A good example of an affiliate arrangement may include a video or bookstore affiliated with a marketing site. The customers click on the ads for the items, and are then directed to the online merchant through an affiliate link. The marketer is identified with that link and all purchases referred in from that link are to be credited to the marketer in the form of commissions. The returns from commissions are dependent from sales and can be quite high in an active or hot market.
But how does this all work? Fairly simply.
1) The marketer enters into an agreement with the online merchant to help market and sell merchants product(s). This is an “affiliate agreement.” The marketer will receive a portion of each sale of the merchant’s product, which is termed a “commission”.
2) In the process of setting up advertisement, the marketer will establish a “link” to the merchant’s site. When the customer clicks on the ad, and lands on the merchant’s site, the merchant will know from which marketer the customer originated. The commission can then be credited to the correct marketer. The marketer has done all the work in promoting the product, including paying for advertising costs.
3) The marketer is not responsible for shipping the product, dealing with returns or any other aspects of customer service.
Here is some of the “nitty-gritty” of the process:
o The marketer gets paid for performance. The higher the number of customers and sales, the higher the commission returns.
o The marketer focuses on marketing only. No product issues.
o The marketer may and often will offer freebies to entice customers to purchase. These may include items from free e-books, videos and software, to sample products such as weight loss supplements and skin care products.
o Other than the costs of advertising and promoting the product, the marketer has no other “overhead” or any direct product related expenses.
Some methods of compensation for the marketer include 1) Pay-Per-Sale (each sale generating a commission), 2) Pay-Per-Lead (each customer referral results in a commission), 3) Pay-Per-Click (less used-each customer click on an ad producing a commission, with or without generating a sale)
There are no fees or similar costs to the marketer in joining any affiliate program. There are often bonuses offered by merchants for certain sales thresholds, and these can be quite generous.
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