Affiliate Marketing Basics

The term 'affiliate marketing' is freely tossed around on the internet but affiliate marketing basics are often not well understood. Before we get into that, let's be very clear - affiliate marketing is a very simple business model that can be a very productive business for you. Don't forget that as we move through this material.

Why do you want to learn affiliate marketing?

If you've got a piece of paper and a pen handy, write down your answer(s). My bet is you probably answered something along the lines of: 'It looks like an easy way to make some money on the Internet.'

You're right! Affiliate marketing can be a very easy way to make money online. However, you should know from the start that affiliate marketing is not a get rich quick scheme! Talented affiliates can generate wealth, even get rich, but they do so by taking affiliate marketing seriously and treating it like a real business.

This mindset of commitment is crucial and is at the heart of affiliate marketing basics. Far too many people just play at affiliate marketing like a hobby, then wonder why they aren't making real money. The answer, of course, is that doing things halfway. only gets you half the results. In fact, it's often a great deal less than that.

So, what does it mean to treat affiliate marketing like a real business?

First of all, it means being willing to invest in both the tools and the knowledge needed to run a successful online marketing campaign.

So here's another affiliate marketing basics corner stone. Top affiliates tend to invest in:

• Unique domain names for each niche market they want to target
• Web hosting to set up their own web sites under those domain names
• An auto-responder service for collecting opt-in leads to an email list, to which the affiliate can send follow-up email promotions.
• Education and training in Internet marketing fundamentals. like copy writing and traffic generation techniques.

Don't let this scare you off. These tools and resources are inexpensive. They're also easy to set up as long as you have basic to intermediate proficiency with computers.

You will notice in the list above I refer to your web sites and not to your blog. That raises an interesting issue about web sites and blogs. So please read my page on Your affiliate web site

Now, let's talk about another aspect of affiliate marketing basics.

Successful affiliates have something in common: they've learned to think strategically. In other words, they do their market research and formulate their plan of action before they ever launch their marketing campaign. In the old days, when there was less competition, you could get away with being lax in regards to market targeting. You could even get away with not having a proven method or business plan behind your campaign. These days, however, that just isn't so. Your mindset should be selective and your focus should be on achieving domination in one niche market at a time. This takes patience, but it is an approach that will pay off greatly in the long-run.

What is Affiliate Marketing?

Affiliate marketing involves two parties:

1. A Merchant - the merchant owns a product or service for sale on the Internet.
2. 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.

Let's elaborate on this a bit more, just to make sure we have the affiliate marketing basics very clear.

A merchant is usually the owner (or, at the very least, the licensee) of the product(s) and/or service(s) being sold from his web site. He or she can 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 smart merchant understands that he can't possibly reach all of his online target market on his own. It's too costly and too time consuming. So, he starts an affiliate program to build up an independent sales force working on 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.

Make sense?

The sale you helped to generate is a sale the merchant otherwise might not have made on his own. He is 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.

How Affiliate Programs Work

Affiliate commissions are the heart of an affiliate marketers 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.

First, there is no set rule about how high a percentage commission a merchant can offer you. It can be as low as 1% or as high as 100%. Most merchants, though, will set the percentage at a level that is attractive to potential affiliates.

Also, it is important to note that your commissions may be based on a per sale basis or on total sales.

Some merchants skip all of this and go with a flat-rate commission. For example, a merchant might decide to pay a flat-rate of $50 on sales of all products priced from $75-$150.

It is worth noting that, apart from one-off commissions of the type already mentioned, there are affiliate programs that give you commissions in the form of recurring income. These are obviously highly desirable programs so you should go to the Residual Income page. There you will find not only an outline of how these programs work but also my recommendations for the programs to join, in different market niches - a must read.

Now, 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 shows you what's going on here. See the affid?= part of the URL? It indicates an affiliate referral. The number series of '6699124' represents 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.

Affiliate Marketing Basics - The No 1 Affiliate Reality

There is one absolute must that you need to absorb about affiliate marketing and this rounds off our section on affiliate marketing basics:

You obviously want your site visitors to click through to the merchant's site. The click-through rate (CR) will vary greatly. Experience has shown that CR can vary from a low CR of 1% to 10% and even as high as 20%. That kind of variation is only explained by three factors - how you reach your visitors, what you say to them and how you refer them to the merchant.

So print it out and stick it on the side of your computer.

The No 1 affiliate reality:

Your CR will vary according to:

• how you reach your visitors
• what you say to them
• how you refer them to the merchant

Well... so much for the affiliate marketing basics. Let's move on.

The next crucial step in becoming an affiliate marketing champion is to develop an affiliate marketing strategy. If you do not have a clear plan and sense of direction for your future business then you will join the ranks of the many would-be affiliate marketers with a big 'FAILED' alongside their names.

But you are not going to be like them - are you?

So visit our page on Affiliate Marketing Strategy and start the process.