Affiliate marketing involves two parties:
A Merchant - The merchant owns a product or service for sale on the Internet.
An Affiliate - The affiliate is an individual, acting independently, who helps promote a merchant’s product or service in exchange for a commission based on a percentage of each sale.
The merchant can choose to spend tons of time and money on advertising, traffic generation and other methods in order to make sales, and keep 100% of the profit on everything.
However, a merchant can’t possibly reach all of his online target market on his own - it’s too costly and too time consuming. So, affiliate marketing is one way he can leverage the efforts of others.
So, he starts an affiliate program to build up an independent sales force working his behalf. Individuals like you can join the program and become affiliates.
It is important to note here that, as an affiliate, you are NOT an employee of the merchant. It’s not a contract job. Any terms you consent to when joining an affiliate program will govern things like:
- How much you get paid for referring sales
- When and how you get paid
- Acceptable methods of advertising and promoting the merchant’s products
In other words, as an affiliate, you are in business for yourself. You help drive traffic to the merchant’s website via your own advertising methods. Whenever you refer a new customer to the merchant, he credits you with any sales generated, and pays you a commission.
Commissions are usually a percentage of the product price. For example, if you refer someone who buys a $97 product, and your commission is 50%, then you earn $48.50.
The sale you helped to generate is a sale the merchant otherwise might not have made on his own. He’s making some sales through his own efforts and keeping the full $97, while making sales of $48.50 off the customers you refer. Since he is profit-sharing with you, it is a win-win situation for both parties.