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Sales Strategy
How Affiliate Marketing Works?
Liucija Adomaite
August 28, 2024
|
7 min. read
Liucija Adomaite
LAST UPDATED
August 28, 2024
READING TIME
7 min.
If you have never done it, affiliate marketing may sound tricky. You may wonder if it’s even legit.
Be assured, it really is an excellent way to gain passive income, build your audience, and promote products or services.
However, the affiliate industry is very competitive, and gaining traction here is a real challenge.
In order to become a profitable affiliate, you must start by understanding how affiliate marketing works.
In this article, you will learn the mechanism behind affiliate marketing and how it actually functions.
Typically, affiliate marketing works in this way:
1 Step:Apply to the affiliate program
First, an individual applies to the chosen affiliate program and waits to be approved by the company.
When choosing an affiliate program to participate in, it’s important to identify your niche and target audience.
Evaluate the commission rates, cookie durations, and the reputation of the company you’re about to promote.
Depending on the affiliate marketing type you want to do, make sure you try the product or service (which is especially relevant in an involved affiliate relationship) to see if you really like it.
If you’re just starting out, it may be a good idea to join well-known affiliate networks like Amazon Associates or ShareASale.
2 Step:Acquire affiliate links
Upon approval, you will receive a welcome email with login details and program guidelines.
Log in to your affiliate dashboard to familiarize yourself with the tools and resources available.
Here, you need to set up your payment method (bank transfer, PayPal, etc.) and tax information.
Once approved for the affiliate program, the affiliate receives unique links to promote the company's service.
You can also obtain your unique tracking links by generating them for the particular products you like.
Make sure you browse the merchant's product catalog within the affiliate portal and choose the ones you want to promote.
These unique links contain tracking IDs that attribute any sales or actions to you.
Optionally, generate banners, widgets, or other promotional materials provided by the merchant.
3 Step: Create and promote content
Sharing affiliate content on your channels is easier said than done.
That's why planning your affiliate marketing strategy considering your audience and channels (blog, social media, email marketing, YouTube, etc.) is key to the success.
Make sure you create high-quality, relevant content such as product reviews, tutorials, comparisons, or listicles.
Incorporate your affiliate links naturally, and be transparent about your affiliate relationship with the audience.
If you do unattached or involved affiliate marketing, you must rely on SEO techniques to make your content discoverable on search engines.
Working on driving traffic to your channels so you can promote your affiliate links is crucial when you don't have a solid follower base yet.
You may also consider paid advertising options like Google Ads or Facebook Ads to drive targeted traffic.
The most effective affiliate marketing method to boost sales is using multiple communication channels at once. Don't rely solely on your blog or website.
Use social selling on LinkedIn, build authority on social media channels, send out regular newsletters, participate in webinars, create podcasts, attend workshops, share reviews and personal experiences you have with products, film YouTube videos, Instagram reels, and more.
This multichannel tactic is used by the most successful affiliate marketers around the world.
4 Step: Customer conversion
In short, this step is when the customer sees the affiliate link, gets interested, clicks on it, and purchases a service or a product.
When customers click on your affiliate links, they are redirected to the merchant's website.
If a customer completes a purchase or desired action (e.g., signing up for a trial), the affiliate tracking system attributes the conversion to you.
Use detailed reports in the affiliate dashboard to display sales, conversions, and commissions.
5 Step: Get paid
Earn money based on the affiliate program's commission structure (percentage of sales, fixed fee per sale, or payment per action).
You can easily review your earnings in the affiliate dashboard.
Most merchants typically follow a payment schedule (monthly, bi-monthly, or quarterly) with a minimum payout threshold.
Payments are processed and received through your chosen payment method.
How do you get paid in affiliate marketing?
Affiliates earn money based on the program's commission structure, which could be:
Percentage of Sales: You earn a specific percentage of the sale amount made through your affiliate link.
Fixed Fee per Sale: You receive a fixed amount for each sale generated.
Payment per Action (PPA): You are paid for specific actions such as sign-ups, clicks, or leads, regardless of whether a sale is made.
Use the affiliate dashboard provided by the merchant or network to:
Monitor real-time data on clicks, conversions, sales, and earnings.
Review detailed reports on performance metrics to understand which products or campaigns are performing well.
Sometimes there's minimum payout threshold. It means that affiliates must reach a minimum payout threshold before receiving payments. This amount varies by platform but common thresholds are $50, $100, or higher.
If your earnings do not meet the minimum threshold in a given period, they will carry over to the next payment cycle until the threshold is met.
When you get paid also depends on the payment schedules of a specific affiliate program. It can be done in regular Intervals, and payments are typically made on a scheduled basis, such as:
Most commonly, payments are distributed once a month.
Bi-Monthly: Payments are made twice a month.
Quarterly: Payments are made four times a year.
Pay Cycle: Understand the pay cycle and payment dates to plan your finances accordingly. For example, earnings generated in January might be paid out at the end of February.
The last step is payment processing. You can usually select a preferred payment method from options such as:
Direct Bank Transfer (EFT/ACH): Earnings are directly deposited into your bank account.
PayPal: Payments are transferred to your PayPal account, which you can then withdraw to your bank.
Checks: Some merchants offer physical checks sent by mail.
Other Methods: Options like wire transfers or digital wallet transfers may also be available.
When setting up your payment method, it's important to ensure your payment details are correctly set up in the affiliate dashboard to avoid delays. This includes entering bank account information or linking your PayPal account.
Another important aspect you want to know of when getting paid as an affiliate is transaction fees.
Be aware of any transaction fees associated with your chosen payment method. For instance, PayPal may charge a fee for receiving money, which is deducted from your earnings. Banks might charge for international transfers or other services.
Moreover, provide necessary tax information as required by the merchant or affiliate network. This could include submitting forms like W-9 (for U.S. affiliates) or equivalent forms for other countries.
It's crucial to keep thorough records of your earnings for tax purposes. You will receive a 1099 form if you're a U.S.-based affiliate and earn above a certain threshold.
Who is involved in affiliate marketing process?
There are three main actors participating in affiliate marketing:
1. The affiliate is the individual or entity that promotes the company's product or service.
Once accepted to an affiliate program, the affiliate receives access to a unique affiliate link or a set of links connected to the company's products or services. These links track the affiliate's performance using cookies.
The affiliate earns a commission based on the agreed terms of the affiliate program, which could be a percentage of the sale amount, a fixed fee per sale, or a payment for other actions (like clicks or sign-ups).
2. The merchant is the entity selling the product or service that the affiliate promotes. The merchant provides the actual products or services that are available for purchase.
The merchant establishes an affiliate program to encourage others (affiliates) to promote their products or services. They set the terms of the program, such as commission rates, payment methods, and the duration of tracking cookies.
The merchant is responsible for tracking sales or conversions driven by affiliate links and pays the agreed-upon commissions to the affiliates for their marketing efforts.
Sometimes, there's an intermediary between an affiliate and a merchant's affiliate program called the affiliate network. It is a common channel for creating affiliate relationships.
3. The customer is the individual who purchases a product through an affiliate. Merchants partner with affiliates to connect with the affiliate's audience and convert them into customers.
Key takeaways
Affiliate marketing, while initially seeming complex, is a legitimate and effective way to earn passive income, build an audience, and promote products or services.
But to make it work, you must understand the process very well.
The key steps include applying to a suitable affiliate program, acquiring and promoting unique tracking links, and converting customer interest into sales, all tracked through detailed reports.
Earnings are based on the program's commission structure and are paid out through chosen methods according to a specific schedule, provided the minimum payout threshold is met.
Key players in this industry are the affiliate, who promotes the products, the merchant, who offers the products, and the customer, who makes purchases through affiliate links.
Liucija Adomaite
Liucija Adomaite is a viral content writer and organic traffic expert on a mission to help turn ambitious businesses into big names.
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