In affiliate programs, you pay people or companies when they earn you a sale or introduce new target customers to your product.
A widespread example is bloggers who promote products. These bloggers receive a percentage of every sale made through the product links on their blogs.
Major companies who use affiliate marketing are Amazon, Zappos, eBay, Orbitz, and Netflix.
Affiliate programs work best for retail, information products, and businesses that rely on lead generation.
Amazon, Target and Walmart are the biggest retail stores with affiliate networks.
Amazon pays between 4% and 8.5% per sale depending on the seller’s performance.
Many smaller retailers who can’t coordinate their own affiliate programs turn to affiliate network providers like Commission Junction, PepperJam, and LinkShare.
There are 5 major categories of retail affiliate programs:
- Coupon sites: These sites offer coupon codes for popular retailers or their products. A percentage of every purchase made with these codes goes back to the coupon site (CouponCabin, Slickdeals)
- Loyalty programs: These sites offer cash back on purchases made through their partner retailers. When someone purchases an item, the site earns a percentage of the sale and gives some of that commission back to the customer in cash (Upromise, Ebates)
- Aggregators: These sites advertise retailers’ products and add extra information about them, like ratings or reviews (Nextag, PriceGrabber)
- Email lists: Individuals or companies with large email lists recommend products to their subscribers, and earn a percentage of every sale made through the list
- “Vertical” sites: Niche sites with large audiences in a certain “vertical,” like weight-loss or parenting, promote products to readers and earn a percentage of every sale made through the site
Since digital products don’t cost anything to distribute, affiliate commissions on information products are often very high.
ClickBank is the largest network and provides rates of up to 75%.
Lead-gen affiliate programs are great for businesses like the legal and insurance industries.
Companies use their own affiliate program, or turn to a dedicated network like Affiliate.com, Clickbooth, Neverblue, or Adknowledge.
The first thing you have to figure out is how much you are willing to pay to acquire a customer? These affiliate commissions will come out of your own pocket.
Start by using an existing affiliate network or niche network related to your product. They already have lots of affiliates ready to work with you.
You must pay upfront to gain entry into these networks, and it sometimes costs upwards of $2,000. But if you’re successful, you will earn back the entrance fee.
You can also start your own affiliate program and recruit existing customers to be your affiliates. In this case, you don’t have to pay them in cash. Instead, you can give them free access to paid features of your product, for example.
Dropbox gives extra free storage space and QuiBids gives free bids to users who invite friends to the platform.
After inviting your customers to be affiliates, reach out to bloggers, influencers, publishers, and email list curators to participate.
The best way to get bloggers’ interest is by building a relationship with them. Help them by giving them free products or writing for their blog.
Choose a simple fee structure to start. Start with a flat rate (for example, $5 per purchase) or a percentage (for example, 5% of the price per purchase).
Most major affiliate networks have more complicated pricing tiers based on affiliates’ performance.
Overall, affiliate marketing is a great place to start because you’re more likely to get a sale than with SEM ads. Also, unlike SEM ads where you pay a set fee regardless of performance, you only need to pay affiliate commission if a purchase is made.