How Affiliate Marketing Works

Article by:  John Granskou - SEO Digital Marketing Consultant

Tips to Avoid Pitfalls of Affiliate Marketing

Affiliate Marketing is a unique form of performance-based advertising in which a company rewards one or more affiliates per visitor or client brought about by the affiliate’s promotional efforts.

In a nutshell, Affiliate Marketing is about using one’s own product or service to drive traffic to a website, and in return, receiving a commission on each sale that resulted from visitor clicks, subscriber or client email addresses, or purchases made as a result of visitor visits.

Affiliates make money either as a result of a single sale or through sales of multiple products or services through their personal website(s). Affiliate marketing can be very profitable, but only if done correctly and with sufficient effort.

There are some basic fundamentals that must be understood before undertaking affiliate marketing. The first is that there is often significant upfront start up cost. As an affiliate, you will need to select a product, build a website, set up links to direct traffic to your website, secure appropriate hosting and sign up for an affiliate program.

You can then begin to drive traffic to your merchant’s website. For merchants, this means building relevant and useful content, as well as creating effective advertisements and tracking any results to determine whether or not the product or service has been successful in bringing in revenue.

Affiliate marketing can be very competitive, and therefore it is important for merchants and affiliates to remain vigilant and work together to enhance the overall effectiveness of the campaign. It may also be wise to diversify your own skill sets so that you do not become too reliant on one particular revenue stream.

In particular many affiliates become frustrated when sales do not go as planned, due to poor website design or traffic flow, or perhaps even for no reason at all. In these instances, it may be wise to hire a freelance professional to take on the specific task at hand.

Some affiliate marketers choose to create their own websites and to market their products through this medium. However, this does not always result in the desired revenue levels. A lot of research must go into such a venture to ensure that your website is both search engine optimized and will generate enough interest to draw in visitors and potential customers.

It may also be beneficial to invest in some pay-per-click (PPC) advertising or join an affiliate network that offers pay-per-click advertising. There are a number of ways that affiliate marketers make money but there are also plenty of pitfalls that need to be avoided.

One of the major pitfalls of affiliate marketing is poor performance-based reporting. If you are working with a performance-based budget, you need to make sure that you are aware of how much money is coming in and how much is going out. By doing this, you can ensure that there is sufficient cash flow to meet your goals and maintain a good, healthy balance between profits and expenses.

Performance-based budgets are typically based on a certain amount of revenue that must be generated in order to be eligible for the funding. It is common for companies to have a minimum amount that is required to be earned by the affiliate program in order to maintain a certain level of success. By failing to properly calculate this minimum amount, many affiliate marketers find that they do not have enough revenue to sustain their campaigns and pay their bills.

Another pitfall of affiliate marketing is poor tracking and inaccurate reporting. It is common for affiliate marketing programs to provide a variety of reports and metrics, but the truth is that not all of these reports can be used to track performance. If you are not tracking the performance of your revenue streams, you are likely relying upon the “gut feeling” that your advertising is effective and that your sales are increasing.

When a company relies on such “feelers”, there is often a tendency to develop errors in judgment. Poor financial and management tracking means that a company does not accurately assess where the money is going, what its needs are, and whether or not the marketing strategies are working to increase revenue.

Many affiliate marketing programs, even those with revenue sharing as an option, also offer a commission based on the number of sales generated from the use of their affiliate links. There are several reasons for this, but the most important one is that the company can set the threshold at which it will charge a commission.

If you are a new affiliate marketer, you may be able to build revenue streams that require more time and effort.  But, if you have had some experience, you may be able to earn very well with very little effort. For this reason, it is important that you understand exactly how your commission structure works and why the company is considering the level of your commission.

The third pitfall of affiliate marketing is pay per sale, or PPS. This payment method is popular with merchants, because it increases their overall revenue without having to implement any additional advertising or sales techniques. The way in which pay per sale works is that a certain percentage of each sale that you generate will be paid by the merchant to reflect their overall profit.

In general, the higher the percentage that your affiliate has, the better chance the merchant will have of paying you a higher commission. Pay per sale is also used in online auctions, though it is now commonplace in many online businesses. If you are looking to get paid for your efforts, it is a good idea to keep this in mind.

    Article by:  John Granskou - SEO Digital Marketing Consultant

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