Affiliate Programs and the Way they Work

You might’ve probably heard about an affiliate program, as it’s quite popular in today’s times. Amazon.com had popularized the concept of an affiliate program in the late 1990s. This program is also known as the ‘associate program’. It involves a business paying you for links from your website to its site.

You’re the ‘affiliate’ in this program and the business paying you is the ‘merchant’. Usually, you’ll be paid a certain amount in commission. The payment is made only when your link results in the sale of the merchant’s product or products.

The technical term used for this method is Pay Per Action or PPA. In this method, you’ll not get anything for placing the merchant’s link on your website. You’ll get a certain amount only when a visitor to your site performs a certain action. This action involves filling a form and submitting it or making a purchase.

How an affiliate program works

Here we’ll take the example of Amazon.com’s affiliate program. It begins with you signing up on the website of Amazon. Once you sign up, Amazon.com assigns you an Associate ID. Now, let’s say that you have a book review website. You post the review of a new release. Somewhere in the review, you provide a link to the book’s description on Amazon’s website. The visitor who reads your review clicks that link out of curiosity.

The link includes your Associate ID, which is generally at the end of the link. Amazon’s web server will record your Associate ID along with the visitor’s session ID. If the visitor makes any purchase during the session, you’ll get the credit for his or her purchase. Now, if the visitor purchases the exact book you’ve linked to, you’ll get a certain percentage of the sale.

If he or she ends up buying another book, the percentage of sale that you receive will be lesser. You’ll receive the payments from Amazon.com on a quarterly basis. However, your total commission due in a quarter must be more than Amazon.com’s minimum amount.

Benefit for the merchant

Through the affiliate program, a merchant can save big on advertising costs. For example, the merchant has to pay a certain amount in banner advertising. This is irrespective of whether a purchase occurs or not. Under an affiliate program, the merchant’s cost of advertising is limited to the percentage paid to an affiliate.

If the visitor likes the merchant’s website, he or she is likely to visit the site directly. This is yet another benefit that the merchant can get from an affiliate program. In this case, the merchant gets a customer for life.

Benefit for the website owner

Let’s say you’re the website owner. You’ll get to make a good income as long as you have a considerable number of visitors. They must not only click on the affiliate links that you place on your website but also make purchases. You don’t need to take the trouble of setting up the e-commerce functions on your site.

This would be the responsibility of the merchant. You just have to join the affiliate program and place the links strategically on your website.