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What Affiliate Marketing is and how it Works

What Affiliate Marketing is and how it Works – A definitive Guide

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In this article, we will look at what affiliate marketing is and how it works. Affiliate marketing started off as a sub-niche of marketing but has since grown into an industry with different facets of its own.

From being a way for vendors to sell more products and marketers to earn more money, it is now a multi-billion dollar industry that serves as a full-time career and business for thousands of people out there.

Evidence of just how much it has grown can be seen the number of major affiliate conventions that are taking place all over the world. In fact, there are 11 international conferences that stand out this year while many more are happening at a local level.

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What is Affiliate Marketing and how does it Work?

Affiliate marketing is when a vendor gives a seller a commission every time that they sell a product on their behalf. The general way it works is through a special link that identifies the affiliate (seller) as the referrer of the sale. The selling transaction happens on the vendor’s property (website/physical premises)

What Affiliate Marketing is and how it WorksBenefits of Affiliate Marketing for Businesses/Vendors

Affiliate marketing is attractive for vendors because they don’t need to pay for staff members who may not actually be delivering. They only payout money once a sale has been made. There are no employee or overhead costs associated with having employees.

They can literally have a sales force in the thousands from all around the world selling their products to markets they otherwise could not have reached and without any of the associated costs of breaking into this market.

Their focus is mainly on creating a converting sales funnel and the leads come from the affiliate. The cost of acquiring a lead falls on the affiliate marketer.

Over and above the sales funnel, the vendor supplies the customer service.

Benefits of Affiliate Marketing For the Affiliates

For the affiliate, it’s a great model because they don’t have to stock any inventory whatsoever and don’t have the headache of dealing with customer service. Their main responsibility is channelling leads through to the affiliate offer they are promoting.

They can test multiple products to see which ones are converting best then scale these up when they find a winning offer.

There are many affiliate marketers who earn thousands, tens of thousands, hundreds of thousands and even millions just from promoting affiliate offers. I have come across a few affiliate marketers who earn more than $100,000 per day through this business model.

Types of Affiliate Offers

Now, let’s look at the different types of affiliate offers. They fall into two general categories which are Paid per Sale and Paid per Action. Let me get into more detail on these below.

affiliate marketing PPCIn this model, an affiliate is paid each time that they refer someone who buys a product. There are many affiliate products that you can promote out there and they fall into the categories of physical products and digital products.

The best know physical products vendor out there has to be Amazon. They have a wide array of products that provide any affiliate marketers with an opportunity to make significant incomes through selling Amazon products.

I believe the best way to sell Amazon products is through affiliate niche sites. These are websites targeting a specific market like a particular car model or audio/visual equipment for example. The idea is to create content that ranks well on Google and drives people to your site.

You then make product recommendations and when people buy through your site, you get paid a commission. My general experience has been that it’s best to create a site with high-value products. That way you only need to sell a few in order to make a decent commission.

Anything below $200 is a good bet. People are willing to buy on impulse when it’s within this price range. Anything above that generally needs more time to research before someone eventually buys.

Physical products attract lower commission percentages when compared to digital products which can pay up to 80% commission in some instances.

Digital products don’t have any costs, except hosting and after-sales support, once they have been created. Many vendors use them as lower-priced leading products which place you in a funnel that can later sell you higher priced offers.

That’s one of the major reasons why the vendors are generally willing to give away such high commissions.

Paid per action affiliate offers are those where you get paid when your lead fulfils a certain action. The most common actions are when a prospect fills in their information or a form or installs an app on their phone or computer.

Once your prospect does this, you get paid. Companies use this method to acquire leads for their business who they then promote their offers to.

These kinds of offers are the easiest to get into but they require that you have the ability to get targeted traffic from a specific location. The leads required are usually from a specific country or a group of countries.

If you are able to get these leads, the companies pay you. This kind of offer is usually for a specific period or up to a certain number of leads so the affiliate site model will not work here. Your best bet would be to use pay per click advertising or an email list if your list has the required audience.

Different Ways of Promoting Affiliate Offers

Now, let’s look at how you can promote affiliate offers. The different methods I will outline here really depend on whether you want quick results or slower ones. The determining factor will be whether you have a budget for it or not.

Through Niche Websites

This method will take the longest before you start seeing results. We are looking at a timeline of about six to eight months before you make your first income. For most first-timers without a guiding hand taking them through it, it will take as much as a year.

If you choose a niche that is too competitive or go for keywords that are hard to rank for, the journey will be much harder. It is imperative, therefore, that you go for easy to rank for keywords that attract decent amounts of traffic.

If you create enough content over time, you will see results that get better with time. An average niche site will have anywhere from 50 to hundreds of articles on it and sometimes, thousands. There are generally 2 paths that you can follow here.

The first path is to create a few high-quality articles that attract high volumes of traffic from keywords which are generally high competition or alternatively, go for low traffic, low competition keywords and let the numbers build up as you create more content.

Regardless of which approach you pick, this can be a really rewarding process that’s bound to bring a good amount of income over time.

Through PPC Advertising

The second way to promote affiliate offers is through paid advertising namely PPC or pay per click advertising. This is when you drive traffic by paying for leads using services like Google Adwords, Bing Ads and others.

Some years ago during the early 2000s, an e-book called Google Cash made some waves and made a lot of people some good money in the process. It basically taught people how to make money as an affiliate through PPC.

Back then, Google’s terms allowed people to send traffic directly to affiliate offers. Their terms have since changed and you can’t use this method anymore. People’s spending habits have also changed now and there needs to be some level of pr-selling before a prospect buys.

What I mean is that you now need to do some level of convincing before a prospect is willing to take you up on whatever you are offering. You can do that in 2 ways. You can use a marketing funnel or a mini-site.

I’ll cover the marketing funnel in my next point but for now, I will cover the mini-site. A mini-site is a small website with about 3 to 10 articles on it which are highly optimized to make an affiliate sale. Practically 90 to 100% of the links on it lead to an affiliate offer.

When you set up your PPC campaign, you drive traffic to this mini-site and provide valuable information which pre-sells your prospect into clicking your affiliate offers and subsequently buying. This model works better with Bing Ads better because they are cheaper and have fewer restrictions than Google.

Through Email Lists

I did say I would talk about how to incorporate a lead capture and marketing funnel approach with PPC. I am talking about this under email because this is what you will use to convert your leads. Instead of setting up a mini-website as in the last section, you set up a landing page.

This landing page will have either a video or brief sales copy then a lead capture form which puts your prospect into a marketing funnel. This approach is great because as you promote your offers, you are also building an email database which you can market to for years to come.

If there’s an asset that proven to be valuable over the years in online marketing, it’s an email list. It’s an asset that you can start all over again with were you to lose it all. You can even sell it the same way that you sell a business.

Generally speaking, each and every lead that you have on your email list is worth between $0.50 to $2.00 per month. This means that if you were to build a list with 10,000 emails on it, you should be able to make between $5,000 to $10,000 per month.

Email is a great investment to start working towards if you want to be a serious affiliate marketer.

How to set up an Affiliate Arrangement with a Local Business

Lastly, I want to show you how you can take affiliate marketing to your local businesses and help them make sales while getting a good commission.

First of all, look for a niche that you want to target. These should be businesses that offer high-value products or services so that you make good money for every sale you generate for them.

The next step is to use the preceding steps that I mentioned in this article to get leads. When you go to a local level, ranking on Google is much easier if you know what you are doing and PPC advertising is generally cheaper.

Build up your audience and an email database in the process. You then approach local businesses in your niche and make arrangements for special offers for your audience like discount coupons. Convince them by telling them that they can get a spike in sales over a short period of time.

If you choose your niche right, you can choose different companies in that market and negotiate special deals for your audience.


I hope this article has helped you to understand what affiliate marketing is and how it works. Now the ball is in your court. Go out there and make some money!

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