What is Affiliate Marketing and How Does it Work?

Do you dream of having the freedom and flexibility to work from home? For many these days, the ultimate goal is to be able to make their own schedule, work from the couch, or fit their workload around the school pick up. Some even have a dream of being able to work from anywhere in the world: a beach resort one week, and an ancient city the next.

All of this is possible with affiliate marketing. This fully remote, passive income-generating work puts you in control of not only your own schedule but also your own success. As an affiliate marketer, you have the power to make the decisions that will make or break your business.

But how do you get started with affiliate marketing? And how do you make sure your venture is successful? Read on for our ultimate guide to affiliate marketing.

Overview

Affiliate marketing can be a highly profitable strategy for both sellers and affiliates. However, in order to get the most out of affiliate marketing, it is important to thoroughly understand how this process works and the best strategies to use.

In this guide, we will cover everything you need to know about affiliate marketing, including:

  • What affiliate marketing is
  • Who are the key players in affiliate marketing
  • How much you can earn as an affiliate marketer and how you get paid
  • The benefits of affiliate marketing for affiliates
  • How to get started in affiliate marketing
  • Key affiliate marketing tactics
  • Tips for being successful in affiliate marketing
  • How to use affiliate marketing as a seller to make more sales

Affiliate marketing basics

You’ve probably heard of affiliate marketing, either through the success stories of affiliate marketers who earn six-figure passive incomes and only work a few hours a week, or when bloggers or influencers you follow tell you about a product partnership they have. However, very few people have a good understanding of affiliate marketing, so let’s start with the basics.

What is affiliate marketing?

In the simplest terms, affiliate marketing is a form of revenue sharing. The affiliate marketer promotes a seller’s product. If someone then buys that product based on the recommendation,  the affiliate marketer receives a percentage of the sale, similar to a commission. Therefore, they share in the revenue. However, if no sale is made, there is no revenue. Then, the affiliate marketer does not get a cut.

Usually, this involves an individual (the affiliate marketer) partnering with a business, most often an ecommerce store (like amazon) or digital products company/brand. The affiliate marketer typically needs to have a following to promote these products to, such as a social media followers, a blog with traffic, or an email list. The affiliate marketer may promote a product or simply mention it to their audience, providing a link to the site where individuals can buy. If a follower clicks on the link and actually buys the product, the affiliate marketer will get a cut.

Affiliate marketing has become a very popular way to make money online. It is also one of the best ways to build up your passive income, which we will look at next.

What is passive income?

People usually think of passive income as earnings that you receive without having to put any effort in. It’s true that once passive income systems are established, they may generate cash flow with little to no ongoing effort. It should, however, be remembered that these systems do require work to set up in the first place. Before you earn a passive income, you’ll likely have to invest your time and other resources.

For example, it requires time and energy to set up affiliate marketing links and content, as well as even more time and effort to build an audience or a following. Once these have been established, however, every time someone clicks on the link and buys a product, the affiliate marketer receives income, with no additional effort.

What is the difference between a MERCHANT and an affiliate?

It is important to understand the difference between a merchant and an affiliate. The merchant is often referred to as the seller, or sometimes the vendor, creator, brand or retailer. They are the party that ultimately sells the product to the consumer. They could be a huge global company or a solopreneur.

An affiliate, or affiliate marketer, on the other hand, is the party who promotes the product to their audience and gets a percentage of sales. Like merchants, affiliates come in all sizes, from individuals to large companies. Sometimes, the affiliate is called the “publisher” because they publish content for their audience.

What role does the consumer play?

Along with the affiliate and the merchant, the consumer is the third party in the transaction. They are arguably the most important party in this process, even though they may or may not be aware that they are participating in it. After all, without the consumer to buy the product in the end, affiliate marketing wouldn’t work at all.

The consumer sees the content from the affiliate that mentions or promotes the seller’s product. They then click on the affiliate link and make a purchase, allowing the seller to make their revenue and give the affiliate their share.

Sometimes, people talk about a fourth party in the transaction. This is the network: the overarching system that allows the affiliate to reach their audience, and therefore facilitates the whole process.

How do affiliate marketers get paid? 

If you’re thinking about becoming an affiliate, this set up probably sounds pretty good: you promote a product to your audience and you get a pay-out. But how do you get paid exactly? There are a few different ways that affiliate marketers can receive payment from their partners, and it is important to understand the difference.

So far in this guide, we have discussed the most common affiliate marketing model: pay per sale. Under this arrangement, every time an affiliate promotes the seller’s product to the consumer and the consumer actually buys the product, the affiliate earns a commission. If the consumer looks at the product and thinks about it but doesn’t actually buy it, the affiliate earns nothing. This means that the seller is never out of pocket because they only pay the affiliate a percentage of actual, guaranteed sales.

There are also alternative models, where the consumer doesn’t necessarily have to buy the product in order for the affiliate to receive a commission. One of these models is a pay per lead arrangement. This means that the seller pays the affiliate every time they generate a lead for the seller. This can be a more complex set up, but a lead is generally defined as the consumer completing some pre-determined action that the seller wants them to do. This could be getting a quote, signing up for a mailing list or a trial, or filling out a contact form. This is more of an incertain investment on the seller’s behalf, but most often the investment pays off.

Under another set-up, pay per click, the seller rewards the affiliate for simply getting consumers to visit their website or product page. In this situation, the affiliate receives a payment every time a consumer clicks on the seller’s link. Like the pay per lead model, the seller is paying for the potential sales they may get, in this case, from the increase in web traffic.

How does affiliate marketing work?

As mentioned above, affiliates get paid most often based on sales, but sometimes based on leads or clicks that they have generated for the seller. They persuade consumers to click on a link, and then once they do so, the affiliate then receives a payment for any sales, leads or simply clicks on the link itself. This system works because affiliates use special types of links called affiliate links.

An affiliate link is a link to the seller’s page that contains a special code that allows the seller to see where the traffic has come from. This works by storing a cookie on the user’s computer when they click on the affiliate link, and the merchant can then see who referred the consumer to their site. This means that the seller knows that the sale (or lead or click) was generated by that affiliate and will pay them accordingly.

How much money can you make with affiliate marketing?

This amount you make as an affiliate marketer can vary greatly and depends on multiple factors. The affiliate marketing model you use can affect how much money you make. The payments that sellers are prepared to make generally vary depending on whether it is pay per sale, pay per lead or pay per click. Obviously, sales are more valuable.

In the same way, different sellers will offer different levels of compensation. If you partner with large global brands they are likely to pay less than small companies and entrepreneurs. Because the are so large and well known they simply don’t have to pay as higher commission to attract affiliates.

Most of all, how much money you make depends on how many sales, leads or clicks you are able to generate on your affiliate link or links. This, in turn, depends on how effective you are as a marketer. We will cover tactics and strategies for effective affiliate marketing later in this guide.

Having said all that, the most successful affiliate marketers (top 1%) earn millions a year. It should also be noted that affiliate marketing income can often fluctuate greatly when you are fist starting out: you may have some months when you make very little, and others when you turn a sizable profit. It is best to see this as a long-term exercise and evaluate it annually rather than monthly.

What are the benefits of affiliate marketing?

A lot of people are drawn to affiliate marketing for one major reason: passive income. Affiliate marketing is arguably the best way to generate passive income in 2020. After an initial investment of time, energy and sometimes funds, you can sit back and relax and watch the funds roll in. This allows you to earn money on the side when you’re working on other projects, or perhaps not even working at all. Furthermore, this income can continue to roll in for months or even years after you have put the work in.

Affiliate marketing is also very attractive to many people because it is something you can do anywhere, anytime. If offers complete freedom in terms of your schedule and your location. You can work from home or work while travelling. You can also balance affiliate marketing with other work, family or personal commitments, as it can be done on your own time.

Another major benefit of affiliate marketing is that it requires very little set up, investment, or on-going logistics. Because you are not selling any products yourself, you do not have to deal with the hassles of product development, negotiating with suppliers, shipping or returns. Equally, you do not have to deal with customers at all, saving a lot of resources and headaches over customer support. This sets it apart from many other types of enterprises and start-ups, allowing you the same level of freedom and control without many of the hassles.

Finally, unlike many other businesses and ventures, affiliate marketing requires very little initial investment or ongoing cash flow. As an affiliate, you do not need to buy products or pay for shipping, staff, storage and so on. This means you can get started with virtually no startup capital and do not need a steady flow of cash to keep your venture running. You can, therefore, ride out the low months without any worries and reap the benefits of the months when you make more money.

These factors combined make affiliate marketing an ideal choice for many people.

How to get started with affiliate marketing

With all of the benefits and advantages of affiliate marketing, it is a wonder that more people are not launching their own affiliate marketing ventures. This is, perhaps, because the world of affiliate marketing can seems overwhelming and it may be difficult to know how to find your feet. Below is a basic, step-by-step guide to getting started with affiliate marketing.

Build your audience

In order to be an affiliate marketer, you need to learn how to build an audience. The affiliate marketing model relies on introducing consumers to products. To do that, you need to build an audience of consumers who will listen to you.

There are many ways to do this. One of the most common approaches is through a website or blog, here’s an example. You need to build a site or blog that offers valuable information and useful content to your users. This could be product reviews, blog articles, or anything else that your audience will want to read. Providing great content is the only way to reliably build an audience. Affiliate marketers can also build a following through social media and then draw on that audience in order to promote their partners’ products.

Just Van Life – example website using affiliate marketing.

Whichever route you choose it will, of course, take some time and effort to set up. This is your initial investment in your affiliate marketing venture, which will repay you many times over in the long run. If you’re an established blogger or social media influencer who already has an audience, you’re ready to get started with affiliate marketing.

You should also work on promoting your content to your community in order to get consumers to click on your affiliate links as much as possible. For more on building and strengthening your community and the best ways to promote products to them, see the “affiliate marketing tactics” section below.

Find suitable products

Once you have your audience established, the next step is to find products you can promote. The best and most authentic way to find products is to look at the products or services you already use and love. Take the time to examine the products you use on a daily basis. Which ones can’t you live without? Which are particularly useful, ingenious or simply enjoyable? If you love these products, chances are your audience will love them too.

This is the key: the products you promote must be highly relevant to your audience. Otherwise, affiliate marketing simply won’t work. In most cases this will happen naturally: you will write or post about topics that interest you. Therefore, your audience who likes your content will be interested in the same products that you are.

Also, make sure that you niche down. This means finding your specific niche: focus on the topics that you are passionate or knowledgeable about and target the segment of your audience that wants to hear about those topics.

Accordingly, the topics you promote should be highly relevant to this niche. Put your favourite products through this lens to make sure they are suitable for your audience. Search around for other products that are exactly what your audience will want to buy. Having targeted content and then promoting products that are specific to that niche is a winning combination when it comes to affiliate marketing.

Find partners

Once you’ve identified the products you want to promote, it’s time to make partnerships with the people who sell them. These partners will be the sellers in the important seller-affiliate-consumer relationship that makes up affiliate marketing.

Sometimes, if you have an established audience relevant to their customer base, these sellers will get in touch with you to see if you’d be interested in marketing their products as an affiliate. If not, you can also get in touch with them. Introduce who you are, tell them about the audience you have, and suggest that you could become an affiliate. If the product is relevant, they will likely see that it’s a natural fit and be interested in partnering with you.

You can also sign up to an affiliate marketing program. There are a number of these around, some of the most popular programs being:

The world’s largest affiliate marketing program is undoubtedly Amazon. It is also one of the easiest programs to join and get started. All you need to do is sign up to the Amazon Affiliate Program, and they will give you an affiliate link for any product on their site. With Amazon’s huge marketplace, you will probably be able to find a number of relevant products there. It then works like any affiliate marketing system, where you earn a commission from sales made through your affiliate links.

Advertise to your audience

The final stage in the process comes once you have all your ducks in a row. Once you have your audience, your products, and your partners, you are ready to bring it all together and start earning money from affiliate marketing.

This means that you need to promote your partners’ products to your audience. You will present an affiliate link to your audience through your content, who will then have the opportunity to click on that link and buy the product. You will then earn your percentage of the sale.

Of course, it’s not quite as simple as just having an affiliate link, and certain approaches are much more effective than others. There is also a range of affiliate marketing tactics that can help you to be more persuasive in promoting your partners’ products, thus achieving more sales for your sellers and earning you more money as an affiliate. We will cover these tactics and how to be a more effective affiliate marketer in the next section.

Affiliate marketing tactics

As an affiliate marketer, there is a range of tactics and techniques you can use to reach your audience and encourage them to click on your affiliate links. By developing your skills and mastering one or more of these techniques, you will be able to get more sales, leads or clicks for your partners, which means greater earnings for you.

Blogging

Bloggers make up a large proportion of affiliate marketers today, and for good reason. Blogging and affiliate marketing are made for each other. Bloggers have their own dedicated audience, and they can also organically rank in search engines. If they do one or both of these things well, bloggers can reach a large number of potential customers to drive sales for their partners.

Often bloggers already have an established blog and an audience before they decide to get involved in affiliate marketing. In some cases, they may have had an established blog for years, building up their audience and eventually adding affiliate marketing to their wheelhouse. In other cases, affiliate marketers may set up a website or blog specifically with this purpose in mind.

There are a variety of ways a blogger can promote their partners’ products to their users. They may write a blog post on a related subject, and then mention the product, directing users to it with an affiliate link. Another approach is to write a blog post specifically about the product or a set of products, such as a product review. Some of the most successful affiliate marketing sites purely review and promote affiliated products.

Social media

Social media is another very effective affiliate marketing tactic. This tactic works well because we are living in the age of the influencer. Influencers have reached great prominence in recent years, and the reason for this is rooted in basic human psychology. People are overwhelmingly more likely to buy a product based on a recommendation of a friend or a family member than in response to brand marketing or advertising.

This is because people trust their friends and family, and therefore they trust their recommendations. Influencers build up a relationship with their followers through their Instagram, Facebook or YouTube posts that invited their followers into the influencer’s life. This establishes a level of trust. When an influencer recommends a product, it’s almost like a friend’s recommendation.

Similar to blogging, most influencers don’t start out with affiliate marketing in mind. However, once they have an established group of followers, they are in the ideal position to promote products and earn affiliate dollars.

It should be noted that affiliate links do not usually work the same way on social media platforms as they do on websites. Often social media platforms disable or block affiliate links. Therefore, the best affiliate marketing tactic for social media is to create a landing page or post on your website, and then link to that page on your social media posts. After directing users to your site, they will click on the affiliate link from there.

Email marketing

Email marketing is another great tool for affiliate marketers and it’s an excellent way to drive more affiliate sales in conjunction with other tactics, such as blogging, digital marketing or social media marketing.

The first part of a successful email marketing strategy is building a great email list. In order to market effectively by email, you need a healthy list of subscribers to market to! Start building your email list by having a signup button on your website as a call to action. Popup windows prompting website visitors to sign up to your email list also work very well. Exit-intent popups, which appear when the visitor is about to leave the site, are particularly effective.

From there, you can use your email list to send out information about products you think they will like, containing an affiliate link, of course. Because you have niched-down your site and are targeting a specific audience, you will have a fairly good idea about which products will interest them.

Live webinars

Webinars are another great affiliate marketing tactic. These are particularly effective because they represent a way to offer real, valuable content to your audience, which also happens to contain affiliate links.

My Banner

Writing a blog post or product review can be highly engaging and may persuade your users to buy a certain product. However, a live webinar showcasing the product in some way is arguably many times more engaging and more persuasive. Live webinars are also a great way to strengthen your relationship with your audience by interacting on a personal level.

There are many ways to host a live webinar and stream your content live to your audience. Some of these methods are even free, such as using Google Hangouts. The most effective way to use live webinars for affiliate marketing is to promote a particular product.

Stream live to your audience, showing them the product and talking them through the features. Remember also that live webinars should be two-way: invite your audience to ask questions and then you can answer live. Be as personal as possible, sharing your own experiences with the product. And, of course, be sure to share an affiliate link!

PPC advertising

Even though affiliate marketing can be very effective with low-cost marketing tactics, adding paid marketing to the mix can exponentially increase your affiliate earnings. PPC, or pay-per-click advertising is a tactic to consider once you are already an established affiliate marketer, in order to take your efforts to the next level. PPC advertising is a type of online ad where you only pay for the ad based on the number of people that click on it.

PPC advertising is most useful in supporting other affiliate marketing tactics. For example, you can advertise online to grow your email list or to promote your webinar. PPC ads are a great way to reach more people and further your affiliate marketing efforts.

How to be a successful affiliate marketer

Affiliate marketing is very popular, which is hardly surprising given all the benefits. Therefore, in order to stand out from your competition and be successful as an affiliate marketer, there are certain tips and advice you should follow.

Build personal relationships

As an affiliate marketer, one of the best assets you have is your relationship with your audience. If you form a personal relationship with your audience, you will build trust with them and they will be more likely to follow your recommendations.

This also comes back to your niche: by targeting a very specific target audience, you can work to establish your expertise in that area. This translates to the products you sell, as you should promote products only within your area of expertise. People will then trust your recommendations.

As we’ve already covered, people are more likely to make purchases based on personal recommendations. Therefore, the more personal you can be in your approach to your audience, the better. Don’t be afraid to let your personality come across, whether through blogs, social media posts, or live events like webinars.

Mix things up

One of the keys to being a successful affiliate marketer is to not be afraid to try new things and to use a variety of tactics. For example, if you have not previously done product reviews, this is something you could try. You can also explore different types of blog posts or new social media.

Cross-channel marketing is the best way to build your affiliate marketing efforts. Focusing on one channel only will bring you some results. However, working on multiple channels, and even better, using different channels to promote each other, will multiply your results.

It is also important to choose the right partnerships. Great affiliate marketing skills will go a long way, but if you are working with the wrong brands or the wrong products, even the best affiliate marketing tactics will not allow you to be successful. This is in your interest too, as you do not want to invest time and energy in a partnership that will not be suitable.

Disclose your affiliation

Affiliate Disclosure is required by the FTC.

As an affiliate marketer, it is critical to always disclose your affiliations. This means it is important to always clearly tell your followers whether any of your links are affiliate links. This is important for a few reasons. Firstly, openly disclosing your affiliations will help to strengthen the level of trust between you and your followers. If your followers later find out that you are promoting affiliate links without being open about them, they could feel this is a breach of trust.

Disclosure is also important for legal reasons. Depending on the jurisdiction where you operate, there may be legal requirements that indicate you need to disclose your affiliations. Often this means having a statement on all pages with affiliate links to make users aware.

Develop your SEO skills

SEO can be a vital skill for any affiliate marketer. SEO, or search engine optimisation, means optimising your website so that you will rank highly when users search for terms related to your site. In the affiliate marketing world, this can be extremely useful in driving traffic to your site and therefore increasing the chance that visitors will click on your affiliate links.

SEO is a somewhat complex field. Search engines are developing increasingly complicated algorithms for search results and therefore it requires a degree of skill to be able to rank your site. It is therefore important to invest some time in developing these skills in order to make sure your website is SEO-friendly.

How to work with affiliate marketers as a seller

So far, this guide has mostly covered the affiliate marketing process from the perspective of the affiliate. However, affiliate marketing can also be highly lucrative for sellers: working with one or more affiliates is a great way to drive more traffic to your site or your listings and to boost sales of your products.

Choose your product

If you want to get started selling products and marketing them through affiliates, the first thing you’ll need to do is come up with a great idea for a product. Coming up with a phenomenal, truly unique product idea can be challenging. However, it is important to remember that you do not necessarily need a phenomenal product idea.

Rather, all you need is a viable idea: that is, an idea for a product that will sell. If you can come up with an idea for a product that no one has before, great. However, this is very difficult to do. Instead, you can simply try to improve on existing products that are already out there – plenty of successful businesses have been built this way.

To do this, consider the problems that consumers face. How can you make existing products better in order to resolve these problems? If you’re struggling for ideas, do some research and find popular products that reviewers have common complaints about. Then find a way to address that complaint.

Product development

Once you’ve come up with a great idea for a product that will solve consumers’ problems and address their needs, you can move to the product development stage. This is an important stage in the product life-cycle because it allows you to create a product that consumers will definitely want to buy.

Product development involves extensive market research. Testing the market allows you to try out your product ideas and work out what will be best received. Take surveys with your customer base, offer free samples, or find other ways to test out your product. This will help you to refine your offering to make sure it is as attractive as possible before launching it.

Establish partnerships

Once you are ready to launch, it is time to find affiliates to help you sell your product. There are a few ways you can do this. The best way is typically to list your product for sale with a platform like Clickbank or with one of the many Affiliate networks out there like the ones mentioned above. These networks and platforms already have many thousands of affiliates that are looking for new offers to promote.

You can also seek out affiliate partners yourself by identifying those individuals who are best placed to sell your product. This means finding people who have an audience that closely resembles your target audience. Look for influencers, bloggers and websites with a following that will be interested in your project. Then approach them to propose an affiliate marketing partnership.

Final thoughts

Affiliate marketing can be a highly lucrative venture that allows individuals to earn passive income with very little investment and with a high degree of freedom and control. For businesses and brands, affiliate marketing is a highly effective way to reach your target audience and drive more sales.

In order to be successful in affiliate marketing, it is important to have an understanding of the process, as well as the key tactics and strategies. The best affiliate marketers have worked for some time to build up an audience and use a range of strategies to build a successful venture.

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