What is Affiliate Marketing?



You may have heard the term affiliate marketing, but you may not understand what it is or how it works. Fortunately, the concepts of affiliate marketing are fairly easy to understand.

At its fundamental level, your business creates an affiliation with a company that is selling a product or service. You then promote this, in other words market these products and services to your customers.

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You do not handle any of the actual sales or delivery of the products or services; all of this is handled by the company you are promoting. In return for referring people to their sites, these companies will pay you a commission on every sale that your referrals generate.

Creating these affiliate relationships benefits both you and the companies that you are promoting. You have the opportunity to earn a substantial income online without having to incur the expenses of production, shipping, and customer service. The company running the affiliate program obtains free advertising in the form of your marketing and promotional efforts. The company you are promoting actually receives significant saves on marketing expenses while reaching a larger customer base.

The amount of the commission you earn for each sale is determined by the company selling the products or services. In general, when you set up an affiliate relationship you will net 5 to 10 percent commissions on physical products (such as toys, kitchen appliances, and books), and 25 to 75 percent commissions on virtual products (such as ebooks, downloadable software, and video training courses). The reason why commissions are higher on virtual products is because they do not involve any production costs beyond the original development of the product, or any shipping costs.

Most companies that offer affiliate programs will give you a variety of links and banners you can use in your website or blog to refer your visitors to them. It is up to you how you want to use these resources as part of your marketing strategy, as long as you use them within the terms and conditions of the affiliate program.

Typically, the affiliate products you choose should complement your business, that is the products should be relevant to the website or blog you are promoting them on. For example, if you own a website about personal finance, then you could promote products related to insurance, healthcare, investments, and so on.

Some affiliate marketers make the mistake of promoting irrelevant products (for example, including an affiliate link to an online casino on a blog about cooking). Doing this will net you very few sales, because the people interested in your blog won't necessarily be interested in unrelated products. Some visitors will even find this approach irritating, and will choose not to return to your site.

Another aspect to consider is the quality of the product that you wish to promote. When you promote a company, a product, or a service your customer is accepting your recommendation based on the reputation you have built with her (or him). Ensure that you are promoting a product that you would purchase yourself, or one you would be proud to recommend to a friend.

Done correctly, affiliate marketing is an excellent way to make money online. Beyond the initial setup of your affiliate accounts and posting of your links and banners, it requires very little effort on your part. Once you have your links in place, though, you can continue earning commissions for years to come.

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