A Brief Introduction to Affiliate Marketing

Affiliate marketing is a sales process where merchants (a.k.a. advertisers, retailers, brands) can sell and promote their products and services by allowing websites to promote them in exchange for a reward, usually a commission payment.

The industry is well established and has been an active, online revenue generating system since 1994 when Amazon.com launched their own affiliate program.  Nowadays affiliate marketing is a multi-million dollar industry attracting the largest names and providing many companies with a sizeable chunk of their sales. 

Here are some definitions of some of the most common terms used;

1. Affiliate - An Affiliate is a person or a company that assists the merchant in marketing products and services in return for a commission. This is you!

2. Merchant - A merchant is a person or a company that markets their products and services on the web. Your merchant is the person/company whose program you joined.

3. Tracking and Management Solution - In order to track the incoming Affiliate-referred traffic to their sites, merchants need to purchase or create software to Track and Manage their Affiliates and their activities. Since you're here at The Kolimbo Training Center, the merchants here chose the My Affiliate Program Software.

4. Affiliate Networks - there are many networks similar to Kolimbo that have a wide variety of merchants to choose from.  The way they operate can be different in the details, but basically they all provide a central site from which you can join and manage many affiliate programs.

5. Click-through - A click-through is the action that takes place when a visitor clicks on a banner or a link on your site to go to your merchant's site.

6. Impression - An impression occurs when a page containing your Affiliate code is loaded on your site or in your HTML email messages. Impressions are also called page views.

7. Conversion Rate - this is the most important figure to look out for as it tells you how effective your performance is in actually generating revenue.  A conversion maybe making a sale, or generating a sign up, or simply an impression or click through - it all depends on the type of program the merchant is running.

8. Commission/Reward - this is the whole point of becoming an affiliate and using affiliate programs, the money!  The commission is either determined by a percentage or a fixed rate each affiliate program will specify this.  Cold hard cash isn't always the method of payment, some merchants may reward you by offering products, services, discounts, vouchers, points, etc, although this is quite rare.

9. CPS (Cost per Sale) - this where the merchant rewards you for each sale you make.  It can either be a Percentage, e.g. 20% of the final sale - or - it can be a fixed rate, eg. $10 for every sale you make.

10. CPC (Cost per Click) - the merchant will reward you for every click through you generate to their site from your own.  A CPC deal maybe something like $0.05 CPC, this means you get 5 Cents for every click through you produce.

11. CPM (Cost per Thousand) - this is to do with impressions.  Every time a banner appears on your website then that is counted as one impression.  A typical deal could be $0.50 CPM, which means you'll get 50 Cents for every thousand times a particular banner or creative is served on your website.

12. CPL (Cost per Lead) - a lead is something which a company can use to contact someone in order to solicit a sale, eg. This usually involves getting someone to fill in a form with some personal details and their contact information.  Every form completed is a 'Lead' for the merchant.  A CPL deal could be $2 CPL, which means you get $2 every time a visitor you refer fills in a particular form.

13. CPA (Cost per Action) - very similar to CPL but it can refer to something other than completing a form, eg. Downloading something, joining a newsletter or forum, watch a movie, etc.  Basically, any action that a merchant wants visitors to perform on their website can be rewarded if they so wish.

14. Cookie Life - most affiliate programs (including most Kolimbo programs) need to use cookies somewhere in their tracking process.  A cookie is a small text file that is placed on a user's computer when they click on an affiliate link and visit a merchant's site.  This cookie has the affiliate ID on it so if the user then buys something, the merchant's site can look at the cookie and see that the merchant needs to reward Affiliate XX with a commission.  A cookie life is the length of time this cookie will remain on the user's computer.  Some last 24 hours, others 1 week, 30 days, 1 year or even forever.  So, if you have joined a program that has a cookie life of 30 days, if a user clicks on your link, visits the site and then decides 40 days later to buy something, YOU will NOT get a commission.  A longer cookie life is preferred especially if you are selling a product or service where there is a considerable 'decision making' process, eg. An expensive item.

© 2005-2006 Ben Ellis, Kolimbo - http://www.kolimbo.com