Dissecting Affiliate Marketing Properly

It is a well-known fact that the internet is deemed as the best invention ever created. It opened up a lot of opportunities for everyday people. Of course, marketing will not be left behind in this technology-driven world. Together with the internet, affiliate marketing is at its peak now more than ever. This can be attributed to the new awareness that people are displaying towards affiliate marketing and its benefits.

The two parties in affiliate marketing are the merchants and the affiliates and their relationship can best be described as mutually beneficial. The merchants will be able to benefit by advertising their products on affiliate websites and the affiliates will be able to generate extra income because of the advertising space that they are providing for the merchants. This relationship paved the way in order for people to see affiliate marketing, not as an alternative method, but rather as a primary method in which more effort and money can be invested in.

Affiliate marketing encompasses a lot of methods and all of them are different from each other. If you are just starting out with affiliate marketing then differentiating these methods can be tricky. To start off, here are some of the popular examples of affiliate marketing. Affiliate marketing can be categorized in two general categories and these are Pay per Click (PPC) and Pay per Performance (PPP).

PPC is the common method being used by start-up websites because starting this campaign will only require a small amount of money to be invested and the return on investment can be high and obtained in a short period. With this method, the merchant will pay the affiliate a fixed amount (usually a minimal fee) every time a person will click on the PPC ad. This payment is guaranteed even if the website visitor will not purchase anything.

On the other hand, PPP is tagged as a popular method among merchants. In this method, the affiliate will only get paid if the click will translate into a purchase. It might be harder to achieve a large number of conversions from clicks to sales, but the income of the affiliate will be boosted because this type of affiliate marketing is commission-based. PPP can further be categorized between Pay per Sales (PPS) and Pay per Lead (PPL).

PPS occurs when the affiliate will be paid by the merchant an agreed amount whenever the website visitor will actually buy from the merchant’s site. The fees can either be a fixed amount or a commission-based payment depending on the amount of sales generated by PPS. The fees in PPS are generally higher than PPC fees. PPL is considered as a variation of PPS and is often used by companies who give heavy reliance to leads for income generation. Examples of such companies are insurance companies and financial institutions. In PPL, the affiliate is paid whenever a person or a lead will fill up a form related to the merchant who will allow its company to grow. Rates for this type of affiliate marketing are usually on a fixed basis.

Affiliate marketing can also be classified based on its depth. It can be Single-tier, Two-tier and Multi-tier Affiliate marketing. Classifying affiliate marketing by its depth refers to the levels of process by which payments are transferred from the merchant to the affiliate. For example, in Single-tier, the merchant will directly pay the affiliate based on the traffic or sales that has been generated. The types of affiliate marketing using this type of approach are PPS, PPL and PPC. When it comes to the Two-tier approach, the affiliate is not compensated solely on the direct sales or leads he generates, but also on the other affiliates who joined the campaign by the main affiliate’s referral. The same definition can be applied to the Multi-tier approach, although the affiliate will now get commission based on the number of additional affiliates that he brings in on the campaign.

There is another kind of affiliate marketing also known as Residual Income Affiliate Marketing. In this type, the affiliate will get paid not only one time for every customer that he brings on in the merchant’s site but also whenever the same customer returns to the merchant’s site and purchases other products.
All the types of affiliate marketing mentioned above will give different advantages and disadvantages. Choosing one method which will work best for you might be hard, but choose one which would be a right fit to your over-all marketing plan and long term company goals.

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