What Is Affiliate Marketing and How Can I Use It For Business?

Finding ways to generate new sales leads can be incredibly difficult task for some business owners. In this day and age, digital customers are incredibly fickle. They’re hard to engage, and retention can be a thorny issue for various industries.

That’s why so many small business owners are turning to affiliate marketing in order to both generate sales leads and produce a small income.

What is Affiliate Marketing?

Affiliate marketing is essentially an exercise in revenue sharing that sees a company pay someone a commission in exchange for referred business. The concept itself has been around for ages — but thanks to advances in ecommerce and digital technology in recent decades, affiliate marketing has rapidly evolved into its own dynamic industry.

Affiliate marketing as we currently understand it was first deployed online by a start-up called PC Flowers & Gifts in 1994. By launching an organized revenue sharing platform through the iconic Prodigy Network, founder William J. Tobin convinced thousands of other companies and publishers (or ‘affiliates’) to passively promote his company’s products in exchange for a small commission. PC Flowers & Gifts earned millions in affiliate sales, and registered affiliates were able to earn a small income with little-to-no-effort.

Tobin went on to patent the idea in 1996, and scores of digital pioneers inevitably hijacked and rejigged the model. Amazon launched a hugely successful associate program in 1996 that rewarded website owners for promoting the company – and in 2003, Internet upstart Google streamlined the process by launching its Google AdSense program.

How Does Affiliate Marketing Work?

Although the concept itself is quite simple, there is actually a wide range of varying models that all fall under the ‘affiliate marketing’ banner.

Pay-per-click (PPC) is without doubt the most popular type of affiliate marketing among publishers. This method sees a company pay a commission for each visitor that clicks through to their website from an affiliate’s website. This method is popular among bloggers, because it enables them to become merchant affiliates without overtly advertising third-party products. PPC also generates higher commission levels for affiliates, because companies must pay a commission whether visitors buy a product or not. That being said, PPC affiliate programs consequently offer relatively low commissions.

Another type of affiliate marketing is pay-per-lead. This structure offers affiliates a commission that is typically dependent upon referred visitors registering for a newsletter, trial offer or product download.

Finally, Pay-per-sale (PPS) sees an affiliate rewarded with a commission for each referred visitor that goes on to purchase goods and services from a merchant. This method typically offers the best value-for-money for companies, and also substantially higher commissions for registered affiliates.

There are other models out there, and each affiliate program comes with its own bells, whistles and caveats. It’s also worth pointing out that a huge number of ecommerce programs are constantly evolving, and commission sizes tend to vary as time goes on.

How Can My Company Use Affiliate Marketing?

As a small business owner, you are able to take advantage of affiliate marketing in one of two capacities: you can either set up your own affiliate program in order to generate sales for your business, or you can register for an existing affiliate program and generate leads for another company in order to generate a small, passive income for your own business.

It’s incredibly easy to launch an affiliate marketing program for your own small business. If your small business is currently hosted by a platform like WordPress or Shopify, there are plenty of downloadable apps or extensions that come pre-programmed with all of the analytics, payment capabilities and forms you’ll need in order to sign up affiliates, track referrals and pay necessary commissions.

If you’re not so keen on managing your own affiliate marketing program, you can also hire a specialist agency to design and manage a program for you. There are loads and loads of bespoke agencies to choose from that specialize in both managing existing programs, launching new ones and taking on different types of short-term affiliate marketing campaigns. If you’re interested in going this route, just be sure to do your homework and shop around.

Your small business can also get involved in affiliate marketing by joining an existing program as an affiliate. Existing programs like Amazon Associates and Google AdSense offer straight-forward models that can provide you with a steady stream of passive income each month by simply allowing certain ads to be displayed on your own website. These programs also give you control over the types of ads that are being displayed on your site, which means you won’t need to worry about inadvertently displaying the ads of competitors.

The Bottom Line

Ecommerce is an ever-changing beast, and generating new leads can be incredibly tricky. That’s why it’s definitely worth checking out affiliate marketing for your small business. It may or may not be right for you, and you’ll need to bear a lot in mind before trying to start your own affiliate program. The same can be said of joining an existing program as an affiliate.

But if you do your homework and decide that affiliate marketing is indeed right for you or your business, there are plenty of tools out there that can help you to get started.

Affiliate Marketing Photo via Shutterstock

This article, "What Is Affiliate Marketing and How Can I Use It For Business?" was first published on Small Business Trends