Synopsis Description of benefits of affiliate marketing for both merchants and affiliates.

Chapter Contents What is Affiliate Marketing? Three Basic Steps Benefits of Affiliate Marketing Responsibilities of Affiliate Marketing

Benefits of affiliate marketing

In the previous example, the Acme Widget Company is the merchant and Sally is the affiliate. A merchant is a company that operates an affiliate program and is responsible for actually providing the products being purchased. An affiliate is a person who participates in that program by promoting the products in order to earn commissions. The practice of affiliate marketing offers benefits to both parties.

Merchants

Why would a merchant want to start an affiliate program? Merchants realize that to sell more of their products, they need more exposure. Opening more retail locations is one possible way of increasing exposure, but it is expensive because new retail outlets require land, buildings, and staff. Advertising is yet another option, but with conventional advertising a merchant spends his advertising dollars up front. Even if the ad doesn't generate a single sale, that money is gone.

Affiliate programs, however, are an effective alternative to conventional advertising. The exposure a company can achieve through an affiliate program is hard to beat. Because the cost of running the program is so low, merchants can afford to partner with literally thousands of affiliate marketers. This can place their products on thousands of websites accessible all over the world. Possibly even more valuable than exposure is cost effectiveness. Since affiliates are only paid when a sale is completed, none of the merchants advertising dollars are wasted. This concept is so groundbreaking that it has its own name. It is called "pay-for-performance", because the merchant only pays when the advertisement performs, meaning that it generates a sale.

Affiliates

Without affiliates, a merchant's attempts to increase sales will fail. In order to be successful, merchants must offer something to attract affiliates. The benefits to the affiliate are three fold.

• First, the affiliate gains the ability to offer valuable products and services to his customers that he would otherwise not be able to offer. This makes his website more useful.
• Second, the affiliate need not be concerned with the details normally considered when offering a product. These include manufacturing, managing inventory, processing orders, and customer service. The actual ordering process is not even handled by the affiliate, but by the merchant. The affiliate simply links his website to the merchant's website where the order is completed.
• Third, and most important, the affiliate earns a commission for every transaction completed.