Most internet merchants (e.g. Amazon, eBay, Yahoo) have an affiliate program that you can join and earn commission for referring people to their website.

In a way, it’s a partnership between you and the merchant. The merchant will handle the product development, fulfillment, customer support and payment collection. All you have to do is refer people to the merchant’s website.

It’s very easy to get started. Here’s a somewhat oversimplification of the process:

Step 1: You join a merchant’s affiliate program.

It’s usually free to join. You just submit your contact information and you’re in.

There are affiliate programs that require you to buy a product from the merchant first before you can join but these programs are quite rare.

Step 2: You obtain your unique affiliate link from the merchant.

Upon joining, you’ll be given a link that is unique only to you. This link helps the merchant track your referrals.

Step 3: You send people to the merchant’s website by getting them to click on your affiliate link.

Here is where the “marketing” aspect comes in. To get people to click on your affiliate link, you’ll have to promote the link. Here are a few common ways affiliates promote their link:

• Advertise on Google, Yahoo and MSN.
• Build a website and optimize it for search engine traffic.
• Distribute a viral ebook that contains their affiliate link.
• Post on forums with their affiliate link displayed in their signatures.

Step 4: Your referrals buy something or register at the merchant’s website.

When your referral buys a product or registers at the merchant’s website, you’ll be credited for the sale or registration. Your account at the merchant’s affiliate program will display the sale or registration so that you can keep track of your earnings.

Step 5: The merchant pays you a commission for every sale or registration.

Once your earnings reach the merchant’s payment threshold (usually $50 or $100), the merchant will pay you with a check, a wire transfer or PayPal.

And that’s affiliate marketing in a nutshell.

That’s what affiliate marketing is all about.

It is a marketing method whereby you reward third parties (known as affiliates) for every visitor, subscriber, customer and/or sale that they send to your website.

The types of compensation available:

1. Pay per sale: The affiliate gets a percentage of the sale.
2. Pay per click: The affiliate gets paid for every click on your ad.
3. Pay per lead: The affiliate gets paid a specific amount per lead generated.

How Affiliate Marketing Got Started

According to Shawn Collins of AffiliateTip.com, common lore holds that “affiliate marketing started at a cocktail party. Jeff Bezos, CEO and founder of Amazon.com, was chatting with a party guest who wanted to sell books on her web site. This got Bezos thinking. Why not have the woman link her site to Amazon’s and receive a commission on the books that she sold?

“Soon after, Amazon introduced the Amazon Associates Program. It was a simple idea. Amazon associates would place banner or text links on their site for individual books or link directly to Amazon’s home page. When visitors clicked from the associate’s site through to Amazon.com and purchased a book, the associate received a commission. With that thought, Bezos created Amazon.com’s affiliate program in July 1996.”

However, Collins also reports that this was not the first affiliate advertising program in use. “In November 1994, almost a full year before Amazon.com even launched its web site, the venerable CDNow began its buyweb program. With its buyweb program, CDNow was the first to introduce the concept of an affiliate or associate program with its idea of click-through purchasing through independent, online storefronts. It worked like this.

“CDNow had the idea that music-oriented web sites could review or list albums on their pages that their visitors might be interested in purchasing and offer a link that would take the visitor directly to CDNow to purchase them. The idea for this remote purchasing originally arose as a result of conversations with a music publisher called Geffen Records in the fall of 1994.

“The management at Geffen Records wanted to sell its artists’ CD directly from its site by didn’t want to do it itself. Geffen Records asked CDNow if it could design a program where CDNow could link directly from the artist on its Web site to Geffen’s web site, bypassing the CDNow home page and going directly to an artist’s music page. By linking Geffen Records to CDNow, the affiliate marketing format was born.”

The Pros And Cons Of Affiliate Marketing

There are pros and cons to affiliate marketing. Among the benefits is that it is a “pay for performance model” in which you do not have to pay unless you get results, with the exemption of the initial design and development of the program.

Also, having an affiliate program can be highly lucrative. As more people spend time online, it increases the chances that affiliate advertising will reach the appropriate audience.

However, one of the major problems with the affiliate advertising industry is that it lacks regulation. There is no governing body, despite numerous attempts to establish one, that initiates regulations, standards and guidelines.

“Trial and error” is probably the best way to describe how affiliate marketers operate. Another problem with affiliate marketing is that it is often confused with network marketing or multi-level marketing. Some industry insiders have recommended changing the terminology “affiliate marketing” to “performance marketing”.

Without question, affiliate marketing can increase your sales if you establish and maintain your program.

Basic Tips On Starting Your Own Affiliate Program

By starting an affiliate program, you can create an army of salespeople who will recommend your products on their website. You can increase your sales without increasing your marketing budget.

You do not have to spend money on salespeople or advertising. Your affiliates are doing your advertising for you and you only have to pay them when they are successful. As more and more affiliates sign up and you invest time in teaching both new and old affiliates on increasing their commission checks, your income will grow exponentially.

For instance, if you sell hair care products, it would make sense to recruit stylists as affiliates. By recommending your products on their website, they can earn money without taking any risk. Their only investment is the time it takes to place your advertisement on their site. They could also create banner ads or publish articles about your company and products.

If you decide to set up an affiliate program, your main goal should be to find affiliates who can reach previously unreachable markets. Be sure that you are not competing with your own affiliates.

In other words, make sure that they do not use the same search engines, content sites, or email lists that you are currently using. Since it can be time-consuming to oversee a large number of affiliates, select only a few companies and interview them.

Choose carefully as these companies will be representing your organization on the web. After working with affiliates for a while, you will be able to see who produces results (usually a small percentage) and who does not. Stick with the best and let the rest go.

Here are some additional tips to get you started:

• Set your prices, financial and marketing goals prior to starting the program.
• Establish strategic relationships that you can see having long-term potential.
• Choose affiliates carefully, keeping in mind your customers and target market and making sure they have similar markets that encourage the image you want to project.
• Identify your most productive affiliates and devote your time and resources to them.
• Test ads on affiliate sites.
• Help your affiliates promote your products.
• Keep a plan in place to continually recruit new affiliates. You will have turnover.
• Create new advertising for your affiliates frequently.
• Find out what your best affiliates are doing. Are they advertising? If so, where? Do they have an opt-in e-mail list? If so, how often do they email them? Are they doing pay per click? What keywords are they using?