How Does Affiliate Marketing Work?

The heart of affiliate marketing is about relationships. The relationship between the Advertiser, the Affiliate and the Consumer.

The advertiser is a brand selling a product or services. These can range from electronics to sports equipment, to credit cards and banking solutions. The key feature to keep in mind is this. As an Advertiser, you are prepared to pay other people to promote your brand and sell your products. You also have to provide a library of creatives for your affiliates to use. Images, banners and landing pages among others.

An affiliate can be an individual or a company who undertakes to promote the Advertiser’s products for a commission. There is no up-front remuneration. Affiliates make money purely based on their performance. Links from the affiliate website to the advertiser website (affiliate link) carry a unique identifier which tracks all the sales and commissions from the particular affiliate.

The final component is the consumer. The consumer is the end-user who actually follows the affiliate links and buys the advertiser’s product. The affiliate makes a commission on all sales generated through their affiliate links. This commission can be a fixed amount, a percentage of the sale value or even a combination of these.

The beauty of the system lies in its simplicity. Each spoke in the relationship knows exactly what they need to do. Advertisers need to offer a product and make sure this gets to the consumer, affiliates need to promote the product and make sure the consumer gets to the right page on the advertiser’s website and consumers, well, they just need to consume. AS long as people buy things, affiliate marketing will continue to flourish.

So far so good, but how does the affiliate know how many sales they have referred and how does the advertiser know who earns commission for the sale?

This is done by the affiliate tracking. At the heart of any successful affiliate program lies the tracking and reporting feature. Once an affiliate has signed up to promote a particular program, all the links and creatives they use will be coded with their unique tracking code. This tracking code carries through till successful completion of a sale and records all the affiliate’s referrals and commissions. Usually referred to as a cookie, the tracking code is set with a fixed expiration time. More often than not, this expiration is set for 30 days. That means the affiliate will still get credit for the sale even if the consumer abandons the checkout process but comes back within the 30 day period.

Affiliates can track their performance on the advertiser reporting system. In many cases this will be in real-time, giving affiliates an instant overview and analysis of their marketing efforts.

The whole process seems simple enough and in fact, the front end is simple. Offer – promote – sales. What could be easier?

The real difference comes in the systems advertisers use to run their affiliate programs. Does the system allow multiple variables on the tracking links? Does the reporting system work in real-time? Do tracking links track correctly all the way through the conversion process? How long does the cookie last and how accurate is the tracking?

These, and more, will determine the success of the affiliate program. Cutting edge systems make for cutting edge performance and if you’re looking for cutting edge results from your affiliate program then we can show you how.