Affiliate marketing is a form of marketing where you promote someone else’s product and you get a commission on the sale. You don’t need to buy the product, stock it or provide any after sales support.
Affiliate Marketing Terminology
It is important to become familiar with affiliate marketing terminology. This is necessary to help you recognize terms commonly used with affiliate marketing.
The advertiser is the company that produces the products or the services that you are going to promote. The advertiser and the Merchant are synonyms.
The affiliate is the individual who is promoting the advertiser’s services and products and will receive commission for the leads or sales that the advertiser gets. So, if Ramesh is a blog owner promoting Amazon books, then Ramesh is the affiliate, book is the product, Amazon is the advertiser.
This is the agreement that is drawn between the affiliate and the advertiser when they enter into an affiliate relationship. It has details of rules, roles, legalities and responsibilities for the relationship.
An affiliate link is that which the advertiser (or affiliate network) provides to the affiliate. This link will have a unique tracking code specifically for the affiliate so that the merchant can keep track of the sales that the affiliate is generating. So, if you are the affiliate, the merchant will assign a link to you containing the unique code so that when visitors on your website visit his business and buy something, the sales has been generated through you.
This is the person managing the affiliate program for the advertiser. He recruits affiliates and ensures that their promotional methods are above board and increase affiliate sales. The merchant is also the connection between the affiliate and the advertiser.
The network, unlike the manager, is a third party, managing the affiliate program for the advertiser. Networks provide technology for tracking the efforts of the affiliates. They also ensure that there is proper tracking of the sales, prompt payment of commission to affiliates. The network will also help the merchant meet potential affiliates for promotion their services and products. One example of an affiliate network is the Amazon Affiliate Program.
As mentioned in “affiliate link”, there is a unique code that is provided to the affiliate. This code helps in tracking the traffic that has been sent to the advertiser. An example of affiliate tracking is – advertiser.com/?ID=AFFILIATEUNIQUEID.
A banner ad is a graphical advertisement that the affiliate puts on his website for the advertiser’s promotion.
A click through occurs when a visitors clicks on the affiliate link. He is taken to the website of the merchant.
Click Through Rate
Also known as CTR, this is a metric that compares how many times the affiliate link has been clicked to the number of times it has been viewed. The result is displayed in the form of percentage. For example, if the banner ad on your website has been viewed 100 times and has been clicked once, then you will divide 1 by 100 and multiply it again by 100. This will give you a result of 1%.
Commission is the money that the advertiser pays to the affiliate. This is a pre-defined amount that is entered into the affiliate agreement.
When a visitor visiting your website takes action, such as buying a service or product, signs up for email or fills up a form, then he is converted. The conversion of potential customer to a buyer complete.
The comparison of number of times the affiliate link has generated conversion to the number of times the affiliate link has been viewed and displayed as percentage is conversion rate. The method of calculation of conversion rate is same as CTR.
When an individual visits your website a text file is sent from the website to the web browser of the visitor. This is used for assigning an ID to the visitor who has clicked on the affiliate link to reach the advertiser’s website for a specific period. If the visitor returns to the website within the specified period, then the affiliate gets credited with a sale. Example, Ramesh visits your website and clicks the affiliate link. Cookie is dropped to his web browser. He returns to the advertiser’s website again before the cookie expires. This ensures that you receive credit and commission for the sale.
CPC is cost per click. This is the money that is paid for generating a click by a visitor on an affiliate link. For example, you have spent Rs.200/- on an advertisement. The advertisement gets 100 clicks. Therefore, your CPC is Rs.2. The calculation formula is the cost of the advertisement divided by number of clicks generated.
A disclosure is a page that the affiliate has on his website to make visitors aware of the compensation that you are paid for recommending products or services that you are endorsing for purchase. This is mandatory for affiliate marketing.
This is an email advertisement sending affiliate link sent to users so that they can utilize it in their email marketing.
Earnings Per Click (EPC)
As the term states, this is the earning that the affiliate makes on every click of the affiliate link. EPC or the earnings per click is calculated by dividing the total amount received from the affiliate link by the total number of clicks.
Independent Affiliate Program
This term refers to advertisers who run independent affiliate programs and do not depend on affiliate networks.
If you have a website for dogs, then your niche is dogs. This is your topic.
Pay Per Lead
Also known as PPL, this is the process of paying a commission to the affiliate on generation of a lead. This can be in the form of a quote requested by a visitor, filling up of a form or anything that the advertiser has identified as a lead in the agreement.
Pay Per Click
PPC, as this is known is a program in which the advertiser pays a commission to the affiliate when a visitors clicks on the affiliate link leading to the merchant. The commission is paid whether the lead results in a sale or not.
Pay Per Sale
This is an affiliate program where the affiliate is paid on the basis of the total number of sales made when visitors click on the affiliate link. For example, Ramesh visits your website and clicks on the affiliate link that takes him to the advertiser’s link. He makes a purchase from the advertiser and is, therefore, converted. A sale has been made. This results in a commission for you.
The affiliate is paid a commission of the initial signature of a visitor. He continues to receive commissions as long as the visitor is using the service and paying for it. Therefore, if you refer a visitor Ramesh to a website. And he signs up for the services and pays for them, you are paid a commission. If Ramesh continues to buy the services, then the commission you get is Recurring Commission.
Residual Earnings or Lifetime Commissions
Many affiliates are receiving lifetime commissions when they sign up for such programs. In this type of program, the affiliate is credited with lifetime sales when they refer any new visitor to the merchant’s website. The initial referral has been made by the affiliate and he continues to get the commissions.
These are the most common terms used in affiliate marketing. Familiarize yourself with them.
Part one – Affiliate marketing – 1