Affiliate Marketing, the most popular of the online business models: Advantages And Disadvantages

Affiliate Marketing - The most popular of the online business models - Advantages And Disadvantages
April 12, 2021

Affiliate marketing is a very popular business model and one of the best and easiest ways to earn money online. The  affiliate marketer promotes other people’s products on their blog, email list, and social media to earn money. When someone buys through the affiliate link, the affiliate marketer gets a commission. See below for some examples of commissions.

The affiliate marketer, either as an advertiser, a blogger or a website owner shows a product to the potential customer, explains a problem the potential customer might be having in a post or a mail. The affiliate marketer hopes that the potential customer makes a purchase through one of their links. In that case, the affiliate marketer receives a commission from the sale.

Content

1. How does Affiliate Marketing work?

There are three parties involved in the process:

  • The seller
  • The affiliate marketer
  • The buyer

The seller: A product manufacturer or a retailer with a product to market. The seller gives each affiliate marketer a unique link so they can track which affiliate was responsible for a sale. The seller shares the profit with the affiliate for every product sold by the affiliate.

The affiliate marketer: Either a company or an individual that markets the seller’s product to potential consumers. When a consumer buys a product from the seller’s link, the affiliate marketer receives a commission on the revenue made.

The consumer: Affiliates market seller’s products to consumers on websites, blogs and social media. When consumers buy the product, the seller and the affiliate share the profits.

How Affiliate marketing works
The seller gives to the affiliate a link similar to the following:
https://mediasys.com?id=pftre:45hgsd.9d45c2

“id=pftre” is the id of the affiliate marketer.

The affiliate markets the seller’s product using this link. When a potential customer clicks on this link, a small file called cookie gets stored on their device (laptop, computer, tablet, etc.).

An affiliate cookie does the following:
a) It helps the merchant attribute the sale to the right affiliate
b) It (often) has an expiration date, so the affiliate gets paid even if the buyer delays their purchase

Hereafter an example:

Suppose that Mariam, visiting the affiliate’s website, is interested in buying ski shoes. She clicks on the corresponding link and is sent to the eBay website.

But suddenly, Mariam receives a call from an old friend and stays a long time on the phone. After the call, it’s time to go to the gym centre for her daily yoga session. Later in the evening, she comes back to eBay’s website to complete her purchase. She then saw an interesting ski uniform that she buys with the ski shoes.

Here is the good news. Mariam clicked on the ski shoes’ affiliate link, and a cookie was stored on her device. Because of the cookie duration, the affiliate will get paid for both the ski shoes and the uniform even if the affiliate didn’t promote the latter.

    The graph below shows a steady increase in the popularity of affiliate marketing.

    Affiliate Marketing Forecast (US) 2010-2022
    “You are to become a creator, not a competitor. You will become a creator by employing the higher faculties with which you have been endowed: Perception, Reason, Will, Memory, Imagination and Intuition. No other form of life was given these creative faculties.”
    Wallace Wattles: The Science of Getting Rich”

      2. Types of models common to Affiliate Marketing

      As you can suspect, an affiliate is paid per performance. Following are the three types of performance-based models common to affiliate marketing:

      1. Pay Per Sale (PPS) 

      Companies pay a percentage of all qualified sales. This percentage is agreed upon by the company and its affiliate. This is the most popular for Affiliate Marketing.

      Among the most common PPS programs is Amazon Associates, where a publisher can earn up to 15% depending on the products sold.

      2. Pay Per Click (PPC) or Cost Per Click (PPC)

      An affiliate gets paid for all the valid clicks generated regardless of whether these clicks resulted in sales or leads.

      By clicking on the ad, users show their interest in the offer, which means that the affiliate is paid by building the target audience.

      The affiliate can also contribute to a better CTR by improving the quality of the ad and by setting precise targeting while creating the campaign for the ad.

      3. Pay Per Thousand (PPM) aka Cost Per Mile (CPM)

      Nota: Mile stands for 1000 ad views.

      An affiliate gets paid for ad views regardless of whether these clicks resulted in further actions like clicks, leads or sales.

      4. Pay Per Action (PPA) or Cost Per Action (CPA)

      Companies pay a fixed commission for every qualified action a click generated. This action might include

          • purchase,
          • installing an app,
          • online form submission,
          • free trial sign-up,
          • completing a short survey.
          • subscription,
          • call,
          • download PDF.

      By the above actions, the affiliate is paid by  leads generated.

      Finally, which model is better?

      Usually, each vendor and/or the affiliate network has a performance model that they want to use for paying the affiliate.

      The choice of the model by the affiliate is part of the global analysis and research while choosing the best supplier. The performance model is chosen along with other criteria the supplier should meet the requirements of the affiliate. 

      Each model of buying traffic has its own characteristics. Choose the best for you!

      3. Advantages of an Affiliate Marketing business

      1. You present relevant offers to help your visitor

      Since you can’t make every product your visitor will ever need, it’s advantageous to both the affiliate and the customer to present relevant offers they may find an interest in and solve problems that way.

      2. You get an opportunity to partner with larger brands

      Merchants are always looking for a way to reach larger and larger audiences. This is your opportunity to partner with them and takes your trust and authority to the next level.

      3. It opens the door to ask them for a return favour

      When you do get around to making a new product, you can ask the larger brand you partnered with to promote your product to their audience.

      4. It’s easy to track

      Using something like Pretty Link or long term cookies will make it a breeze for you to understand which offers are bringing in the most cash for you and which ones are just taking up space on your website.

      4. Drawbacks of Affiliate Marketing

      1. Some affiliates may be dishonest

      In order to secure a sale, some affiliates will promise heaven and earth. Then they won’t be able to deliver. It’s the responsibility of the seller to choose reliable affiliates to promote their products wisely to avoid this kind of situation.

      2. Some merchants may be dishonest

      This is a two-way street; not all the merchants you, as an affiliate, work with will have your best interests at heart. Do your research before striking any kind of deal with a merchant.

      3. Affiliate links can be hijacked

      Although this has never happened to me, I’ve heard horror stories of links on a website being taken over. There are many forms of this, but in a nutshell, if your link is high jacked, you don’t get paid for all your hard work. Not a pleasant thought.

      5. Cases of Affiliate Marketing Networks

      Affiliate marketing is a good business, and there are out there a lot of companies who offer these programs. 

      For getting the best affiliate programs, you might also use Affiliate Networks that act as middlemen between the publisher (you) and the seller. Here below some affiliate networks:

      Affiliate Marketing Networks

      You might also want to use Google Search to get the best affiliate programs as follows:

      Use Google Search to get the best software affiliate programs

      Hereafter two cases among the best known of them: Amazon and eBay.

      1. Amazon Affiliate Marketing Program

      The Amazon Affiliate Marketing programme has the following advantages:

      • A large variety of products
      • Easy integration with the affiliate marketer’s website
      • Easy to use
      • Easy to configure Ads (widget and banners)

      Amazon Commission Rate

      Hereafter an extract from Amazon’s “Associates Program Advertising Fee Schedule.”

      How Affiliate Marketing Works - Commission Rate of Amazon

      2. eBay Affiliate Marketing Program

      eBay Affiliate Marketing program provides a comprehensive number of advantages, including the following:

      • Multiple products
      • Multiple discounts
      • Interesting commission
      • Flexible payment method

      In addition, the affiliate can sell their own products if they wish.

      eBay Commission Rate

      Affiliate Marketing Commission Rate of eBay

      6. How to start an Affiliate Marketing business

      For those who are interested in this topic, I’ve written a separate article dedicated to learning “How to start an Affiliate Marketing business. A 4-step guide“.

      How to start an Affiliate Marketing business. A 4-step guide

      7. Email Marketing: Building your email list

      Email marketing helps you not only to build a relationship with your customers but gives you a proven way to nurture subscribers (aka leads) and convert them into long-lasting customers.

      No matter what type of business you operate, an email list is the most important element of a successful marketing strategy. With that list, you can share your story, promote your business, and showcase your products, all while turning subscribers into paying customers. 

      Online businesses that want to attract potential customers can use signup forms in their website to attract opt-ins, most often using lead magnets to generate leads.  

      In my article below, you will learn how to build a mailing list in 7 simple but effective steps :  

      How To Build An Email List For Small Businesses: 7 Proven Steps

      8. Affiliate Marketing FAQ

      What is CTR (Click-Through Rate)?

      According to Google, CTR is a ratio showing how many people who saw your ads end up clicking it. CTR is calculated by dividing the number of clicks that your ad receives by the number of times your ad is shown (impressions).

      CTR = clicks / impressions.

      For example, 1000 people see the ad and 50 of them click on it. In this case, you have 50 clicks out of 100 impressions, your CTR would be 5%.

      A higher CTR indicates that your ad is well-targeted and relevant to the people who see it.

      What is a lead?

      Usually, a lead is a potential customer who has expressed interest in your company by providing an email address or following you on social media, but they haven’t made a purchase.

      However, a lead can mean different things to different businesses. A qualifying lead for one business might be a customer who completes an online purchase.

      See more details on a lead as a part of the sales funnel in my post: How to start an online business from home – The ultimate guide/Define your sales funnel.

      Is there a cost to join an affiliate program?

      There is no charge to join an affiliate program. However, you may incur expenses if your marketing strategy is using paid advertisement. 

      For example, while your blog won’t cost you anything but your time, pay-per-click marketing, email campaigns, and social media ads will require an investment.

      Are there any qualifications required to be an Affiliate Marketer?

      No qualification is required. Remember that the affiliate marketer is paid per performance. Anyone can become an affiliate marketer, and there are no standard qualifications.

      However, some assets are useful if you want to be successful in your journey. If you opt for free organic traffic, knowing how to write a blog post is a plus. Or, if you plan to operate your marketing on Youtube, it’s valuable to know how to produce a quality video. Otherwise, you may have to pay for content or ads production initially, which may impact the profitability of your business. Also, any existing marketing knowledge you have will be a great advantage to you.

      What Are Affiliate Networks?

      Affiliate Networks act as a middleman between supplier companies and their affiliate marketers. They manage the relationship and providing third-party checks and balances.

      These networks provide services like tracking technology, reporting tools, and manage payments to affiliates. When you sign up with an affiliate network, you usually gain access to all the affiliate companies managed within the network.

      Go here for the Top Affiliate Networks in 2020.

      The takeaway

      It’s a win-win situation for both the seller and the affiliate marketer as they share the profit made on each sale.

      It’s easy for anyone to be an affiliate, even if an affiliate doesn’t own a website and they can rely entirely on social media.

      We realize that if you’re new to affiliate marketing, you may have some additional questions. You may want to join our free Online Marketing training programme where you’ll learn in more details about how it works.

      Ready to start and scale an online business? 

      Sign up for our FREE masterclass today!

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