An affiliate program is a method that a business can use to market their products. Amazon is a perfect example of a company that successfully uses an affiliate program. They launched theirs in July 1996.
When a business uses affiliates instead of employees it removes a majority of the overhead expense associated with an employee. Affiliate arrangements greatly leverage personnel far beyond a traditional employer-employee situation.
Affiliate programs began to surface when the Internet was opened up for commercial use and webmasters needed to find an efficient way to market their products.
Commission Structures for Affiliate Programs
After a period of time, affiliate programs grew outside webmasters exclusive use when bloggers, forums and Internet marketers began to implement them.
An affiliate relationship works like a company-agent relationship where the agent refers business and is compensated by the company using a commission structure for referred sales. This type of commission structure is often times called revenue sharing when used within the affiliate program.
Businesses can prosper when using affiliates because they can set the commission structure so payments are only made after sales are made and revenue is generated.
Affiliate marketers can be compensated in a variety of ways with payment per click, payment per lead and payment per sale being the most common.
The affiliate program sales arrangement has become an important type of marketing since the advent of the Internet.
MarketingSherpa has reported an estimate of worldwide affiliate marketing for 2006 to be $6.5 billion, which shows affiliates are making a big impact in many different industries including gambling, retail, gaming and travel, along with lots of other segments.
Affiliate Marketers and How They Earn Their Sales
Affiliate marketers usually keep a very low profile, with the majority of the time remaining in the background and just acting as a middleman, so the customer does not even realize they have gone through an affiliate.
The affiliate marketer will use methods that include online marketing like search engines, websites and e-mail, plus they often use offline strategies like print advertising.
Affiliate sales can be tracked by a number of ways including browser cookies, exclusive coupon codes and sales made directly with the affiliate.
These different types of sales tracking methods are used and decided upon during the agreement process between the business and affiliate. When the number of affiliates grows, the tracking will need to be automated and consistent between all affiliates for ease of implementation.
There are issues that need to be addressed with the different type of tracking and payment of commissions. Therefore you should always research any arrangements in advance.
Often affiliates must sign non-disclosure and non-compete contracts for protection of the business.
There are protections for affiliates also with these types of arrangements which need to be agreed upon in the beginning of the business-affiliate relationship.
Multi-tier Affiliate Programs
Multi-tier programs work on a hierarchical referral system and can easily compound commissions.
This type of affiliate program structure can greatly benefit the affiliate but requires a higher degree of management on the part of the business.
If you feel that an affiliate program can increase your product sales there is a lot to be considered before implementing the program, so always do adequate research in the beginning.