression.
The merchant site seeks to gain visitors from links on the affiliate’s site. Even if a visitor does not come to the merchant site, the link is still valuable to the merchant. The number and type of links pointing to the merchant website can help the merchant’s rankings in the search engine result pages.
This type of marketing technique became more popular due to large web merchants such as Amazon and Hostgator. Amazon.com has it’s affiliates to create links to individual novels for purchase on Amazon.com. Amazon pays a percentage of the sale to an affiliate if a visitor buys books or other products after clicking the affiliate’s link. Amazon takes care of all the other steps, such as receiving the order, collecting the money, and sending the novel to the consumer – but the affiliate assists in making the sale. Amazon’s program is incredibly fruitful, especially with over half a million affiliate websites currently participating in their program.
Affiliate programs have shown a significant increase in notoriety over the past couple of years, and they take on a plethora of intriguing structures. Performing as an affiliate is a great way to get involved in ecommerce and earn income with minimal investment.
Benefits of Affiliate Programs
The merchant site seeks to gain visitors from links on the affiliate’s site. Even if a visitor does not come to the merchant site, the link is still valuable to the merchant. The number and type of links pointing to the merchant website can help the merchant’s rankings in the search engine result pages.
This type of marketing technique became more popular due to large web merchants such as Amazon and Hostgator. Amazon.com has it’s affiliates to create links to individual novels for purchase on Amazon.com. Amazon pays a percentage of the sale to an affiliate if a visitor buys books or other products after clicking the affiliate’s link. Amazon takes care of all the other steps, such as receiving the order, collecting the money, and sending the novel to the consumer – but the affiliate assists in making the sale. Amazon’s program is incredibly fruitful, especially with over half a million affiliate websites currently participating in their program.
Affiliate programs have shown a significant increase in notoriety over the past couple of years, and they take on a plethora of intriguing structures. Performing as an affiliate is a great way to get involved in ecommerce and earn income with minimal investment.
Conventional advertising has a disadvantage over affiliate programs. This is because the only time online merchants compensate its affiliates is when it obtains a desired outcome. Conventional advertising is perilous because they must use their funds on advertising based on a rough estimate of its successfulness. If the business earns less money than it initially spent on advertising, then the business takes a loss. There is no cause for worry with an affiliate program – the only time an online merchant compensates its affiliates is when things are successful. The risks are much lower for the merchant when their websites participate in affiliate programs.
Affiliate Programs Payment Types
There are three basic types of affiliate program payments. The three types are:
- Pay-per-click: With this type of program, the merchant website compensates the affiliate based on the number of visitors who click on the link to enter the merchant’s website. Users do not have to make a purchase, and the affiliate does not care what a user does once they reach the merchant’s website.
- Pay-per-lead: Businesses that have these programs compensate their affiliates based on the number of leads generated by the affiliate. What this means is that the user completes a required form for information at the merchant website. Furthermore, the merchant website can make use of this information to sell to another business as a sales lead.
- Pay-per-view: also known as pay-per-impression. Businesses who operate these programs pay affiliates based solely on the number of users who viewed their advertisement banner. This method of payment is most similar to traditional advertising. The advertiser pays for a certain number of views but there is no guarantee that the visitor will see/pay attention to the merchant’s advertising banner.
- Pay-per-sale: This is the most common form of payment. An example of this would be Amazon’s affiliate program. Within this agreement, the merchant website compensates an affiliate when the affiliate delivers a sale. Some merchants pay a flat rate per sale while others pay a percentage of the sale. Click here to join an excellent pay per sale affiliate program.
In addition to this, there exists several other agreements. Simply put, it is possible for a business to create an affiliate program based on any measure that they would benefit from. They are then able to compensate their affiliates based on the amount of consumers the affiliates deliver to them who initiate that measure.
Residual/Recurring Affiliate Programs
Residual Affiliate Programs allow affiliates to make recurring profits from customers they deliver to the merchant website. If the customer buys residual services or products from the merchant website, then the merchant will pay the affiliate each time the customer makes a payment. The residual payments are usually the same amount as the original commission. This is not a rule set in stone. The number and amount of recurring payments can be anything that the merchant and affiliate agree upon. Internet merchants who sell residual services such as web hosting and WordPress hosting usually operate this type of program. Click here to join an excellent affiliate program with residual payments!
Multi-Tier Affiliate Programs
Multi-Tier Affiliate Programs have a form that is similar to multilevel marketing institutions, like Primerica or Herbalife Nutrition, which gain income via affiliate recruitment and commission sales. Additionally, affiliates in this type of program are able to earn commissions from the sales generated by affiliates they referred who are on tiers below them. A tiered affiliate program is different from multilevel marketing because no money is required from any affiliate to be in the program. Click here to join an excellent affiliate program with multi tier payments!
Let’s examine some examples of tiered commission transactions. The red figure at the top represents you as an affiliate. The green figures (tier 1) are affiliates that joined the program through your affiliate link. The yellow figures (tier 2) are affiliates that joined the affiliate program through a green figure’s (tier 1) affiliate link.
Now, we’ll take a look at your position when sub-affiliates refer sales. When a tier 2 affiliate refers a sale you earn a tier 2 commission. When a tier 1 affiliate refers a sale you earn a tier 1 commission. Tier 1 participants earn 10% of the commission earned by the referring affiliate. Tier 2 participants earn 5% of the commission earned by the referring affiliate.
Example 1: The yellow affiliate generates a sale with a sub-total of $100. The commission on this sale for the yellow affiliate is 20%. The yellow affiliate earns a commission of $20. The green affiliate earns $20 X 10% which is $2. You, the red affiliate, earn a tier 2 commission of 5% of $20 which is $1.
Example 2: The green affiliate generates a WordPress hosting sale with a sub-total of $300 per month. The commission rate for this sale is 30%. The green affiliate earns a commission of $90. You, the red affiliate, earn a tier 1 commission of 10% which is $9. Since WordPress hosting is a recurring service, $9 and $90 commissions will be paid to both affiliates each month that the customer makes payment.
