Affiliate marketing is a program between a seller/advertiser and an affiliate. This sales concept is characterized by a success-based commission that is paid by the seller. The amount of the commission is agreed between the seller and the affiliate. The affiliate is responsible for the affiliate portal and manages the advertising space. Affiliate marketing can be implemented online, but also offline.
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How it works
Affiliate marketing is an online marketing method that allows businesses to promote their products and services. Therefore, companies may seek affiliates - business partners - who place advertisements on their own sites in the form of links or banner ads. The advertising is done by the seller, so the affiliate is actually the intermediary medium. The partner is paid in a variety of ways, which are detailed a little further on the cost-per-action model. Affiliate programs can be created with the seller itself and in cooperation with the chosen affiliate. Alternatively, affiliate networks offer a wide choice of affiliates for sellers (for a fee). Such networks often support both partners, with the creation of the campaign and the payment of commissions.
Seller and affiliate
The seller, also called merchant or advertiser, is one of the two parties involved in the partnership program that is affiliate marketing, which is actually a cooperation between sellers and network partners. It is the seller who offers the program and the advertising material. As an online merchant, he cooperates with a website provider, also called a publisher or affiliate, who offers his website as an advertising medium for banners or similar.
Through this cooperation, the seller knows that his product is presented to a wider range of potential customers, which increases the reach. To make the partnership as effective as possible, the vendor should choose an advertising partner that has a high popularity. In addition, the interests of the target groups should be similar, in order to achieve a high advertising effect. The affiliate is a counterpart for the seller, as well as a sales partner for the campaign from which the seller will benefit. The affiliate is paid for the advertising space he provides to the seller.
Payment models
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There are many, many payment models, to name a few Pay Per Click, Pay Per Lead, Pay Per Sale, Pay Per Click Out, Pay Per Link, Pay Per Print out, Pay Per View, Pay Per SignUp, Pay Per Install, pay for life or pay airtime. Pay is often replaced by "cost". The most used models are :
Cost Per Click (CPC)
With Cost Per Click or Pay Per Click, the seller does not pay the affiliate a flat rate, but pays a certain amount if a user clicks on the ad. Thus, a payment is only made if a user responds to the ad by clicking on it and being taken to the advertiser's website. With this model, the company only has to pay if the user really recognized the ad.
Cost per lead
With this method, the payment is calculated with the payment per lead. Each lead represents one contact gained. This model is mainly used in areas where it is not common to sell something directly to anonymous customers, such as in the insurance industry. Leads can also be obtained via catalog requests or newsletter subscriptions.
Cost per sale
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This model calculates the payment on the number of times a customer buys something by clicking on the banner. With Unique Identifiers, a user's actions can be identified, so it is possible to ensure that a purchase was actually made directly after clicking on the banner. This system is also called cost-per-order, but it involves a fee for each order. Other models that do not follow cost per action are for example cost per thousand (CPM) or cost per impression.
Conclusion
Affiliate marketing includes benefits for both parties. The seller's company can acquire customers at low cost and experience an increase in recognition, as the partner can develop sales through the affiliate system. If the web presence is properly utilized and the affiliate is wisely selected, significant sales can actually be developed. In order to use affiliate marketing effectively, patience, good planning and creativity are required, as the better the ad placement, the more clicks can be generated.
Affiliate marketing can also be useful for blogs, if favorable arbitrage deals are used to generate traffic.
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