Affiliate marketing is a subset of performance marketing.
Performance marketing refers to any online marketing strategy where a vendor (seller/merchant) pays for a specific action or outcome rather than potential results. In performance marketing, the goal is to get users (consumers) to perform an action that a advertiser wants them to do, called a conversion. This could be clicking a link, making a purchase, filling a form, or downloading a mobile app.
Today affiliate marketing is one of the most effective ways to earn income online, drive sales and increase brand awareness.
How affiliate marketing works
Affiliate marketing is unique among online marketing techniques because it operates as a distributed system. In other words, it spreads out responsibility of making impressions and promoting a product or service to third parties.
There are 3 parties in a typical affiliate marketing scenario:
- The creator : known as vendor, advertiser, is a business or brand that offers a product or service. They are looking for users or traffic specific to their products or services, which results in leads or sales. The creator shares revenues with affiliates.
- The affiliate: or publisher, is a business entity or individual that have relevant websites or traffic sources for the vendor's target audience, and generate revenue by promoting the vendor's products or services and receives a share of each sale that they help to generate.
- The consumer: or the customer/user of the creator. They make online purchases, fill out surveys or sign up for services, etc. They are sometimes referred to visitors, traffics or target audience.
Products or services purchased via affiliate marketing typically cost no more to the consumer than they otherwise would by any other channel; rather, the sales commission is baked into the retail price of the good or service.
The payment structure
There are three payment structure, and which structure used depends on the personal preferences of the vendors and the affiliates.
- Per click: The affiliate is paid a flat rate for every individual they redirect to the vendor's website. Performance is indicated by increased website traffic.
- Per lead : The affiliate is paid for every prospective customer that visits the vendor's website and performs their desired action, such as signing up for a mailing list or free trial.
- Per sale : This is the most common one among three structures, where the affiliate is paid a commission ( eg 1%-10%) of every purchase made via the affiliate unique product link.
By: VSHR Digital Media
Source: 1. https://academy.tune.com/
2. https://www.forbes.com/ , Jan 2021