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An Affiliate Program?~Definition of Affiliate Marketing~Affiliate Marketing Definition~Affiliate Marketing}

Affiliate marketing involves an association between multiple players:

1) the Merchant (aka the Advertiser, or Partner),

2) the Affiliate (also known as the Publisher), and

3) the Customer – If we think about the Affiliate Program in its entirety, we must include another actor as well.

The Merchant gives the product for sale, and the Affiliate works to sell that product for the merchant and/or send traffic back to the merchant’s site. In return, the Merchant agrees to pay the Affiliate a commission for sales and/or contracted performance measures.

Commission Agreements

Commission plans are usually performance-based (which is a form of risk mitigation by the Merchant) and arrangements are regularly structured as Pay Per Click (PPC), Pay Per Sale (PPS) and Pay Per Lead (PPL) – or some combination.

Affiliate Marketing Groupings

If we evaluate affiliate marketing in terms of levels, we have four different classifications:

1. single-tier,
2. two-tier,
3. multi-tier, and
4. residual income programs

Single-Tier Affiliate Programs

In Affiliate Program}, the Affiliates get the commission, only for sending visitors or sales to the merchant’s url. Pay/performance and pay/click are included in this grouping.

Two-Tier Affiliate Marketing Program

In Two-tier marketing~Two-Tier Marketing}, the Affiliate generates a commission for every action performed by the people he’s referred directly, plus he gets the commission when one of the people he’s personally referred gets the commission.  Thus, there are two levels to his commission plan and the Affiliate earns a commission both actively and passively.

Multi-Tier Affiliate Marketing

Affiliate Program} is very similar to Two-Tier Marketing, but here, the Affiliates get compensated for the revenue generated by their affiliated affiliates in multiple, unlimited, tiers.

Residual Income Marketing

In Residual Income Affiliate Marketing~Marketing}, the Affiliate marketer is rewarded for every sale that is made by any of his referrals. In Residual marketing, Affiliates get paid for every sale that his referral makes at the Merchant’s site.

The only requirement is that on the first time visit, the visitor must come from the Affiliate’s authorized affiliate link. Then, when the same person visits the Merchant website (even without using the affiliate link), the Affiliate will get compensated for every sale made by the individual.

Cookies make this strategy work.

A “cookie” is stored on the first-time visitor’s computer. This cookie stores the affiliate id of the Affiliate. Cookies commonly cease to be valid after 3 months; however, some may remain valid longer.  Every time a visitor comes to the Merchant website, his computer is queried for any previously created cookie. If a cookie is discovered, the Affiliate Id is retrieved and the Affiliate receives credit for any purchase made by the visitor.

Everybody Wins

Once the affiliate marketing relationship is designed well and well-executed, everybody wins:

1. The Merchant receives greater visibility and market penetration, attracting customers that would normally be beyond the Merchant’s existing market segment.
2. The Affiliate receives compensation for online sales, without needing to establish a full e-commerce site or needing to manage inventories and fulfill orders.
3. The Customer obtains products or services that s/he would otherwise not find – at least not easily.

Effective affiliate programs are Win-Win-Win situations.

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