How Affiliate Programs Work
When you register for an affiliate program, you will receive an affiliate link with a unique affiliate ID. Wherever you place a link to the products or service that you’re promoting, this link will include your unique ID.
This means that when the visitors click on those links they are automatically tracked, which allows the merchant to know that you are the affiliate responsible for the sale.
The process of accepting applications, tracking and reporting of results, and payment of commissions is often automated.
As an example, if you own a website that gives information about traveling, you can simply place links to related products and services (travel agencies, airplane tickets, etc). When your visitors follow those links to the website you are promoting and they purchase a product or service, you will be paid a commission.
Affiliate commissions are the heart of an affiliate marketer’s income. You’ve seen an example of one type of percentage-based commission, but there are other types of commission structures you may come across depending on the affiliate program you’re involved in... more on this in a later lesson.
Now, there is no set rule about how high of a commission a merchant can offer you. It can be as low as 1% or as high as 100%. Most merchants will set the percentage at a level that is attractive to potential affiliates marketers.
You might be wondering exactly how a merchant tracks your referrals and knows to credit you with a sale. The key to your commissions is your affiliate link. The easiest way to explain this is to take you through a real world example.
Think about all of the websites that you visit on a daily basis. Whenever you go to Ebay, for example, you type in http://www.ebay.com, right? This is just a ‘direct link.’ Now, imagine that a friend of yours is an affiliate of Ebay. If you typed in http://www.ebay.com/ or clicked on a plain link, there would be no way for Ebay’s affiliate program to know that your friend referred you. Why? Because the link just takes you directly to the site, and doesn’t contain any special, personally identifying information about who referred you.
Now, let’s say that your friend gave you his affiliate link to Ebay instead. It might look something like this: http://www.ebay.com/affid?=6699124
The above link is just an example I made up, but it’s good enough to show you what’s going on here. See the affid?= part of the URL? It indicates an affiliate referral. The number series of “6699124” represent your friend’s actual “affiliate ID” in this hypothetical scenario.
Once you click that link, the affiliate ID is noted by the affiliate program where your friend’s name is associated uniquely with his affiliate ID. Affiliates links come in many lengths and formats, and you’ll find they vary from merchant to merchant depending on the software solution they use to run their affiliate programs. The digital store known as Clickbank (www.clickbank.com), for example, formats all affiliate links like so: http://affid.merchantname.hop.clickbank.net/
The ‘affid’ part of the URL gets replaced with your unique affiliate ID, while the “merchant name” is replaced with the unique ID of the merchant. Clickbank is an interesting case because it is actually a payment processor for multiple, different merchants. Hence, the “merchant name” portion of your affiliate link will change depending on which merchant/product you’re promoting.
It’s interesting to note that there are actually different types of affiliate marketing revenue sources.
Pay-per-click - with this type of revenue source, the merchant pays you when a visitor simply clicks on an ad on your website that leads them to the merchant’s website. This means that as an affiliate you get paid even if the visitor doesn’t buy anything. The commissions under this type of source tend to be relatively small.
Pay-per-sale - this is the most popular among merchants. Under this model, the merchant pays the affiliates when the visitor purchases something. The commissions are significantly higher than with pay-per-click, especially for digital products.
Pay-per-lead - with pay-per-lead, the affiliate gets a commission when the referred visitor fills out some sort of application or similar form. This can be very profitable for affiliates because some companies are willing to pay handsomely for leads that are highly targeted.
Single tier, 2-tier, multi-tier - these types of affiliate programs allow you to get paid for direct sales you generate, as well as sales generated by affiliates that you brought into the program.
Residual income - with residual income, affiliate marketers are paid whenever the customer they referred returns to the website they promoted and purchases another product. Another form of this is where the service or the product is one where the customer has to pay on a monthly basis (like a subscription), then each month that the customer stays on, you'll get the commission.