Affiliate Marketing for Newbies
What is Affiliate Marketing?
Affiliate marketing is when you drive traffic to someone else’s website and help them sell their product.Affiliate programs work in different ways. Some will pay you commission on the sales that you are directly responsible for. So if you send a prospective customer to the merchant’s website and the prospect makes a purchase (becoming a customer) you are paid a commission on the product sale.
Commissions are usually a certain percentage of the purchase price. The percentage is extremely variable and depends on the product and the merchant and probably the profit margin. I have noticed that the percentage commissions are usually more generous with digital products than with physical products and that is probably because once a digital product is created there are no further costs involved. Whether you sell 20 copies of a digital product or 20,000 the cost involved in producing the product is only the initial creation and time costs of the product owner. Digital download can be completely automated and doesn’t incur any extra costs. Physical products, however always have a cost per unit. Merchants can get discounts for purchasing from wholesalers in bulk but in general there is a fixed cost per unit and therefore a fixed profit margin.
Lead Generation
Another type of affiliate program is essentially a lead generation or lead capture business model. In some industries or niches where the product or service is expensive even a prospective customer is valuable. Rather than paying you, as the affiliate marketer, a commission on any product that is sold to that prospect, the merchant can set up their affiliate program so that they pay you a smaller sum of money just for the lead. I think that this is definitely a win-win situation. You, as the affiliate, win because the prospect just has to be interested in the product or service and you get paid. In this situation the affiliate gets paid whether or not a product sale occurs.
There are many things that you can do to make extra money online. Some companies will pay you if you can get a prospect to fill in a form online. Some companies will pay for an email address or telephone number. The companies that have their affiliate programs set up this way also win. They get new prospective clients and I’m sure that they know their conversion rates. They know how many prospects they have to make a presentation to, to make one sale and they know exactly how much the average customer will spend with them. Once they know all this they can calculate a commission for the affiliate that is generous and represents the value of the potential client to the company.
Recurring Commissions
An affiliate program can be set up to give you a one time commission for the first sale that the merchant makes to the customer or it can be setup so that you, as the affiliate gets a commission every time the customer buys a new product from the merchant. With each subsequent purchase that the customer makes, she becomes more valuable to the merchant. You, as the affiliate also benefit if the affiliate program is set up in this manner. This is called back end sales. It is common for a merchant to have multiple products for sale and usually they sell you their cheapest product first. Once you have bought from the merchant once they build a relationship with you and gradually try and sell you more expensive products. If they have done their job well and have provided good value and service then their customers are more likely to buy from them again. You, as the affiliate, get rewarded if the merchant has an effective sales funnel.
Another way to get recurring commissions is to sell a membership product. This is a product that the customer has to make a monthly payment for. There are many examples of this online. You pay for your webhosting, auto responder service and shopping cart each month. Things like teleseminar and webinar services are also paid for by the month. So are membership sites and forums, link building services and article submission services. Mobile phone plans and internet access are other products that incur a monthly fee. These are just a few examples, I’m sure you can add you own.
Second Tier Affiliates
Some affiliate programs even pay you for introducing other affiliate marketers into their affiliate program. You may get a fixed amount for a new affiliate – a reward for a lead. Or you may get a commission on every product they sell as well.
Benefits of Affiliate Marketing
So why am I an advocate of affiliate marketing? The truth is that whilst the affiliate does make money from selling other people’s product, the product owner usually makes more and the product owner can have an army of affiliates selling his product for him!
The true benefit of affiliate marketing, if you are an internet marketing newbie, is that you can learn to sell stuff online without being too invested in the product.
If you spend time developing your product before you learn to sell online your product may or may not be a success. If your product fails you’ll never know if the reason was because no-one was interested in what you had to sell or whether you didn’t sell it well enough online. You tend to take things more personally when you are selling something that has taken you time and effort to produce.
Learn how to sell online using other people’s products then when you get to the point when you have something of your own to sell at least you will have the skill to market your product properly on the internet.
Benefits of Affiliate Marketers to the Merchant
Affiliates are very valuable to the merchant. They are the sales force of the merchant. But, because the merchant doesn’t have to pay out a commission to the affiliate marketer until a sale has been made they are an extremely cost-effective way for the merchant to have an army of people selling his product. In the offline world salesmen are usually paid a retainer and then commission on top of that but online it is not usual to pay an affiliate anything until they have been successful.
In my next post I will discuss how to find a product to sell online and how to find an affiliate program.
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affiliate marketing | imnd | August 12, 2009
affiliate marketing, affiliate marketing for newbies, affiliate program, internet marketing for newbies, lead generation, make extra money online, traffic generation
[...] first post on affiliate marketing explained how affiliate programs work and that all are free affiliate programs.Then we discussed finding a niche and there were heaps of [...]
There are lots of Affiliate programs out there like Amazon, Clickbank, etc. Just sign up with them and see what works for you.*;;
affiliate programs pay much better than adsense but they do not pay per click;~`