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Understanding Affiliate Programs
By S. Housley
Affiliate programs are
commonly misunderstood, in order to
understand affiliate programs lets start
with terminology. For clarification purposes, an affiliate is defined as
any "referrer" or website that promotes a product in an effort to earn
revenue. A merchant is defined as someone who owns a product and is sharing
revenues with an affiliate based on the affiliate's performance. Affiliate
programs can drive targeted traffic to your website.
There are 3 basic
affiliate programs, though only the first two are commonly used.
Pay
Per Click - this is when an affiliate is compensated for
sending traffic to
the merchant. (AdSense is an example of
PPC affiliate program)
Pay Per
Sale - this is when the affiliate is compensated by
the merchant if the
referral generates a sale or purchase.
Pay Per Lead - this is when the
merchant agrees to pay for a
qualified (or sometimes unqualified lead), which
is very
uncommon because it is subjective and up to the
merchant.
Affiliate websites tend to provide
information, entertainment, and content services to their customers.
The online merchants sell products, goods and services online. These are
programs permitting affiliates to earn money based on the visitors to your
site who click through to another's website. Some pay a token amount for the
click through and others provide a percentage of sales when a visitor
"clicks through" to your site and buys a product or service on the other
party's site. This could represent a value added service to your
visitors.
Affiliate programs allow you to pay and track
incentives from other websites that send web surfers, leads or
paying customers to your website. Commissions based on purchases made by
traffic sent from the referring website can be paid. Besides a commission, an
affiliate can receive a flat fee, or other incentives for all valid
transactions it refers that generate a sale or lead.
Be careful that
the affiliate's web page is not cluttered with banner ads that may crowd out
your link, or that be annoying to customers. Affiliate programs enable
affiliates to leverage their traffic and customer base in order to profit
from e-commerce while merchants benefit from increased exposure and
sales.
Commonly traffic to merchant sites is measured and affiliates
can clearly see conversion rates. Meaning, they track the percentage of
people they are referring, and how much of it results in earned revenue. If
the affiliate finds a very low conversion, they will find a better way
to monetize that traffic, quite possibly with a competing merchant
product.
In order to be a successful affiliate, the affiliate
site needs to either have tons of traffic or target a specific audience,
frequently one untapped by the merchant. It has been my experience, the
closer the affiliate site content resembles the merchant products, the higher
the likelihood of a good conversion rate.
Once you are committed to
the idea of affiliates, the next step is to determine the kind of tracking
system you are going to use. Sales can be tracked by HTML code, which
is placed in a shopping cart or on the 'order confirmation'/'thank you'
page, and cookies, which are created after the customers click on a banner
ad. Cookie killers have been a problem for the affiliate
industry. Software vendors have an advantage over other merchants in that
new technologies allow software developers to better control compensation.
Vendors can 'wrap' their software
insuring that their affiliates are
compensated for referrals, even if the customer downloads a trial
version prior to purchasing. Buy now buttons in the software
have affiliate ids imbedded in the download. Combined tracking systems
have more success than those that rely on a single tracking
technology.
In order to develop a successful affiliate
network, merchants must realize that affiliates spend ad dollars on site,
and product promotion. If the affiliate is not compensated fairly they will
not remain in the merchants network. The bottom line is that affiliate
relationships are partnerships, when both sides feel the situation is fair
and equitable the relationship will be a success.
About the
Author:
Sharon Housley manages marketing for NotePage, Inc.
http://www.notepage.net a company
specializing in
alphanumeric paging, SMS and wireless messaging
software solutions. Other sites by Sharon can be found at http://www.feedforall.com ,
http://www.softwaremarketingresource.com
and
http://www.small-business-software.net
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