Understanding Affiliate Marketing

By Biana Babinsky

Once you set up an online business, you should start thinking about ways to increase sales. Running your own marketing campaigns is certainly one option. But what if you could get other web site owners to promote your products and services on their web sites? And what if this didn't require an upfront investment? Affiliate marketing does just that.

Affiliate Marketing is an agreement between a merchant (you, the business/products/services owner) and web site owners (your affiliates). The affiliates agree to use their sites to promote the merchant's products and to link to the merchant's web site. In exchange for this, the merchant pays the affiliates a commission on all sales that were generated by the affiliate web site. A referral occurs when a customer clicks on the affiliate's product link and makes a purchase.

Commissions are the sole driver of the affiliate marketing arrangement. An affiliate makes money only if referrals lead to sales. This is a win-win situation for both the merchant and the affiliate. Let's examine the benefits of running an affiliate program in depth from the merchant's point of view:

• Increase profit - Your affiliates will generate additional sales and hence additional profits.

• Pay for Performance - Even though traditional advertising does not necessarily increase sales, you have to pay for it upfront. You incur the expense whether or not the campaign was successful.

  With affiliate marketing, you pay for performance only. When your affiliates generate sales, they earn commissions. No sales - no commissions. Think of your affiliates as online commission-only sales people.

• Acquire new customers - Visitors who are referred to the merchant's site by affiliates are typically first time customers who didn't know about the merchant's online operations, products and services prior to clicking from the referring site.

Getting new customers is an expensive proposition. Merchants must typically offer a significant incentive (usually a free product or a substantial discount) if they want to increase their customer base. With affiliate marketing, the merchant pays commissions for the purchase, but does not need to provide additional sign-up incentives.

We strongly recommend using affiliate marketing as an ingredient in your marketing salad - your marketing strategy. Used properly, an affiliate program can bring additional sales and profits to your business.

About the author: Biana Babinsky helps coaches, consultants, virtual assistants and other solopreneurs create affiliate programs and make them profitable. Learn how to create an affiliate program for your business at Biana's online business community, http://www.MarketingSalad.com