What Is Affiliate Marketing?
Affiliate marketing (also referred to as commission based advertising) is a form of Internet marketing whereby an entity (the affiliate) receives some form of reward for referring people to a third party website (the seller) which offers its own products and services. In order for an affiliate to receive payment, the referred visitor must usually perform a specific action on the seller’s website (such as purchasing a product).
Whilst affiliate marketing can refer to any payment agreement where one company advertises another’s products and services, the term is almost always informally used to refer to a performance based payment agreement, whereby the seller gives payment to the affiliate only in the event that the affiliate’s advertising actions directly generate a lead or sale for the seller.
Affiliate marketing is a lucrative business for many entrepreneurial Australians since in addition to promoting local products, most US based companies allow Australians to promote their products and services. Even better, as an affiliate marketer based in Australia you’ll be able to promote many local products with much less competition than US based affiliates may face. The reason for this is the lower demographic population in Australia, which results in less competition.
The best thing of all about this field is that you can start making money without any capital, and without owning your own product. This means that you can start promoting another company’s product immediately, and receive a commission for any sales you make, without you yourself needing to make any investment outside of the means through which you wish to promote the company’s product.
Getting Started As An Affiliate
In order to get started as an affiliate marketer, you will need to find a merchant’s product to promote. Clickbank is the centre most International location for merchants to advertise their digital products and services, and therefore it is where you should head in order to find your first product to market. I recommend promoting digital products (downloadable, online products) to begin with, since these are the easiest form of products to promote, and the experience will give you a good opportunity to learn the ropes of affiliate marketing in general. You can always use the skills you muster from promoting digital products if you wish to venture into other forms of affiliate marketing (such as promoting physical products or land based businesses).
Of course there are many websites that offer affiliate programs, both Australian & International. If you do a little head hunting you will find an affiliate program specifically tailored to suit your needs.
When deciding on a product to promote, you will need to think of a number of things. First of all, you must be able to sell your chosen product effectively. You should choose a product that you know something about. Do you have an educational background? If so, in what field? Find a product teaching people about this field that you already have expertise in. You’ll find the product much easier to sell since you’ll already have background knowledge of the field.
Even if you don’t have an educational background, believe it or not all of us are experts in something. Whether it’s gardening, bike riding, playing computer games, or even sleeping, you’re sure to find some niche that interests you and that you know something about. There really are a near limitless supply of products that you can promote. Find one that you’d feel comfortable selling.
Before you get started promoting a product you need to know how you’re going to get paid. Will you receive a commission for each product sale (and if so how much), or will you instead receive a set dollar amount for every lead you send to the company you’re promoting? These are all things you’ll need to consider, and it’s important to understand the different types of affiliate agreements that exist to ensure you’re getting a fair deal. In this section of the tutorial we’re going to cover the differing affiliate agreements that you may come across.
In affiliate marketing both the affiliate and seller need to agree how exactly the affiliate will be compensated for advertising the seller’s products and services. This agreement normally takes place through an “affiliate agreement”. An affiliate agreement is usually a legally binding contract issued by the seller to the affiliate, and details things such as what performance actions are required by the affiliate in order to receive payment, as well as what are acceptable and non-acceptable advertising methods.
In order for an affiliate to receive a commission from the seller, some form of specific action is required by a visitor referred from the affiliate to the seller’s website. The action that is required can vary greatly depending upon the type of affiliate agreement, however is normally broken down into two primary categories – pay per sale and pay per action.
Pay Per Sale
In a pay per sale affiliate agreement, the affiliate only receives a commission when someone they refer to the seller’s website actually goes on to purchase a product. In the event that the referred visitor does not purchase a product, the affiliate will not receive compensation. This form of agreement offers the highest protection for the seller, since they don’t risk losing any money on failed leads. Also, customers that go on to file refunds and chargebacks are usually considered to be invalid leads, and thus don’t contribute to an affiliate’s commissions. For this reason, affiliates cannot technically “cheat” the seller in any way by sending them bad referrals. If the affiliate’s referrals don’t convert into legitimate, paying customers, then the seller doesn’t lose anything.
A seller will usually favor a pay per sale affiliate agreement when no prior relationship with the affiliate exists. This is due to the mostly non-abusable nature of this form of agreement.
The way a seller pays an affiliate for a sale may either be in the form of a set, agreed upon amount at the time of sale, or a percentage of on-going revenue that the customer generates (commonly known as revenue sharing). Affiliates and sellers may vary on whether they prefer an agreement which offers a set amount for each sale made, or a percentage of revenue from all sales made.
The most common type of websites that pay an affiliate through a revenue sharing agreement are membership websites, gambling websites, and websites which offer a wide variety of products and services. These types of websites have the potential to generate future income from a customer, and share the revenue with the affiliate. On the other hand, websites which don’t offer recurring membership, future products and services, or any other way for the customer to spend more money, will offer the affiliate a set, agreed upon amount per sale.
Some companies may offer an affiliate a choice upon whether to receive a set amount per sale or to instead receive revenue sharing. In such cases, the set amount is normally much higher than the initial payment for revenue sharing, however revenue sharing has the potential to be more financially beneficial to the affiliate if the customer continues to spend money with the seller’s company.
Affiliates who make lower quality referrals (referrals whom are only likely to buy one product, or stay at a membership site for a short time) are more likely to gain from a one-off payment commission structure, whereas affiliates who drive higher quality referrals to a company are more likely to gain from a form of recurring, revenue sharing based commission structure (since high quality referrals are more likely to become repeat customers).
Pay Per Action
In a pay per action agreement, if an affiliate marketer sends a potential customer (a lead) to the company they are promoting, then they will be paid regardless of whether or not that lead converts into a paying customer. Usually all that is required for a lead to be considered valid is for the lead to fill out a simple, cost free registration form. The affiliate is then paid regardless of whether the lead goes on to spend any money.
This form of agreement is usuallly only reserved for affiliates who have proven to send quality leads to a company. Affiliate marketers that send poor quality leads will often be exclued from participating in a pay per action program. From the affiliate marketer’s perspective, it will depend upon sales metrics as to whether the Pay Per Sale (PPS) or Pay Per Action (PPA) affiliate agreement is more lucrative.
Why Affiliate Marketing Is Easy To Get Into
Affiliate marketing offers little risk for merchants since they are simply giving the affiliate back a portion of the money made from each sale referred. Commission based affiliate agreements do not normally require the seller to pay the affiliate any compensation for referrals that don’t convert into sales, regardless of the advertising exposure generated. For this reason, affiliate marketing is one of the most popular, low risk forms of advertising available to online businesses. It also offers an easy way for affiliates to establish an advertising relationship with companies that may otherwise not be interested in taking any form of risk with the affiliate.
Wherever in Australia you may be based, it is always a good idea to network with fellow marketers to expand on ideas together and develop your skillset. If you’re interested in networking with fellow marketers, then the Australian Marketing Institute has a good program for emerging marketers.
So, now that you understand how affiliate marketing works, and how easy and viable it is to become an affiliate marketer based in Australia, all you have to do now is choose a product you want to promote, and ensure that it has an affiliate agreement that suits you. Once this is all done, the last, yet hardest part remains – advertising!
Advertising your chosen product over the Internet can be done in many, many different ways, and rather than explaing them all here, I’d rather refer you on to our main tutorials series on Affiliate Marketing For Beginners.