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Affiliate Marketing – Types, Pros and Cons

What is Affiliate Marketing?

Affiliate Marketing is a relatively new type of marketing strategy in which ‘affiliates’ are employed by business firms (or merchants) to help generate sales of the business or bring customers to the firm’s website to check out their products and offers. These affiliates are rewarded on the basis of their performance, i.e. the number of sales generated or visitors brought to the website through efforts undertaken by the affiliates themselves.

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This type of marketing involves the use of third-parties to carry out marketing activities of a business. Affiliates basically work for commission by marketing a particular company’s products for which they are hired.

Affiliate Marketing – Types, Pros and Cons: eAskme
Affiliate Marketing – Types, Pros and Cons: eAskme
In other words, affiliate marketing is all about promoting someone else’s products or services and getting paid for it. For every sale generated with the help of an affiliate’s marketing efforts, that affiliate is given a commission specified in advance.

Some of the techniques employed by affiliates include organic search engine optimization, paid search engine marketing (i.e. Pay Per Click or PPC), e-mail marketing, displaying ads or web banners on different websites for viewers to see, all of which are part of Internet marketing.

In some cases, affiliates might also use techniques such as publishing fake – usually positive - reviews of a firm’s products/services, or recommending them to customers as directed by the firm in order to attract them to try its products and services.

Affiliate marketing has experienced a steady rise since its origin in 1989 by William J. Tobin, the founder of PC Flowers & Gifts. In November 1994, an online retail company known by the name of CDNOW launched its BuyWeb program, in which music-oriented websites reviewed or listed albums on their pages that were of interest to visitors.

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In an attempt to lure customers to purchase the albums, these music-oriented websites put affiliate links on their pages that would take visitors to the website of CDNOW, where they could make the purchase.

Another example of a business using affiliate marketing is the online retail giant Amazon, which launched its affiliate program in July 1996 by allowing affiliates to place banners and text links that would lead to Amazon’s site for individual books, or even directly to the home page of Amazon.

This program gained much popularity among online retailers and served as the basis for affiliate programs launched later. Roses Only has brought to us the following useful information for learning affiliate marketing..

Types of Affiliate Marketing

Affiliate marketing is divided into various types depending on the nature of methods used for each one. Some of the main types of affiliate marketing are briefly discussed below:

Single-Tier Affiliate Marketing

In Single-tier Affiliate Marketing, affiliates are paid commissions only for the sales that they directly contribute by directing visitors and traffic toward the merchant’s website. The different types explained below fall under the category of single-tier affiliate marketing.

o    Pay Per Click (PPC)

As the name suggests, in Pay Per Click affiliate marketing, a merchant pays affiliates for each visitor that is referred to the merchant’s website whenever that visitor clicks on a banner or text ad on the affiliate’s site that leads to that website.

This is the most popular type of affiliate marketing in which an affiliate gets a certain amount for referring visitors to the merchant’s business, even if they do not make any purchases. The fees, however, are minimal, usually not more than a dollar for each click made by visitors.  

o    Pay Per Performance (PPP)

Pay Per Performance affiliate marketing recompenses affiliates whenever they either help in actually generating a sale for the merchant through a visitor, or turning that visitor into a lead for the business. Unlike pay per click marketing, in pay per performance marketing, affiliates do not get paid until their efforts reap a reward for the business, that is, they do not get paid when users simply click on a banner ad and do not purchase anything.

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Commissions for pay per performance affiliate marketing are much higher – usually 15% - 20% of the actual sales generated, which makes it quite profitable and attractive for affiliates. Pay per Sale also comes under this category, which is more or less the same as pay per performance affiliate marketing. 

o    Pay Per Lead (PPL)

Such type of affiliate marketing is used by companies which require leads for the growth of their business. Examples of such businesses are insurance, banking and finance firms.

Affiliates are usually paid a fixed amount of fee for each form filled by visitors, including application forms or other types of forms that help the business to gain customers and grow. Affiliates refer visitors to the firm’s site to fill up the forms for which they are paid commission.

Multi-Tier Affiliate Marketing

Each of these types of affiliate marketing, i.e. single-tier and multi-tier are classified on the basis of tiers or levels of payment in the affiliate network. In multi-tier affiliate marketing, an affiliate is paid for directing visitors to the merchant’s website, as well as for traffic or sales generated by other affiliates who join the affiliate network upon the primary affiliate’s recommendation.

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For example, if publisher (affiliate) X is successful in attracting publishers Y and Z for carrying out the marketing activities of the firm for which publisher X was originally hired, then publisher X would be paid a commission for all marketing activities carried out in future by the two publishers i.e. Y and Z.

Pros & Cons of Affiliate Marketing

Besides its obvious benefits such as being a source of income with little set-up costs, affiliate marketing has its fair share of disadvantages as well. Some of the pros and cons of affiliate marketing are briefly described below:

Pros

Source of Income

For those wishing to add to their income, affiliate marketing is an ideal way to do so. Once you gain experience in the field of affiliate marketing, you can work for as many affiliates as your time and capacity allows. This lets you earn money from multiple sources simultaneously.

Minimal Startup Costs

The startup costs associated with affiliate marketing are minimal, if any, as it does not require any investment. Moreover, it is easy to commence with affiliate marketing as it requires only choosing a product or a service, signing up for its affiliate program and then copy and paste the tracking code to your website, and from there you can start earning right away.

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No Marketing Experience Required

Even those who do not belong to a marketing background or possess no experience in the field can benefit from affiliate marketing. All you need to do is run your own website and employ a few techniques, while the rest is up to the merchant.

Cons

Competition

As affiliate marketing is gaining more popularity along with the fact that it is easy to set up, more and more people are entering into this field. This is a drawback of affiliate marketing as competition reduces bargaining power and results in lower income for affiliates. Moreover, inexperienced affiliates also face competition from those who are expert at SEO and generating more traffic for a business.

Middlemen

Working as an affiliate marketer, you have to pay a certain share to middlemen or intermediaries, usually affiliate networks. These affiliate networks provide a link between the merchant and the affiliate by offering different reporting and tracking tools. Affiliates usually pay these middlemen from the revenue generated by the sales made with the help of affiliates’ marketing efforts.

Low Level of Control over Offers

Another disadvantage of affiliate marketing is that you have no control over the offers made by the merchant. Thus, if competitors have better offers in the form of lower prices or better products/services, it would hamper the sales of the business you are working for as an affiliate. In that case, there is not much you can do except wait and hope that the merchant would change its offers in order to generate more sales.

Conclusion

Even though there are quite a few drawbacks to affiliate marketing apart from those explained in the previous section, it is an effective promotional and marketing tool that is increasingly used by businesses to increase their sales, as well as for individuals seeking to add to their income and venture out to try something different.

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Fortunately, there are solutions to the problems of affiliate marketing posed above.

For example, many affiliates go into partnerships with merchants as they become more and more successful by gaining a large customer base. This partnership agreement cuts out the intermediaries in between, resulting in higher profits for the affiliate as well as an establishment of a closer and a more intimate relationship with the merchant.

Furthermore, it is always beneficial to have some kind of experience related to affiliate marketing – preferably of SEO – even though it is not a prerequisite. This gives you a competitive edge over others in situations where a lot of competition exists, as merchants seek to hire those who can guarantee good results for their businesses.

This is only possible when you have some knowledge and expertise of SEO and the techniques that help in driving traffic to a website so that your skills are in demand even with all the competition around you.

How do you monetize your blog?  Are you an affiliate marketer or a newbie? What is your affiliate strategy?

If you still have any question, feel free to ask me via comments.

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