WHAT IS AFFILIATE PROGRAM

WHAT IS AFFILIATE PROGRAM

INTRODUCTION TO AFFILIATE PROGRAM

When you first start building up a blog you might have money on your mind or you might not. After a few months though, most people start to wonder why they’re doing it. Affiliate marketing can give you the money you need to fuel your passion and keep blogging.Some people even make a full-time living blogging and promoting products with affiliate marketing. Before we begin, let's define some common industry terms that you’ll come across in this guide. If you don’t understand something while reading, check back here for the definition

Affiliate:

this is the person or company that promotes products and/or services for a merchant. In return, they receive an agreed commission for the sale made or lead generated

Affiliate Link:

this is a special link given to the affiliate by the merchant that is embedded with a unique tracking code. This enables the merchant to track the sales or leads the affiliate has generated.

Affiliate Program:

the affiliate program details the specifics of the arrangement between the merchant and their affiliates, how much commission is given, exit conditions, and other important terms. By joining the merchant's affiliate program the affiliate agrees to these terms and is bound by the rules of the program

Associate:

another type of affiliate

Commission:

this is the percentage or amount a merchant pays an affiliate for generating a sale or a lead. The exact percentage or amount is agreed upon in the affiliate program terms

Merchant:

a store owner or company that runs the affiliate program the affiliate is participating in. They are often the producers of the products and/or services that affiliate promotes

Niche:

a specific topic or business area. For example, if you have a site about yoga, your niche is yoga. On a more general level, your niche is health and well-being. If you focus just on clothing for yoga, that is your sub-niche.

The 3 Types of Payment Terms

Affiliate programs can use different payments terms. You need to be familiar with the three main types to get a better idea of how commissions work.

Pay per Sale:

These programs pay you a percentage of the product sale price whenever a purchase is completed, whereas the the affiliate company pays for t=from the commission your sold for them

Pay per Click:

You get paid depending on the number of visitors you redirect from your affiliate site to the merchant’s website, regardless of whether a sale is made on their merchant website or not

Pay per Lead:

In this program, you get paid every time a visitor fills out a contact form and provides their information above to them in or out of sales (regardless of sale)

Average Order Value (AOV)

The average order value is the sum total of all orders divided by the number of orders. It’s a handy metric to know for forecasting your sales.

Reversal Rate (RR)

The percentage of transactions that get reversed by the merchant. Most affiliate programs may not provide this data prior to registration, but some networks (such as Share A Sale) do provide this data so you can analyze.

Conversion Rate (CR)

This metric is the most exciting to track. It may be a click-to-sale CR or a click-to-lead CR, depending on the program. The conversion rate is calculated by the number of visitors who clicked through the site offering the product/service and made a successful purchase (or converted).

LETS TAKE A LOOK AT SOME EXAMPLES

Let’s assume you’re a blogger with around 10,000 page views every month. And let's say you pick a merchant that pays 30% commission on sales. For our calculations we’ll also assume the following values for each metric: CTR = 5% EPC = $250 AOV = $125 CR = 10% RR = 10% We can calculate for the traffic, sales, and earnings by using the following formulas: Traffic: 10,000 * 5% (CTR) = 500 click throughs Sales:

WHY AFFILIATE PROGRAMS IS GOOD FOR MERCHANT TOO

Companies wouldn’t continue to have affiliate programs if they weren’t making money from it. To give you an idea about how merchants also earn from affiliate marketing, take a look at the formula below: Revenue - Cost - Affiliate Commission Payment = Profit Revenue can be seen as the gross income or “top line” figure from which costs still need to be subtracted from. Cost includes anything and everything the company spends on to market and produce the product (which may include other company expenses). Affiliate Payment is the commission they pay to affiliate marketers like you. Since you, as an affiliate marketer, are the one doing the product promotion for the company, the merchant does not have to spend as much on marketing to attain that sale – that’s what they’re paying you the commission for. Here’s an example scenario. Assume the following values: Revenue: $199 Cost: $40 Affiliate Payment: $59.70 (30%) And inserting these values into the formula, we get the merchant’s profit, or net income. $199 - $40 - $59.70 = $99.30 profit per sale $99.30 is still a great margin for the company so while the $59.70 commission (30%) might seem like a lot, it’s actually probably similar or less than what they themselves are paying to acquire a customer through their own marketing channels. Merchants have the potential to earn more from affiliate programs because, as I’ve just shared with you above, they are earning without the cost of marketing. Of course, they’ll still have to run marketing campaigns on the side for their products/services to gain exposure, but their profits would be dramatically lower if they did not have affiliate programs in place. It’s The Ultimate Win-Win Scenario Affiliate marketing is a strategy that benefits both you and the merchant. It has turned many average Joes and Janes into millionaires and has helped small and large businesses grow.

And now that you know how the math works, it should give you the confidence you need to trust in this strategy so you can earn millions in the future, too! SUBSCRIBE TO OUR NEWS LETTER AND GET UPDATED