I’ve personally been using Affiliate Marketing to generate automated income streams that work for me 24/7, but a question I get asked quite often is, what exactly is Affiliate Marketing and how does it actually work?
In short, it’s a form of digital marketing where you promote other people’s products or services and earn a commission if people end up buying those products, as a result of your marketing skills.
Traditional vs Affiliate Marketing Business Model
Let’s consider a simple example. Let’s say you walk into a new outdoor adventure shop that sells camping equipment and accessories. You find something you like, make a purchase, and then get to take the product home. Now, let’s say you tell your friends and family members that this cool new shop has just opened and they have some amazing gear in there. Then, let’s say they go and buy some new camping gear and accessories the next day. The shop owner gets a nice referral from you, but you don’t see anything in return for that referral. The shop owner may thank you for the referral but you’re not actually going to get paid a cent for your referral. That’s how traditional business works.
But now let’s say that the camping store was online, and you refer your friend and family member, to the online shop where they end up making the same purchase but this time, online. Now you have the opportunity to get paid for that referral through a business model called Affiliate Marketing.
As an Affiliate, you find customers who are looking for a particular product or service and refer them to companies on the internet that sell those products or services. If this results in a sale, then you get paid a commission in exchange for that referral.
We’re constantly making recommendations for products or services, whether it’s things like information products that can be downloaded and accessed immediately or physical products on Amazon. The beauty is that as an affiliate, you get paid for making those referrals every time that results in a sale.
There are literally hundreds of thousands of companies that use affiliate programs to advertise their products and they cover just about every niche or area of interest you can think about from physical products to digital or information products. They include products related to outdoor, travel, fashion, health & fitness to photography, music, gaming, Bitcoin, and website hosting. Some of the more well know companies that offer affiliate programs are Amazon Associates, eBay, Shopify, Clickbank, and Fiverr. Commissions can vary between 3-10% for low-cost products or services and up to 25% or even 50% for high ticket commission items.
The world’s largest private affiliate program is with Amazon. They sell millions of products and have billions of dollars in revenue which creates a tremendous opportunity for affiliates and e-commerce sellers.
Advantages of being an affiliate for Amazon are:
- Highly trusted, therefore higher conversion rate
- Millions of Products
- Great follow up
- Get commissions on all other purchases, not only the items you have referred (24 hours)
Disadvantages of being an affiliate for Amazon are:
- Low commission (3-10%)
- Only 24-hour cookie (unless the product is added to cart)
- Need multiple links in your posts to ensure global coverage
- Products can be sold out or expired
So, what are the parties that make up an Affiliate marketing program?
- The Merchant: Also known as the advertiser, creator, the seller, the brand, the retailer or the vendor. This is the party that creates the product. It can be a big company, like DGI, which manufactures cameras, drones, and other photographic equipment or accessories or a small company like an individual person who has created an online photography course.
- The Affiliate: Also known as the publisher. Affiliates can also range from single individuals to entire companies.
- The Consumer: Also known as the customer. The customer is the most important party and makes the affiliate system go round. Without sales, there wouldn’t be any commissions and no revenue to be shared.
The affiliate will advertise to the consumer on any number of different advertising platforms and this could be through paid or organic means. Examples of paid advertising platforms are YouTube, Google PPC, Bing Ads, Facebook, Instagram or LinkedIn. Examples of organic advertising platforms are content marketing through Website Blogs, SEO, YouTube channels or Instagram.
In general, it takes longer to generate subscriber traffic via organic means compared to paid strategies but in the long run, this could result in a very lucrative and sustainable way to generate income. Paid strategies will result in quicker sales and commissions but of course, this means you need to have an advertising budget to get started. My recommendation is that you need at least 3 month’s worth of advertising budget to start a successful paid advertising campaign.
What are the types of Affiliate programs?
- Regular One Time Payout Programs
You get paid once per sale as a percentage or a fixed amount commission. A typical Regular One Time commission would be in the region of between $10 to $100 per sale. With most companies, you get paid after the refund period is complete, usually, 30 days after the purchase is made. The advantage of onetime payout programs is you generally get higher payment upfront. The disadvantage is you lack consistency in your affiliate revenue stream and may make less over the lifetime of the customer.
- High Ticket Commissions Programs
Similar to above but you get paid a much larger lump sum commissions per sale because you’ve recommended and endorsed something that’s typically more expensive and sells for several thousand. For example, a product that sells at U$ 3,000 and pays out U$ 1,000 commission – this is typically found with high transformation digital or educational programs.
- Subscription Based Programs
You get paid a monthly commission for as long as your commissioned user remains a paying customer. The advantage of a subscription-based system is you generate consistent revenue each month and can better predict how much revenue you’ll make over time. The disadvantage is you make a smaller amount up-front, and the customer could cancel their subscription, eliminating your earnings.
Examples of companies that offer subscription-based commissions are Aweber, Convertri, Teachable, and the SFM.
Finding your Niche
One of the greatest things about Affiliate marketing is that you can have the potential to build a business around your interests by finding and selling products or services that you’re already using and are passionate about. By signing up as an affiliate for companies that sell the products that you already love and use every day, you can now make referrals and potentially start getting paid for that work.
Quick and Easy to start
If you’re considering getting into digital marketing, then Affiliate marketing is an obvious place to start. 90% of people who are successfully running large multiple 6, 7, or 8 figure incomes through digital marketing started out with Affiliate Marketing.
It’s relatively quick and easy to set up and get started. It takes far less risk than traditional brick and mortar business models where you need to take out heavy loans or mortgages to register the business and pay for rent, overheads, staff salaries etc.
Once you understand how to sell online, all you really need to get started is a business website linked to your sales funnel which would typically include an opt-in landing page, thank you page, an email autoresponder, and your chosen advertising platform as well as a monthly marketing budget. Of course, you could also choose to use free marketing, otherwise known as organic marketing. I have a separate article that looks at the pros and cons of paid vs free marketing.
As with any business model, education is one of the keys to success! Understanding how to sell online and how to connect with your customer avatar is vital. For this reason, I strongly recommend you enroll for a digital marketing course like the one offered by the SFM.
Click here for access to an introductory training program that will show you how to get started with AFFILIATE marketing today!
If you’re willing to put in the work to learn how to advertise online, then the amount of money you can make with affiliate marketing is almost unlimited!
Contact me if you want to know more about this exciting opportunity.
2 thoughts on “What is Affiliate Marketing?”
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thanks for the feedback Kofi. Happy to hear you’ve found a system that works for you.