How Affiliate Programs Work – A Beginner’s Guide To Affiliate Marketing

The idea behind affiliate marketing is that you promote the products and services offered by other people, and if your followers actually buy something from their sites following your recommendations, you get paid a commission for your efforts.

Affiliate marketing is based on the idea of revenue sharing. If you have a product or service to sell, you can rope in promoters or affiliate marketers to spread the word on behalf of you. If you don’t have a product or service to sell but you still want to make money, you can earn a living by simply promoting other people’s products and services.

So how exactly does affiliate marketing work? How do the thousands of affiliate programs that are listed on AFFKO work? Let’s find out.

The Definition Of Affiliate Marketing

Affiliate marketing is the revenue sharing arrangement that enables professional marketers, social media users, YouTubers, and virtually anybody with a web presence to earn a commission by promoting products and services offered by various companies.

Basically, if you like a product and you want to tell people about it without physically meeting or approaching them, you just need a web presence – a website, or a blog, or a social media channel, and you can earn a share of the revenue generated for each sale you make through your website or blog.

There are four parties involved in the entire process of affiliate marketing, but essentially, there are two sides of the affiliate equation – the creator and actual seller of the product and the affiliate marketer.

The latter represents the former, and the former is liable to compensate the latter for their marketing efforts.

However, technically speaking, there are four parties. Let’s now delve deeper into these four parties and their roles in the affiliate marketing ecosystem.

The Four Parties In Affiliate Marketing

Affiliate marketing is the process of spreading product/service creation, product promotion, marketing, selling and sales tracking and attributing across three parties, with the fourth party being the buyer. Each of the first three parties gets a share of the revenue generated through affiliate marketing. Here’s a detailed explanation of the four parties involved in the process.

1. The Merchant Or The Product Creator/Seller

The merchant is also referred to as the creator of a product/service, the seller, the retailer, the online store, the brand, or simply the vendor. This party is responsible for creating a product/service and bringing it to the market.

It can be a large corporation like Alibaba, which is a B2B marketplace that aims to make it easy to do business anywhere.

It can also be a smaller company focusing on a smaller niche like children’s clothing, such as Tea Collection.

From small and hyperlocal startups to some of the largest corporations in the world, anyone can be the merchant for an affiliate program. If they have a product or service to sell, they probably have an affiliate program too.

2. The Affiliate Marketer Or The Publisher

Also sometimes referred to as the influencer, brand ambassador or associate, affiliate marketers or partners are the people who promote the products/services of the brands they partner with.

Affiliates can be individual bloggers, marketers, influencers like Finch Sells.

Or they can be entire companies like The Crazy Egg founded by one of the biggest affiliate marketers on this planet, Neil Patel.

Affiliate marketers can rake in a few dollars each month to hundreds of dollars each day. The sky is the limit for affiliate marketers.

Affiliate marketers are the people who do the marketing and promotion for the brands and the products they represent. They invest their money, time, energy, and resources to build their portfolios, and some of them even build their own empires and become Super Affiliates.

Affiliates can create and distribute podcasts, write review articles, and create YouTube videos to educate people about the brands they promote.

An affiliate marketer can just represent one brand or can sign up for multiple affiliate programs.

3. The Affiliate Network Or The Affiliate Platform

Although many experts choose to leave out affiliate networks and platforms from the affiliate system, these platforms are actually integral to the entire affiliate marketing ecosystem.

An affiliate network is like an intermediary between the merchant and the affiliate marketer – the two main sides of the affiliate equation.

Affiliate networks or platforms are affiliate marketplaces that bridge the gap between merchants and publishers or affiliate marketers. Read more about affiliate networks/platforms here.

While some merchants allow affiliate marketers to directly partner with them, some others simply rely on third-party affiliate networks that handle the payments and provide the tracking technology for the affiliate programs.

If a merchant decides to manage their affiliate program on an affiliate network and they don’t manage it in-house, it means you have to become a part of the network first to join the program.

Affiliate networks also serve as a database of affiliate programs and merchants, and you can choose to work with one or more of these merchants after joining these networks.

4. The Buyer Or The Consumer

The buyers are the fourth and the most important party of the entire affiliate marketing system. Without buyers, there would be no sales and no revenue, hence no commissions as well.

The affiliate marketer’s goal is to promote the different products and brands to the consumers through their blogs, websites, YouTube channels, social media channels, and whatever channel they deem fit.

Once a prospective buyer buys a product or even becomes a lead for a merchant, it becomes a win-win situation for both the merchant and the affiliate marketer, and even the affiliate network in case the program is powered by a network. This is because the merchant gets a sale without putting any effort, or a lead and the affiliate marketer gets a commission as a reward.

How Does A Merchant Pay An Affiliate Marketer?

A merchant can compensate an affiliate marketer by following and embracing different payment arrangements. They can either pay per sale, or pay per click, or even pay per lead. There are five different types of payment models, including CPC (Cost Per Click), CPM (Cost Per Mile), CPL (Cost Per Lead), Revenue Share, and CPA (Cost Per Action/Acquisition).

There are also Two-Tier Affiliate programs (similar to multilevel marketing) and affiliate programs that come with recurring commissions.

How Does the Referral Process Work?

If you sign up for an affiliate program and your application is approved, you will receive an affiliate tracking link from the merchant.

Read more about affiliate tracking links here.

You can place the affiliate tracking link in your product reviews. You can also share the link via your social media channels, Facebook, Twitter, YouTube or any other social media channel. If your followers make a purchase or take an action by clicking your affiliate link, you will be eligible for a commission.

Final Thoughts

As you can see, it takes almost nothing to get started as an affiliate marketer or a publisher, except for a web presence, which you might already have.

If you have a sizeable fan-following on social media or you have got a few subscribers to your blog, you can simply start promoting brand and programs and earn commissions along the way.

Affiliate marketing almost always creates a win-win situation both for the merchant and the marketer, although there are a few disadvantages too, which we have explored in our next blog.

However, the sheer advantages of affiliate marketing heavily outweigh the handful of disadvantages.

If you are on the internet today, you can be an affiliate marketer tomorrow.