What is affiliate marketing (examples, pros and cons)
Complete definition of affiliate marketing
Just twenty years ago, businesses spent thousands of dollars each year on radio, TV, or print ads in the hopes that their brand would grow. While they were promised success, the truth is that it was incredibly difficult to stand out and make money via advertising.
Worse yet, their efforts were often pitted against enormous corporations with million-dollar ad budgets.
If they got any airtime at all, the smaller companies had a harder time gauging success against their Goliath-esque competition.
Small companies and your everyday entrepreneur held the short end of the stick, and growth was hard. But that was twenty years ago.
These days, anyone with an internet connection and the know-how can make money by helping brands grow and sell online by participating in affiliate marketing.
Affiliate marketing is an advertising method used by brands to attempt to mitigate wasteful spending in their marketing budget.
Read Also: How to earn in dollars selling other people’s products to global market as an affiliate
It can be frustrating for a business to pay thousands for clicks or impressions only to win a handful of customers.
Many brands have been burned by such endeavors, so as online advertising costs have risen, they’ve turned to innovative ways that minimize costs while still growing their customer base.
While most businesses recognize that spending money on advertising is necessary, the ideal situation is to keep their costs limited to customers earned.
That’s where the idea for marketing with affiliates was born.
As a performance-based marketing method, affiliates and businesses can work together in a revenue sharing relationship between brand and marketer.
For brands that have a product and want to sell more, they can offer a financial incentive through an affiliate program.
For individuals with no product that want to make money, they can find a product that has value and earn income as an affiliate marketer.
This guide provides a step-by-step journey through the world of affiliate marketing for beginners. You’ll learn what it is, how it works, and most importantly, how you can make money doing it.
And since good affiliate marketers can be hard for brands to find, you’ll learn everything you need to stand out from the crowd.
Use this blog as a starting point and a reference for each stage of your journey as you learn how to sell as an affiliate marketer.
As you read through each paragraph, you’ll find affiliate marketing explained to you in a way that you can relate to.
Plus, you’ll find tons of examples and tips that will help you establish yourself and improve your selling methods that will grow your income over the years.
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Understanding Affiliate Marketing
The first question that most people raise when they approach this topic is relatively basic: what is affiliate marketing?
Here’s a basic definition that sums it up nicely:
Affiliate marketing is a way for you to earn money by selling a brand’s products. As strictly a marketer, you have no inventory and work for commission. Generally, affiliate marketers receive payment when a consumer they referred buys a product or service or completes a specific task.
In other words, it’s a way that businesses can outsource their marketing to you in a way that’s strictly performance-based. This offers businesses a 100% return on their investment, which makes it unique among online marketing methods.
It also means that you have the opportunity to make a good deal of money by selling a product that isn’t yours. The more you sell, the more you earn.
And since you don’t have to worry about shipping, overhead costs, or customer service, your input is as small as you want it to be.
But to make money as an affiliate marketer, you have to understand all parties involved and what they stand to get out of the relationship.
Knowing each role and how they can potentially help you make money is an essential first step when starting out as an affiliate.
Your overall success requires building relationships that rely on three distinct parties:
Advertiser: The first party, typically referred to as the advertiser or merchant, is the party that’s selling the actual product or service.
This is the party that you, the affiliate, will be working with. They usually have an established affiliate program, and leave it to you to carve out your space on the web and sell their product.
The product or service could be a physical product like phones or laptops, or even less tangible items like insurance policies. We’ll cover many more possibilities and examine how to choose products wisely in my subsequent blog posts.
Affiliate: The second party is the publisher, more commonly referred to as the affiliate marketer. This is you, the individual working with the merchant to sell in exchange for a commission.
You’ll have a contract in place, and you’ll seek to push traffic in the form of links, ads, or in some cases unique phone numbers that you incorporate on your site.
Affiliate marketers fall under a very broad umbrella and could be just about anyone on the web. If you follow a blog or a popular social media profile, the chances are good that they are an affiliate of a brand.
The Advertiser/Affiliate relationship is a highly strategic one, as both parties need to make money for the relationship to continue. Since you’re working so closely, you need to be on the same page about your roles, responsibilities, and payment.
Consumer: Finally, you have the consumer or the party that will be (hopefully) buying your product. Thus, the relationship between the affiliate and the consumer should be one of trust.
The consumer finishes out the relationship triangle by interacting with your marketing efforts (like clicking a tracked URL or ad) and then moving further into the publisher’s sales funnel.
Once they’ve bought something or completed the action agreed upon by the affiliate and merchant, everyone receives their piece of the exchange.
All three groups center on the relationship created by the affiliate and will receive their product or payment through you. Of course, you’ll also get paid when a purchase goes through.
Once you know how each party plays its role, you start to gain a better picture of how the entire process works:
You, as an affiliate, publish ads or content that encourages a consumer to buy from a merchant. You’ll have a set affiliate marketing method that will allow you to build an audience and promote to them.
Using various technologies and platforms, the merchant can track when you send a customer to them and will pay you if they buy a product or service.
As a third-party to the brand, you have no say over what you sell or the price it sells for, but you also carry less risk.
When every aspect of affiliate marketing works together, every party benefits. Consumers get their product, merchants generate revenue, and the affiliate makes a commission.
If you do this process well, you can make money in the long- term by keeping a consistent strategy and building stronger relationships with all three involved parties.
Let’s look at a basic example of how this works in real life.
Some Examples of Affiliate Marketing
If you want an example of how successful you can be as an affiliate, look no further than the mega-affiliate website MoneySuperMarket.
This massive website has been around since 1993, and at this point has made its founder Simon Nixon, a billionaire. While it’s a pretty rare example of how successful one of these sites can be, it’s the perfect model to show you how this process works.
When you scroll down on the homepage, you’ll see a vast list of products or services that you can browse through. They promote a wide variety of products, including insurance, smartphones, and travel services.
Say you’re in the market for a mobile phone. When you click through to the phone offerings, you’ll see a product page that has a unique ‘Go To Site’ button instead of a ‘Purchase’ option.
That’s because this site doesn’t sell you anything. It recommends products that you can buy elsewhere as an affiliate.
If you were to browse MoneySuperMarket, click on a site, and then buy one of these phones from the merchant, then part of your purchase would be sent to MoneySuperMarket.
That’s how MoneySuperMarket makes their money as an affiliate. As long as you buy from a promoted site, then they will get a kickback. This site has made billions by promoting instead of selling, and they carry zero inventory.
But you can do more than sell a product on a marketplace as an affiliate. Look at what blogger Matthew Woodward does with his website.
You’ll notice from the very beginning that it looks very different from MoneySuperMarket: That’s because this is strictly a blog. Affiliate marketing for bloggers is a different process than for marketplaces.
By writing on topics that his audience needs to know about, he builds trust and acts as an influencer in their day-to-day lives. He also complements his blog with a direct email marketing approach that puts him directly in his audience member’s inbox.
All of this is designed to build trust, not sell.
He then takes the trust he builds with his audience and recommends specific tools that he’s an affiliate marketer for. He even has a whole section of his site dedicated to offering exclusive deals and discounts for his readers.
Much like a marketplace, if someone is referred from his site and makes a purchase, Matthew Woodward then makes a cut. But the difference is that he can also link to these deals in his blog post, or even send them directly by email when a new deal becomes available.
He’s quite successful too, as he reportedly brings in more than $20,000 each month on a regular basis.
But that’s another example of a more prominent, more established affiliate marketer.
What does it look like when you’re starting out?
Well, to answer that, let’s look at smaller Instagram influencers like Cassie Andrews Style. She started her Instagram account in 2015 and her first pictures weren’t all that impressive.
But it wasn’t long until she was up and running. Most notably, she decided to take stylish photos of her home and post them for others to admire. Her Instagram feed is a collection of posts that have the same look and feel as you see in this photo below.
As her following grew, brands started to notice her as well. Before long, she was creating sponsored posts that allowed her followers to take advantage of special deals with her merchant partners.
While I don’t have exact figures on how much she’s made from this, as at the time of publishing this blog post she currently has more than 6,500 followers and gets tons of engagement on her posts.
And while not all of her posts are sponsored or affiliate-marketing oriented, she still promotes brands from time to time on her account.
But as you can see, it’s entirely possible to be a successful affiliate marketer on a variety of levels. If you want more ideas and inspiring stories, check out this free ebook dedicated to affiliate marketing.
Now that we’ve explained what affiliate marketing is, it’s time to start digging a little deeper into what affiliate marketing has to offer and with success stories like these, it’s hard not to want to dive in as soon as possible.
Hold on just a little bit though because you’ve got a long way to go before you can potentially have that kind of success.
Pros and Cons of Affiliate Marketing
Before you start as an affiliate marketer, you should know about the good and the bad. The rewards may sound amazing, but this venture doesn’t come without risks.
Pros of Being an Affiliate
- Low startup cost. Most programs let you join for free, so costs are typically tied to how you build your audience and get referrals.
- You don’t have to make your own product or service.
- When someone buys, your merchant ships for you.
- Work anywhere with a WiFi connection.
- If set up correctly, income can be passive.
- Adds an extra revenue source for home-based businesses or anyone with a website.
For a cash-strapped entrepreneur that’s willing to go slowly, becoming an affiliate is a dream come true. You can grow as you make money, and eventually can create a higher source of income.
If you’re very successful, it could even grow to be your full-time job. But like all good things, not everything is always simply the positives we want to hear.
Cons of Being an Affiliate
- Building traffic for referrals can take time.
- It’s possible for poor tracking systems not to attribute your sales properly (you lose money).
- Bad customers to the merchant can damage your reputation and relationships.
- Zero input on the product you promote.
- The potential for a company to ‘go ghost’ and not pay.
- You have a lot of competition.
- The customer is ultimately the merchant’s, not yours.
If you commit to being an affiliate marketer, you have to understand your place in the pecking order. The brands you work with ultimately can make or break you, so you’ll need to choose wisely.
By now, you should have a better understanding of what it means to be an affiliate marketer and how you can make money doing it.
However, before we dive into the nitty-gritty details of starting out, I have answered a few questions that you need to be aware of in this free ebook made for you. If you like this content please don’t forget to share. Thank you!