What is Affiliate Marketing and How Does it Work (if it Works)?!

The allure of making money on the Internet is strong. In the search to build your own income stream revenue, you’ve come across the term, “affiliate marketing,” but you’re not sure what it involves.

If you’re scratching your head, wondering, “What is affiliate marketing and how does it work?” read on.  

When you grasp the basics and building blocks of affiliate marketing, you will be in a better position to capitalize on this potentially profitable career.

Affiliate marketing becomes a magnet for those attracted to making money online.

Affiliate Marketing for Beginners - You had me at Affiliate Marketing

As its name suggests, “affiliate marketing” involves affiliating yourself with an offer (it may not be a tangible good), and promoting that offer, though marketing means to bring attention to it.  

When you refer an interested party to such an offer, you may then receive a commission if you fulfill specified requirements.

For example, suppose you launch a blog about the best, affordable mobile air conditioners to purchase on Amazon.  

Imagine a blog visitor reads an article on your site and then clicks on a recommended product link. She then purchases the item on Amazon because of your referral.

Woo-hoo! You’re now going to earn a commission from Amazon.

Let’s hope the customer does not return the unit within the refund period, resulting in Amazon debiting your commission from your account.     

In this scenario, you are the publisher, or affiliate reseller, who decides how to build targeted traffic to the offer.  

In contrast, the advertiser, or merchant retailer, is the offer’s creator, who maintains control over the policies of the offer’s distribution and determines when to grant commission and how much share of the profit publishers will accrue. 

In the above example, the advertiser is Amazon. 

While you may just be an affiliate marketing beginner, know that it is possible to earn income (even modest income) from the start. But please realize that advertisers are the ones who are in the “catbird seat.” 

They have full jurisdiction and control over the offer, dictate affiliate-related policies (e.g., they can even decide to no longer share profits with affiliates at a later juncture), and amass many streams of revenue through the synergistic efforts of their affiliate marketing team.

Indeed, there are advertisers who have hundreds, if not thousands, of affiliates working with them, enhancing their bottom line.

While you’re becoming well-versed in the affiliate marketing field, don’t be afraid of looking at the big picture, capitalizing on all opportunities, such as becoming a prosperous advertiser with your own affiliate army one day.

However, for now, let’s focus attention on affiliate marketing. Here are several sample affiliate commission models:

Choose an Affiliate Marketing Commission Model You Can Live with and Prosper

Cost per Sale (CPS): You affiliate yourself with a company or individual who is selling a product or service.  

You send folks to the offer where they purchase the item, and subsequently, you earn commission based on these referrals. You earn no profit if you don’t generate sales..

(It may be best to first direct visitors to your own pre-selling landing or squeeze page en route to convert sales, but I’ll discuss that technique later in a future article or two.) 

Cost per Lead (CPL): This commission structure generates profit for affiliates who refer leads, even if visitors do not opt for the offer.

Here, advertisers want to give publishers an incentive for ushering traffic to their product or service, hoping that sales will eventually materialize.  

Visitors need to fill out a specified amount of the form or forms on the advertiser's site for the publisher to earn commission.

Cost per Click (CPC): Your goal as an affiliate is to send TARGETED TRAFFIC to the advertiser's offer.

If you can generate enough buzz about the offer, your visitors may just click the link (don't forget to provide your unique affiliate link) to said offer where you then earn commission.  

Cost per Thousand Impressions (CPM): Leverage the popularity of your site.

Some advertisers will pay anywhere from $1 to $5 for 1,000 impressions of their offer, featured to 1,000 unique visitors.

 (I'm not a proponent of this model as there should be better ways to capitalize on your site's traffic, such as charging ad space per month to advertisers.)

You will also see other affiliate marketing terms bandied about, such as Cost per Action (CPA) and Cost per Acquisition (CPA).

Cost per action refers to CONNECTIVITY or getting folks to connect with the advertiser’s offer.  

Commission may foment when a visitor takes explicit action, such as purchasing a product, completing and submitting a form, opting in to receive additional information, signing up for a newsletter, installing an application ... or just about initiating any action that the advertiser deems worthy.           

Although some marketers believe that cost per acquisition is only applicable when the advertisement leads to the acquisition of customers, it pertains to any desirable visitor action, such as a form submit.  

So I use the terms cost per action, cost per acquisition, and even cost per conversion interchangeably.

These terms (and relevant audience actions) are all part of “performance-based marketing.” 

Also, instead of using the terms, ‘cost per sale’ or ‘cost per lead,’ it may be more instructive to think of the phrases respectively as ‘pay per sale’ or ‘pay per lead.’

How to Pick a Commission Model Like a Pro

Although you may be an affiliate marketing beginner, you can still think like a marketing pro. Ask yourself: “Which commission model is most lucrative?”

I can set no hard and fast rules.

If you’re using expensive paid advertising methods, you need to ensure ample commission to offset it.

But if you’re reading this article, it is probable that you are a beginner and it may be best to only use free traffic methods to get folks to see your offer.

Assuming that you believe you can build targeted traffic to a winning offer using free marketing methods, seriously consider getting paid by the sale, although it’s best to crunch the numbers if the advertiser provides you with a choice of commission models. 

Suppose that you start off with a cost per sale model, also known as a pay per sale model (CPS/PPS). 

Consider these hypothetical statistics from a campaign:

Number of visitors: 200

Number of clicks: 20

Number of sales: 1

Pay per sale commission: $30

Pay per lead commission: $2.50

You deserve a pat on the back! You’ve just made $30 commission ($30 x 1) but remember to subtract your advertising expense, if applicable, to calculate your total profit.

Hopefully, you’re still in the black.

Now suppose you wish to go under the auspices of a cost per lead or pay per lead (CPL/PPL) model. Out of those 20 clicks, 3 people fill out the form, entitling you to $7.50 commission ($2.50 x 3).

Here, the cost per sale or pay per sale model seems more lucrative.

However, over time if you see that you’re not getting any sales conversions, either abandon the campaign or switch to a different commission model where you can at least earn some money from your referrals taking action, such as submitting a form.

Profitable affiliate marketers choose the right offer in the right niche, This helps to get a flood of visitor traffic with little competition, almost guaranteeing healthy pay days.

Read on, young Grasshopper, and see how to pick promising affiliate programs. 

Warning! - Don't Make this Silly Mistake when Choosing an Affiliate Marketing Program 

Do you want to know the number 1 mistake I’ve made in my affiliate marketing career, especially when I was new to the field? 

Drum roll .... yes, it’s choosing the wrong affiliate marketing program/offer!

I’m not alone. This is the most common error, shared by affiliate marketing beginners, and even veterans, alike.

You can spend an inordinate amount of time building websites, writing endless reams of content, and creating a myriad of videos, yet make nothing from your bountiful efforts.

You can spend a pretty penny on advertising, too, and still not amass any profit from your expenditures.

It’s actually quite easy to fail as an affiliate when you choose the wrong offer to promote and/or the wrong market to promote that offer to, even when you’re using other sound marketing strategies.

Temper your enthusiasm and motivation to take action until you find a constructive and profitable avenue to take.

To find that profitable avenue, pinpoint your attention on a hungry market demographic and find a coveted product that will appeal to that audience

Alternatively, you can center your focus on a winning offer which should lend itself as a useful commodity or service to a community.

Here is a list of key considerations when selecting a favorable affiliate marketing program or offer:

In a nutshell, give the people what they want and gain handsome financial rewards. If you offer an undesirable product, even to a desperate audience, they will still turn their backs away.

Look for offers with value (especially with unique selling points), affordability, and favorable social proof to jump-start your affiliate marketing career.

But you need not only rely on pay per sale commission models. You can, for instance, join affiliate marketing networks and prosper using their pay per lead offers.  

Email/zip submits (affiliates get paid for referring people to share their email or zip code information) can translate into a lot of commission, even if each referred lead provides only a dollar or two of compensation.

Obviously, drum up a lot of traffic to hear the soothing beat of consistent pay per lead commission.

Oops, I don’t want to get ahead of myself.

What do I mean by “affiliate marketing networks?”  

Read on, please.

Affiliate Marketing Networks for Beginners - Why is Everyone Talking About Them?

New affiliate marketers may wonder, “How do I get become an affiliate so I can get paid a referral commission?”

The answer is simple: You have to get accepted into a product creator or vendor’s affiliate marketing program.

You can try to join independent affiliate programs and/or you can join affiliate marketing networks.  

While you should focus your attention on one niche or sub-niche, diversify your list of recommended products by joining a network

But simultaneously, do NOT promote too many products at once. You don’t want to give the impression to your audience that your primary focus is making money.

Serve their needs first, not yours!

An affiliate marketing network is an entity that connects advertisers  with publishers.

Everyone wins! The advertiser, through the affiliate marketing network’s help, can gain an army of vetted affiliates.

Affiliates who get accepted to these networks can choose from a myriad of varied products to market and make money from.

Affiliate marketing networks charge advertisers to be part of their system and gain a slice of commission pie from the efforts of their member affiliates.

As a beginner, consider the following highly regarded affiliate marketing networks:

Before trying to join, read as many reviews as you can and determine your own level of comfort. The ones above foment positive praise, although their records are not perfect.

While some networks offer virtually instant approval once you set up your profile, others require a more involved application process.

But fear not, this process is not too difficult, and many newcomers to affiliate marketing can gain admittance.

A significant advantage to serving as an affiliate is that you don’t have to collect payment for any recommended product, or deliver the product.

Advertisers, or even networks, fulfill those tasks. After any sale, any customer will contact the vendor, not you (with rare exceptions).

The Customer? - I Almost Forgot About the Customer

If you want to be successful in affiliate marketing, you can’t afford to forget about the customer.

Yes, have keen focus and understanding about what product and niche to select. In that respect, you’ll eventually choose a myriad of advertisers and networks.

But never lose sight of your audience!

Let me emphasize:

No matter how you will draw visitors to the products you recommend, remember there are actual humans who are evaluating your recommended offer.

Use persuasion techniques, refraining from deception, bait and switch, and any other method that will compromise your reputation. (I’ll cover persuasion strategies as the site grows.)

In that respect, it’s important to be transparent.  

Let people know that you’re an affiliate who may make commission if you make a recommendation that results in a purchase or other favorable action.

Remind your audience that they will not pay extra for the item just by going through your affiliate link.

In fact, sometimes affiliates can offer discount coupons to reduce the customer’s expense.

Another crucial point to highlight:

Your role as an affiliate is not to sell. It is to recommend and lead the customer to the offer. It is the role of the advertiser to sell directly!

If you try to sell aggressively, you may turn off the customer who may then click away.

For example, suppose you set up a review site on survival gear. In each article, you focus on a particular product, mentioning a host of pros and no cons. 

You engage in gross exaggeration and hyperbole, exclaiming that each product is the best!

Potential customers will probably dismiss your site as one big sales ploy and not regard it as a trustworthy resource.

This is not what you want! Tread lightly, honestly, and fairly with your audience.  

How Do I Get Started in Affiliate Marketing? - Ready, Set ... Spring Into Action

The moving pieces are slowing down and coming closer together. 

You know about advertisers, publishers like yourselves, affiliate networks, and customers.  But how do you get started in affiliate marketing?

The following will briefly list the steps:

Now that I Know How Affiliate Marketing Works, Does it Really Work?

The answer is unequivocally, yes!  

Affiliate marketing works, even in 2021, as long as an affiliate selects a high value product in a niche with a hungry, if not desperate audience.

The affiliate then must provide additional value. For example, content-oriented affiliates should offer worthwhile information, build an excellent reputation, and establish trust with readers.

Reciprocity can more readily result, as readers will be more apt to reward the affiliate by purchasing through an affiliate link.

If you’re entering the field, know that you will also have to work smart, work hard, and work outside the box, too.

As you gain in experience, you will think of creative ways to take your knowledge base and transform it into creative, profitable campaigns.

But here is a stringent warning: If you align yourself with disreputable product vendors or shady affiliate marketing networks, your brilliant work may be in vain.  

There are scam affiliate programs (gulp) so do your due diligence!

Research any potential advertising or network ally and make sure you want to forge a relationship with that entity.  

They may take a close at you, too, but you have nothing to hide.

Make certain that any endeavor you undertake is worth your time. For instance, there’s no point in working months or years on a blog if the products you highlight provide slim returns.  

Here, you would have to get massive traffic just to earn modest compensation.

Affiliate marketing works and works well.

Use your intelligence, creativity, and strong work ethic while embracing the concept of trial, error, and mastery.

How Much Money Will I Make as an Affiliate Marketer?

There’s no way to know how much money you will make. I don’t know your commitment to the field, how many hours per week you plan on working on this craft, which niche products you will highlight, how you will build traffic to the offer, and so many more unknown variables exist.

But I’m confident in the POTENTIAL of affiliate marketing.

And I’m confident in YOUR POTENTIAL, earned by reading this blog. 😉

(Oops, there’s no place for self-aggrandizement in affiliate marketing.)

You can make a full-time income with affiliate marketing, but it can take years to do so.

In the interim, however, you can create an additional revenue stream that will help pay the bills.

But at the heart of it, you can determine your income.

Set accountability goals for yourself — in terms of work performed and in terms of financial gain.

Earning while learning is more than a possibility, but it starts with pragmatic action! 

While I’m reluctant to quote any earnings figures, I will assert that there are many seasoned affiliates who earn over 6 figures a year.

A multitude of others easily earn thousands per month.

An added plus: There’s no ceiling with affiliate marketing, and income increases as experience increases.

You may start off slow, but your income can skyrocket when you find one good “affiliate well.”

How Long Does it Take to Make Affiliate Marketing Income?

Remember when Yoda said, “Patience you must have, my young padawan”? It applies here.

You can’t afford to rush with affiliate marketing, even when nervous about mounting debt. 

Generating consistent income can take some time.  

It can easily take six to 12 months, and even longer, until you see steady, daily commissions..  

But even that time frame assumes you’re properly assuming your affiliate marketing duties.

I can’t predict your “success time set” any better than you can.

If you jump into paid advertising, you may start strongly and see almost immediate dividends from your effort (or investment).

On a more somber note, there are too many affiliates who never see sales pouring in. Some never see their first sale. (This won’t be you.)

And to make sure it’s not you, get your mind off money and concentrate on providing actual value!

The more value you provide to others, the more likely your bank account will increase.

Does it Cost Money to Start Affiliate Marketing?

Good news! You can launch your affiliate marketing career on a shoestring budget.  

This assumes that you’re will not embark immediately on paid advertising campaigns.

If you decide to pay for advertising right from the get go (you have more courage than I did), expect to pay at least a few hundred dollars to drive any sizeable traffic to your offer.

It’s likely paid advertising costs will be exorbitant (using Facebook, Twitter, YouTube, and other platforms) to get eyeballs to your offer

Hopefully, there will be a nice return on investment so can continue to reinvest in your business.

But for the vast majority of new affiliates, expenditures will be much less.

You may only need to spend a couple of hundred dollars, and that’s only if you opt to use certain tools, such as an autoresponder.  (I highly recommend using an autoresponder service so you can build a list.)

Think of how you plan to market to more readily determine expense.

For instance, if you plan on only doing YouTube video marketing, it’s important to invest in a good video editing software.

If you plan on creating a blog, you must invest in purchasing a domain, and contracting with a hosting company.

But if you’re inclined to use only “free search,” it won’t cost much to launch your entrepreneurial venture.

Joining affiliate marketing programs doesn’t entail any additional expense. They’re mostly free to join, although there are exceptions.

What is Affiliate Marketing and How it Works Summary

You introduce folks to a particular offer.  

You then gain compensation from the online retailer, called the advertiser, assuming the customer performs a favorable action, like purchasing a product. 

In this model, you’ll receive money when a customer does something deemed desirable. The customer may fill out a form, watch a video, or perform any other such action.

But never lose sight that your aim is to get a customer to click on your offer. It's the advertiser's job to sell. 

Provide value and the money will follow!

My advice to beginning affiliiate marketers: it’s best to start with free marketing (or limited expense) campaigns, such as creating a blog or jumping into video marketing.

Reverse engineer successful affiliate marketers, maintaining your unique, creative touch. For example, offer customers discount coupons or irresistible bonuses.

Put your special twist to reward customers.

You’re now well-versed in what affiliate marketing is and how it works. Now it’s time to get to work. You can attain your dreams!