What is affiliate marketing? Definition and examples
Affiliate Marketing is a marketing arrangement in which the online retailer pays a commission to another website. The other website gets a commission for sales or traffic that it generates from its referrals.
In other words, it is a way that your website or blog earns commissions for promoting another person’s or company’s product or service. The seller pays you either for products that people buy or for referrals. Referrals are visitors to your website that went to the seller’s website thanks to you. They got there by clicking on a link on your website.
Although this type of marketing predates the Internet, nearly all of it today occurs online.
The Cambridge Dictionary has the following definition of Affiliate Marketing:
“An agreement in which a person or organization puts a link to a company’s product on their website, and the company pays them something every time they sell a product through this link. The use of one website to advertise the products and services of another website.”
Affiliate marketing – revenue sharing
Promoters of affiliate marketing say that the system is based on revenue sharing. The term ‘pay per sale’ means the same as revenue sharing.
If a seller has a product and wants more sales, they can offer promoters a financial incentive.
Affiliate marketing – the Internet
Since the advent of the Internet, affiliate marketing has grown and changed dramatically.
Online retailer Amazon.com popularized the practice. With Amazon, bloggers and websites direct links to an Amazon page and receive a fee if a referral results in a sale.
In Amazon’s and most other cases, affiliate marketing is a performance marketing program where the selling of a product is outsourced.
The global affiliate market is massive. According to Yahoo Finance:
“The Global affiliate marketing market was valued at $19.217 billion in 2021 and the value is expected to surpass $36.902 billion by 2030.”
Affiliate marketing before the Internet – example
A door-to-door insurance salesperson would, for example, pay another door-to-door salesperson for appointments. That salesperson would go door-to-door making appointments for the person who sold insurance.
The person who arranged appointments would either be paid per appointment or per sale.
The rest of this article focuses on affiliate programs that exist online.
Three main reward types
Here are the three main reward types that affiliate marketers use:
- Pay-per-click: the affiliate directs a visitor to the seller’s website. The seller pays the affiliate each time this happens, irrespective of whether a sale occurs.
- Pay-per-lead: the affiliate directs somebody to the seller’s website. This time, that person fills out a contact form. In other words, the seller now has their personal information. This person is now a ‘lead.’ Affiliates get money for each lead they generate. It is also possible that the lead filled in the form on the affiliate’s website
- Pay-per-sale: the seller pays a percentage of the sale price to the affiliate.
Affiliate marketing – pros and cons
Like many business models or marketing approaches, there are advantages and disadvantages.
- No investment necessary. You ‘create’ products on offer without having to get involved in creating them.
- A wide variety of goods to choose from. You can, for example, focus on products that pay you the most. Alternatively, you can select products that your visitors are most likely to buy.
- You are not responsible. The seller, not you, is responsible for, for example, customer service, returns, etc.
- Income. If you sell a lot, you could earn a good income.
- The arrangement doesn’t stop you selling your own goods. If you sell your own products, you can still sell other goods as an affiliate.
- Your reputation depends to a certain extent on how well or badly another business does. If the seller gets embroiled in a scandal, the whole thing could end up having a negative effect on you.
- The customer is not yours: every visitor to your site who ends up buying from the seller is the seller’s customer. In many cases, when that customer buys again, you do not benefit financially.
- Getting the right affiliate program is not easy: the chances of choosing the wrong affiliate program are high. Choosing the right product is essential for your financial success. There are so many products out there!
- Competition from other affiliates. Remember that you are not the only affiliate. There may be hundreds or even thousands of rival affiliates promoting the same products you are.
Affiliate marketing – social media disclosures
In the United States, social media celebrities must inform their viewers or followers about any affiliate marketing on their page. However, researchers from Princeton University discovered that such disclosures were quite rare.
They extracted affiliate marketing links from 500,000 YouTube videos and 2.1 Pinterest pins. They identified 3,572 YouTube videos and 18,237 Pinterest pins with affiliate links.
The researchers were surprised to find that very few social media personalities disclosed their affiliate marketing arrangements.
Many marketing approaches
Affiliate Marketing is one of many types of marketing strategies. Here are ten very popular approaches:
- Digital Marketing: Marketing via the Internet.
- Content Marketing: Trying to engage consumers and prospects with valuable content.
- Social Media Marketing: Building brand presence on social media platforms.
- Influencer Marketing: Partnering with influencers for promotion.
- Email Marketing: You promote whatever you are selling via email.
- Search Engine Marketing (SEM): Using paid ads in search engines such as Google or Yahoo to increase search visibility.
- Direct Marketing: You go directly to the consumer and try to sell to them.
- Event Marketing: Using events to promote a brand or product.
- Guerrilla Marketing: Tactics which are extremely creative and low budget. It often involves outdoor activities.
- World of Mouth Marketing: Some people say this is the best one. When your customers tell others how good your product or service is. Your customers are, in fact, helping you sell. If have a word of mouth marketing approach, you will try to generate natural discussion about (and recommendations for) your product, service, or brand.
Video – What is Affiliate Marketing?
This video presentation, from our sister channel on YouTube – Marketing Business Network, explains what ‘Affiliate Marketing’ is using simple and easy-to-understand language and examples.