What Is Affiliate Program?

Affiliate marketing is the activity which happens as a result of an association between two actors – 1) the Merchant (sometimes called the advertiser, or partner), and 2) the Affiliate (aka the publisher). If we consider the Affiliate Program as a whole, we must include an additional party, the Customer, as well.

The Merchant provides the product for sale, and the Affiliate tries to sell that product for the merchant and/or send traffic back to the merchant’s site. In return, the Merchant agrees to pay the Affiliate a commission for sales and/or contracted results.

Commission Arrangements

Commission agreements are generally performance-based (which is a form of risk mitigation by the Merchant) and arrangements are often structured as Pay Per Click (PPC), Pay Per Sale (PPS) and Pay Per Lead (PPL) – or some combination.

Affiliate Program Classes

If we look at affiliate marketing in terms of depth, we have three different classes:  1) single-tier, 2) two-tier and 3) multi-tier programs.

Single-Tier Affiliate Programs

In a single-tier affiliate program, the Affiliates get the commission, only for driving visitors or sales to the merchant’s site. Pay/performance and pay/click are included in this category.

Two-Tier Affiliate Program

In Two-tier marketing, the Affiliate gets paid commission for every action performed by his direct referrals, plus he gets paid additional commission when one of those people he’s personally referred gets the commission.  Thus, he has a two-tier commission plan and the Affiliate gets paid both directly and indirectly.

Multi-Tier Affiliate Program

Multi-Tier Affiliate Program is very similar to Two-Tier Marketing, but here, the Affiliates get compensated for the sales made by their affiliated affiliates in multiple, unlimited, layers. 

Residual Income Marketing

In Residual Income Marketing, the Affiliate is rewarded for every sale that is made by a person referred by him.

In this type of marketing, Affiliates get the commission for every sale that his referral makes on the Merchant’s website. In order for this to work properly, the first time, the person should come from the Affiliate’s pre-defined affiliate link. Then, whenever that same person visits the Merchant website (even without using the affiliate link), the Affiliate will be paid for every sale completed by the visitor.

Cookies are what make this strategy work.  A “cookie” is stored on the first-time visitor’s computer. This cookie identifies the affiliate id of the Affiliate. Cookies commonly expire after 3 months; however, some may persist beyond three months. 

Every time a visitor comes to the Merchant website, his computer is queried for any previously created cookie. If a cookie is found, the affiliate id is retrieved from it and the Affiliate gets credited for any purchase made by the visitor.

Win-Win-Win

Once the affiliate marketing relationship is well-planned and well-executed, everyone wins:

1. The Merchant gets greater market exposure and market penetration, attracting customers that would otherwise be outside the Merchant’s market reach.
2. The Affiliate earns a commission for online sales, without needing to establish a full e-commerce site or having to manage product inventories.
3. The Customer learns about, and can readily access desireable and useful products that s/he would otherwise not find – at least not easily.

Effective affiliate programs are Win-Win-Win situations.

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