Affiliate Programs are arrangements with companies or individuals to pay them for selling your product or providing qualified leads.
In the retail world, companies like Amazon sell (and often warehouse and ship the product) the product and pay the affiliate company to send sales their way and pay them a percentage of the sale as a type of commission. There are at least five types of affiliation to consider:
Loyalty Programs-These companies offer reward programs for customers who make purchases through there partner network. So when a purchase is made, the loyalty site (think about Ebates for example) gets a commission from the seller.
Aggregators-These companies list lots of products, sometimes with some value add service like specifications or customer reviews and then get a commission when a purchase is made originating from their site.
Coupon/Deal Sites-These sites offer consumers some kind of discount coupon or offer that can be cashed in by entering the coupon code after you click through to the site. The customer gets a discount and the Deal site gets a rebate from the participating retailer.
Niche Sites-These sites are typically tailored to a specific audience (it could even be a blog like this one!) and offer deals to readers or members who then click through to a site to make a purchase. Again, a percentage of the sale is paid to the Niche site.
Email Lists-Marketers that have an extensive email list of subscribers blast out information to their list. When the subscriber makes a purchase by clicking through on the link, the marketer gets a commission.
Companies that sell digital products such as software, e-books etc. also make big use of affiliate programs. In this case, the product developer sells through affiliates and can offer a large percentage of the sale because the digital product has little cost of delivery.
Finally, financial services companies such as mortgage brokers and insurance companies as well as law firms make use of lead generators. In their case, the product has a high ticket price and has the potential to offer a stream of continuing revenue that makes each lead very valuable.
For the readers of this blog that are from small companies, it is probably not practical to create your own affiliate network by yourself. It would be very time consuming and expensive and there would be no certainty of success. So to get going with this channel, join a well established affiliate program and pay a fixed percentage or flat fee for a sale. It should not be too hard to figure out how much a lead is worth. Compare the margin on your product to the fee, or if you can get a stream of revenue, figure out what the lifetime value of a customer is likely to be.
You don’t have to be a marketing consultant to realize that one of the best things about using this channel, is you don’t pay anything (except possibly a set up fee) until you make a sale. So consider using affiliate programs as part of your marketing strategy and your marketing plan.