In a Nutshell, Affiliate Marketing is all about Referral
Let's say you recommend a restaurant to your friend. Your friend visits the restaurant and in turn the restaurant makes money - all thanks to you! Normally you wouldn't get rewarded for this, one of the most simple and natural forms of marketing called word-of-mouth marketing. However, in some instances it is possible to earn a commission or fee for recommending a product or service; this is known as referral marketing. Referral marketing has worked in the offline world for many years; but it is online that referral marketing has really found a home.
The Internet is a connected place. People navigate by a series of links, each site referring the user to another site with each person referred to a website being a potential client. As each click can be accurately tracked, it is very easy to reward sites for referring customers. This system of reward where compensation is based on referral is called Affiliate Marketing.
It Takes Two or More to Tango
The basic parties in an affiliate program are:
The Merchant: The individual or company that wants to sell its service or product
The Affiliate: The individual or company that allows their website to be used for the marketing of the merchant's product
There can also be more parties in the mix, depending on how big the affiliate program is. Some larger affiliate programs require a lot of work to maintain the relationship between the affiliate and the merchant. In these cases the merchant can hire an experienced company to run their affiliate campaign for them, or they can join an affiliate network.
Affiliate networks help suitable affiliates and merchants to find each other amongst the thousands of affiliate programs on the Internet. In return for this service they usually charge a set up fee, or take commission on sales.
Other Articles in the digital marketing 101 series:
- What is eMarketing and how is it better than traditional marketing?
- The Arrows in the eMarketer's quiver
- Blogging - Everyone else is doing it, so why can't I?
- A focus on natural search (beginner's guide to SEO)
- A Case Study - SEO in action
- PPC - you gets what you pays for
- A Case Study - PPC to the rescue
- Email Marketing - No not spam
- Affiliate Marketing - because we all need friends
- WebPR and ORM - blah blah blah conversations
- A Case Study - ORM: Keeping Your Ears to the Ground
- Viral Marketing - linkerbation is a normal, natural thing. Perfectly natural
- Online Advertising - Throwing a Banner into the Works
- Conversion Optimisation - Are You Closing the Deal?
- A Case Study - 2010 : Can the SA Tourism Industry Meet Online Expectations?