Understanding Affiliate Programs
An affiliate is defined as any "referrer" or website that promotes a product in an effort to earn revenue. A merchant is defined as someone who owns a product and is sharing revenues with an affiliate based on the affiliate's performance. Affiliate programs can drive targeted traffic to your website.
There are 3 basic affiliate programs, though only the first two are commonly used.
Pay Per Click - this is when an affiliate is compensated for sending traffic to the merchant. (AdSense is an example of PPC affiliate program)
Pay Per Sale - this is when the affiliate is compensated by the merchant if the referral generates a sale or purchase.
Pay Per Lead - this is when the merchant agrees to pay for a qualified (or sometimes unqualified lead), which is very uncommon because it is subjective and up to the merchant.
Affiliate programs allow you to pay and track incentives from other websites that send web surfers, leads or paying customers to your website. Commissions based on purchases made by traffic sent from the referring website can be paid. Besides a commission, an affiliate can receive a flat fee, or other incentives for all valid transactions it refers that generate a sale or lead.....
Be careful that the affiliate's web page is not cluttered with banner ads that may crowd out your link, or that be annoying to customers. Affiliate programs enable affiliates to leverage their traffic and customer base in order to profit from e-commerce while merchants benefit from increased exposure and sales.
Commonly traffic to merchant sites is measured and affiliates can clearly see conversion rates. Meaning, they track the percentage of people they are referring, and how much of it results in earned revenue. If the affiliate finds a very low conversion, they will find a better way to monetize that traffic, quite possibly with a competing merchant product.
In order to be a successful affiliate, the affiliate site needs to either have tons of traffic or target a specific audience, frequently one untapped by the merchant. It has been my experience, the closer the affiliate site content resembles the merchant products, the higher the likelihood of a good conversion rate.
In order to develop a successful affiliate network, merchants must realize that affiliates spend ad dollars on site, and product promotion. If the affiliate is not compensated fairly they will not remain in the merchants network. The bottom line is that affiliate relationships are partnerships, when both sides feel the situation is fair and equitable the relationship will be a success.
Given the present downturn of advertising on the Internet, joining affiliate programs can help bring in additional revenue. You may join a merchant’s affiliate program directly, or utilize the services of a third party solution, such as Be Free, Commission Junction, or LinkShare. These third party solutions handle the administration of the program, such as affiliate registration, commission tracking, statistics and lately, even issuing of commission checks..
Affiliate programs have proven to be a very cost-effective marketing mechanism for merchants like Amazon. They are able to get their banners splashed in thousands of web sites without shelling out any advertising money, mostly paying only when the affiliate member performs.
How effective are affiliate programs in making money for the home-based Internet entrepreneurs? There are a few exceptional cases that makes thousands of dollars each month for the affiliate. For some, they are able to manage a couple of hundreds every quarter. One thing we’ve learned on the Internet is that it takes time, attention, and a bit of creativity to succeed as an affiliate.
In order to maximize your earnings as an affiliate, there are some points you have to watch when you join affiliate programs.
1. Fit with your web site-
Many newbies make the mistake of signing up with several companies and randomly sticking the banners and buttons in every available space on their pages. The resulting web site is a chaotic, disorganized page of clashing and flashing banners that, unfortunately, fails to produce the expected financial results. The key to making money in affiliate programs is to ensure that the program you are promoting is related to the theme of your site. There must be a natural fit between the product and your site.
2. Tracking and Reporting System-
Merchants that use third party systems such as AdSense or Kontera provide access to your site’s performance through online reporting. These statistics tell you how many visitors you are sending to the merchant, what is the conversion rate from visitors to sale, and what creatives (e.g. banners, text link, search boxes, etc.) work well for your site. You will know the breakdown of the pay periods, sales, returns, and total balance. Statistics are important to help you improve the performance of your affiliate relationship and increase your revenues. You can choose to use the banner that has generated the most click-throughs and sales. Having the numbers to tell you how you are doing can help you tweak your performance for the better.
3. Level of Commission-
The commission level should be fair, acceptable and commensurate to the amount of effort that you will put in to promote the program. Low percentages may be acceptable in some categories with low margins and high prices, such as books. Hence, Amazon pays out 5-15 percent commission to their affiliates. Avoid affiliate programs that offer less than 5 percent of the gross sale. Instead, compare various affiliate programs and choose the one that offers a good commission structure.
4. Frequency of Payment-
The contract or operating agreement should clearly specify how often you will be paid by the merchant. Will you be paid on a monthly or quarterly basis? Determine if there are cut-off amounts that you will be paid. Some merchants send you a check even if you have earned only a measly $2 for the quarter. Most, however, set a minimum amount that you can be issued a check, and any earnings for that payment period below the minimum will be carried over to the next payment period.
5. Feedback Response-
When looking to join an affiliate program, you will have a lot of questions in your mind: Does it cost anything to join? How can I sign up for your program? How do I create a link to your site? When will I get paid? The merchant should provide you with the information you need to make the program work for you. Start with merchants that have a comprehensive set of FAQ (frequently asked questions) in their site.
6. Concern with the Security of Potential Affiliates-
Like anything on the web, be careful when you give out your personal information from your address to tax account number. There are merchants that ask for personal information when you apply in their sites using forms that are not located in secure servers. Choose an affiliate program that has reached a certain level of sophistication, and gives prime importance to the security of their potential salespeople.
*Click on any of the links on the side of the page to sign up for their related affliilate/referral programs. Also see my other sections on blogging, surveys and affiliate programs for more information.
