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Affiliate marketing is a fancy name for a commission sales process where one person, usually the website’s owner, receives payment when a customer buys something on a different product. This payment is typically a percentage of the final transaction.
Affiliate marketing is not the same thing as sponsorships, where people get paid specific amounts to advertise products. Sponsorships are typically a one-payment agreement that occurs regardless of advertising performance, whereas affiliate marketing pays for each transaction.
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How It Works: Affiliate Links
Affiliate links are the core technology for affiliate marketing. In short, affiliate links are unique URLs that affiliate marketers can put on their sites. When people click these, they’re directed to a product page on a store’s website.
While the page itself is normal, the store’s site will recognize that people entered with the unique URL linked to the affiliate marketer’s account. This is how the store knows that it’s a sale through an affiliate, not just a regular customer. If the consumer buys something, the sale gets credited to the affiliate marketer and they get their commission.
Affiliate links can also interact with other rules and guidelines for the marketing program. For example, some stores will only give commissions for a specific product the marketer links to, but others will offer commissions for any sales within 15 days of someone visiting the store through that link.
The Three Sides Of Affiliate Marketing
Broadly, there are three primary components in affiliate marketing, and understanding how they mingle together is key to finding success in this area.
The Store
Sometimes known as the “seller,” the store is the company that’s operating a storefront and selling the product. This is not the same thing as the product’s creator because a store can often do affiliate marketing without involving the product creator.
In most cases, the store is a website. It’s technically possible to do affiliate marketing through phone calls or even mail-in orders, but the modern term refers almost exclusively to affiliate marketing that goes through websites.
Stores typically use affiliate marketing as a way of minimizing advertising costs while potentially reaching a much wider audience. In other words, the amount a store pays as a commission is what they’re paying instead of direct advertising for the product. If a store can spend less on commissions than traditional marketing, it’s profitable for them.
Stores can also use affiliate marketing as one of several marketing strategies that help get products in front of consumers. Many stores will still use emails, word-of-mouth, banner ads, and other marketing tactics as appropriate.
The Marketer
The marketer is the heart of affiliate marketing. Marketers usually operate websites that include links to the store, although they can also get ad space in magazines, physical flyers, or other areas.
Most marketers don’t have any products directly available to sell, but they do have an audience that might be interested in buying something from the store. Generally, marketers want to advertise as effectively as possible to get people to convert.
(For context, typical conversion rates range from 0.5% to 1%.)
Most affiliate marketers find success by advertising products that people are naturally inclined to purchase, rather than trying to force things on an audience with no interest in the topic.
For example, a makeup store won’t find much success advertising on a blog about modifying offroad trucks, but a fishing equipment store could get good results from a blog about bass fishing. Marketers need to figure out what content audience members are likely to be interested in.
Marketers also need to decide how much to advertise. Most people don’t visit blogs and other areas that host affiliate links with the intention to buy things that day, and aggressive advertising often turns people away rather than converting them into customers. Making links seem natural usually works out much better.
The main exception to this is blogs that focus on buying advice and information, such as the top five products in a specific category. These are for people who are already interested in buying, and affiliate links can be quite successful in converting them to customers.
Marketers often run several websites or blogs and post affiliate links on each of them. If the websites have a lot of evergreen content, this can end up converting many people into customers over time.
The Consumer
Finally, the consumer forms the third side for affiliate marketing. Consumers come in many forms and preferences, but only two qualities truly matter for affiliate marketing.
The first quality is a readiness to buy. A customer who is ready to buy is actively looking to purchase something and only needs to determine which product to get. These are great for affiliate marketing because they’re more likely than anyone else to click on a purchase link.
Consumers may also be persuadable when they’re not ready to buy when they arrive but could be talked into it. Marketers can use various tactics to persuade these consumers, although some of them depend on agreements with the store. For example, a marketer could offer a discount code in their articles.
Finally, some consumers are not ready to buy. These consumers can’t be persuaded, and they’ll make up the large majority of visitors to most sites. However, it’s still worth trying to attract them because their presence makes a site more active, and thus more likely to get pushed higher in search results.
In other words, even consumers who don’t help you profit directly can help you profit indirectly. Great affiliate marketers know how to make the most of all consumers, not just those who want to purchase right away.
Niche Marketing
Most affiliate marketing is niche marketing. That is, the marketing platforms cater to a specific type of user, and that determines which stores will see the most success. While you can attempt to market towards a general audience, building a recurring base of visitors interested in one topic is usually more effective.
Related post: 39 Best Niches for Affiliate Marketing
Affiliate Products: The Good, the Decent, and the Wrong
There are three types of products that affiliate marketers can try to sell to a particular audience, just like there are three sides in the transaction relationship.
The Good: Products That Perfectly Match The Site
Good products are those that fundamentally cater to the people on the site and are directly relevant to their interests.
To go back to the fishing analogy, good products for affiliate links on a fishing blog would be things like fishing rods and types of bait. These are products that visitors to the site are already inclined to buy and are willing to purchase with money they’ve already budgeted towards their hobby.
Naturally, good products tend to have the highest conversion rate. They can be of any price, but affiliate marketers usually try to advertise several good products together, targeting them towards different parts of the audience. One product might be a luxury product for those with plenty of money, while another might be a budget option or geared for special situations.
The Decent: Products That Are Relevant, But Not Exact Matches
Decent products are adjacent to the primary focus of a blog, but not its exact focus. These don’t convert as well as good products, but you can still expect some conversions from interested parties.
For the fishing analogy, a decent product might be something like a waterproof first aid kit. This is something people might want to have, but it’s not a must-have. Persuading people that a decent product is a good one can help increase conversion rates.
While a lot of this is marketing, it fundamentally relies on the idea that a decent product will be genuinely useful to someone. People are much more likely to buy something if they believe it will address a problem or otherwise help them.
The Bad: Irrelevant Products
Bad products are those that have no relevance to the audience. You probably won’t be selling cruise tickets to people looking for local hiking destinations, regardless of how good of a deal you’re offering.
Note that this isn’t a statement on the quality of the products being sold. In most cases, affiliate marketers try to sell good products, especially those with high reviews. These products are only bad because they don’t matter to the audience, so they’re best avoided.
How Much Does Affiliate Marketing Pay?
Affiliate marketing pays different amounts from different stores, usually based on the types of products being sold.
Physical products usually have lower payment thresholds, and this is especially true when the storefront is not the product’s manufacturer. These often hover around 5%, but the high price of physical goods helps make each transaction worthwhile. Hundreds of consumers giving you a few dollars each adds up fast.
Digital products may have much higher commissions. It’s not unusual to see commissions of 50% or more for wholly digital products, especially those created by the store.
While individual circumstances vary, it is possible to estimate the average income from an affiliate marketing relationship.
Start by finding the average purchase price for visitors to a particular store, and multiply that by the commission percent. For example, if the average customer spends $100 and the commission is 5%, you’d have $5 here.
Next, divide the number of unique monthly visitors to your blog by 200, then multiply that by the dollar amount you got from the first step of the equation. This is approximately how much you’ll earn per month through affiliate sales. If a blog has 10,000 unique monthly visitors, it may have 50 conversions and a total profit of $250 in affiliate sales.
Most people will not earn exactly as much as this equation indicates. Some people will purchase more, or less, than the average customer on that site. Conversion rates can also vary greatly. However, this equation does serve as a good off-hand way for estimating potential value. Good marketers can significantly improve total profits.
Becoming An Affiliate Marketer
While almost anyone can become an affiliate marketer, four steps are particularly useful for getting started. You don’t have to go this exact route, especially if you have an existing audience, but it will help.
Related post: Best Ways to Start Affiliate Marketing in 2020 [Easy Guide for Complete Beginners]
Step 1: Start Reviewing Products
Reviewing products is a great way to get started as an affiliate marketer because it attracts customers who are ready to buy. These people convert at the highest rates and can help you see the greatest profits.
You can review practically any product on the market. If someone is selling the product, chances are someone is buying. It’s okay to review niche products, too, as they may convert in especially high numbers. A large chunk of a small audience can be better than a small part of a large audience.
Make sure your reviews are genuinely helpful for your audience. Try to talk about specific concerns they may have, as well as genuine upsides and downsides. Be as discerning as possible here and don’t hesitate to say when you do, or don’t, recommend a product for a certain part of your audience.
Try to find something negative to say about each product, too, even if you have to stretch a little. This can be something simple, such as being too expensive for some buyers or hard to find in certain stores.
The goal here is to come across as credible and reliable. If something is your top choice, say that and explain why, but freely admit when it’s not the best choice for all people. Most readers are far more likely to trust you if you’re honest about the upsides and downsides, rather than trying to convince them that every product is perfect in every way.
Oh, and don’t forget to mention that your reviews contain affiliate links. Letting people know about your financial relationship with the seller is also part of building trust. Being honest and straightforward always works better in reviews.
Advanced Technique: Buying Reviews
Too busy to write things yourself? Being an affiliate marketer can require creating a lot of unique content, and it can be hard to do that yourself. If that’s the case, consider hiring professional writers to create the reviews for you.
Great writers can create content that converts at higher rates, meaning more profits for you. It’s also a one-time cost for each article, so over time, this can be more profitable than writing it yourself. When time is money, you can spend a little to gain a lot.
Make sure you hire good writers, though, such as those from a reputable agency. Great writers are somewhat expensive, but worth the cost if you have a successful affiliate marketing model.
Step 2: Build Email Lists
Building email lists is another part of marketing content. Good lists can help you attract an audience to a blog or a website. This works especially well if you have other content that’s relevant to the reviews you’re writing.
There are many ways to build email lists, including banners at the tops of pages or making accounts. You may even be able to build email lists by collecting them from the storefront when they collect account information, although that takes some more technical expertise.
It’s fine to focus on having small, narrowly-tailored email lists instead of making them as large as possible. Try to contact your audience at least once a week with something useful or relevant.
Step 3: Start Running Webinars
Live webinars are an advanced technique for generating sales. They require more work, but they also tend to generate higher sales. You can make this easier on yourself by having a pre-recorded video rather than running it live.
These work well when you combine them with your email lists because you know everyone in the audience is genuinely interested in your products and what you’re selling. This is a good opportunity to address any questions they have, and you can use those questions to figure out what you should write about in the future.
These work best when you’re selling higher-value items, such as appliances. Webinars probably aren’t appropriate for products that are too cheap, like low-cost pet toys or snacks, as affiliate commissions aren’t high enough to make that too viable.
Note that many stores are happy to give extra discounts if you’re doing the hard work of marketing with a webinar. Showing them that you have a few hundred reservations for the webinar can quickly convince them to give you a special discount code or something else that you can use to help convert buyers.
Make sure you put your affiliate links at the end of a webinar, as well as somewhere at the start for anyone who decides to buy mid-way. This is a soft selling tactic, and it works because people are much more likely to be interested after hearing you talk about a product for an hour.
Step 4: Use PPC Advertising
Finally, once you’re getting enough income, you can move into paid advertising. When you look past the surface, this is essentially paying someone a commission to advertise for you, just like you’re doing for stores.
PPC advertising is great for getting people to sign up for webinars, growing email lists, and making more direct sales. It’s always better to pay for each click, rather than views or impressions since this guarantees you’re getting views on your site.
Google and Facebook ads are especially viable but don’t be afraid to consider alternatives that can help reach your audience. Remember to target your audience as specifically as possible.
Is Affiliate Marketing Like Pyramid Schemes?
No. Pyramid schemes are highly questionable advertising practices where the people at the top get all of the money from most of the transactions that people make, and people lower in the chain need to reach an increasingly crowded market.
Affiliate marketing is a direct commission program where you get paid for every sale you make. Furthermore, you’re usually not expected to bring anyone else into the program, although you may get a small bonus if you do. Affiliates usually work directly with stores, rather than multiple layers of intermediaries.
How Much Time Should I Spend On Affiliate Marketing?
As much as you want! Affiliate marketing is a direct sales program, so you’ll generally get more income if you spend more time doing it. Conversely, you can do casual affiliate marketing for a few hours a week and still earn enough for smaller purchases or savings. This means that whether you’re looking for extra money or a full-time career, affiliate marketing can work for you.
One thing to remember here is the value of evergreen content. Evergreen material is consistently valuable for people and will convert people month after month, year after year. If you get enough evergreen material, you can essentially stop doing active marketing and continue to get the benefits from what you already have, with minimal maintenance.
You can roughly graph your overall income, too. You’ll need analytics software to get the right numbers from your website, but once you have that, use it as follows.
Start by determining the cost of creating each piece of content. If you hire professional writers and spend $100 on some mix of writing, unique pictures, and advertising, that’s your starting cost per article. Next, estimate the average per-month value of each article or piece of marketing content you have.
Let’s say that you earn $20 in affiliate commissions a month from each article you publish. With these numbers, it takes five months for an article to pay itself off, and everything after that is pure profit.
Using these numbers, you can determine roughly how long it will take to earn enough money for each increment of your publishing schedule (usually daily or weekly) to pay for your content solely through your affiliate income. Once you pay off the backlog of what you spent to get it, you’ll start increasing your profit.
This is where the real money in affiliate marketing lies. It usually takes a few months minimum to reach this point, but the more you can put in, the more you’ll get out. From there, how much time to spend is up to you.
Related posts: 12 Best Affiliate Marketing Sites, 8 Best DFY Affiliate Website Builders in 2021