Definition of Affiliate Marketing

Affiliate marketing creates an association between two parties - 1) the Merchant (aka the advertiser, or partner), and 2) the Affiliate (sometimes called the publisher). If we look at the Affiliate Program as a whole, we must involve a third actor, the Customer, as well.

The Merchant makes available the product for purchase, and the Affiliate acts to sell that product for the merchant and/or drive traffic to the merchant’s site. In return, the Merchant agrees to pay the Affiliate a commission for sales and/or established actions.

Commission Arrangements

Payment plans are typically performance-based (which effectively shifts some of the risk from the Merchant to the Affiliate) and arrangements are normally structured as Pay Per Click (PPC), Pay Per Sale (PPS) and Pay Per Lead (PPL) - or some combination.

Affiliate Marketing Classifications

If we divide affiliate marketing based on depth, we have three separate groupings:  1) single-tier, 2) two-tier and 3) multi-tier programs.

Single-Tier Affiliate Marketing Programs

In a single-tier affiliate program, the Affiliates get the commission, only for sending visitors or sales to the merchant’s site. Pay/performance and pay/click fall under this category.

Two-Tier Affiliate Marketing

In Two-Tier Marketing, the Affiliate gets a commission for every action performed by the people he’s referred directly, plus he gets the commission when any of the people he’s personally referred gets compensated.  Thus, he has a two-tier commission plan and the Affiliate gets paid both directly and indirectly.

Multi-Tier Affiliate Marketing Program

Multi-Tier Affiliate Marketing is very similar to Two-Tier Marketing, but here, the Affiliates get compensated for the sales made by their downline in multiple, unlimited, layers. 

Residual Income Marketing

In Residual Income Affiliate Program, the Affiliate is compensated for every sale that is made by a person referred by him.

In Residual marketing, Affiliates get paid for every sale that his referral makes at the Merchant’s website. The only requirement is that on the first time visit, the visitor must come from the Affiliate’s authorized affiliate link. Then, whenever the same person visits the Merchant website (even without using the affiliate link), the Affiliate will be paid for every sale performed by the visitor.

Cookies are what make this strategy work.  A “cookie” is created on the first-time visitor’s computer. This cookie stores the affiliate id of the Affiliate. Cookies usually expire after 3 months; however, some may be effective longer. 

Whenever a visitor visits the Merchant website, the visitor’s computer is checked for any previously created cookie. If a cookie is found, the affiliate id is retrieved from it and the Affiliate gets credited for any purchase made by the visitor.

Win-Win-Win

As long as the affiliate marketing relationship is well-planned and well-executed, everyone wins:

1. The Merchant gets increased market exposure and market penetration, finding customers that would otherwise be outside the Merchant’s market reach.
2. The Affiliate earns a commission for online sales, without needing to establish a full e-commerce site or having to manage inventories and fulfil orders.
3. The Customer learns about, and can readily access desireable and useful products that s/he would otherwise not find - at least not easily.

Properly done affiliate programs are Win-Win-Win situations.

If you like what you’ve just read, and would like to learn how to leverage your efforts, put your income on autopilot, and become a millionaire, get the FREE Infinite Income Plan report here. Follow me on Twitter: @MaxProMe.

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