The advantages of affiliate marketing is highly prominent now a days than earlier. This is one among the many reason for the enormous reputation of affiliate marketing programs among several thousands of internet marketers.
The highly advanced web technology now has enabled the affiliate marketers to get all their statistics and income figures the moment they strike an affiliate sale. Companies like PayPal who are the most popular payment processors help you with payment and receipt processing. This has made the time gap that was required to get the payment after making the sale and now an affiliate marketer need not wait very long for his payments to be collected from the merchants.
Both the affiliates and the merchants have now realised that affiliate marketing is effective for both of them. The merchants perceive affiliate marketing as an opportunity to advertise their products at a much lesser cost. On the other hand, the affiliates see affiliate marketing as a uncomplicated way of earning profits online by doing something which they like most, and that is web publishing.
Just as the popularity of affiliate marketing has gone into overdrive, similarly the outlook of people has changed for the better about affiliate marketing. Affiliate marketing is no longer considered as a secondary method of marketing by the merchants, or as an additional income source by an affiliate marketer. For merchants and affiliates alike, affiliate marketing is now considered as a main source of profits and revenues.
We now need to analyze what type of affiliate marketing will work best for any person? Are there any differences in affiliate marketing programs? Are the paybacks from these programs the same? Which are those affiliate marketing programs that work better than the others?
There are actually varieties of affiliate marketing, and the types will depend on how you are going to classify them. The primary classification of affiliate marketing programs falls under two categories: pay-per-click (PPC), and pay-per-performance (PPP).
1. Pay Per Click (PPC) – PPC is the most popular type of affiliate marketing for affiliates with no websites or one page websites, and probably the easiest way for them to start making money. In this type of affiliate marketing, the merchant pays his affiliate whenever a visitor visits the merchant’s site through the affiliate’s reference, that is whenever someone clicks through the merchant’s banner or text ads that the affiliate has put up. PPC is basically used to just divert the traffic from the affiliate’s site to the merchant’s site and the affiliate gets paid for this effort. The visitor he referred need not purchase anything from the merchant’s site. However, typical fees for PPC affiliate programs are very small, usually not exceeding a dollar for every click.
2. Pay Per Performance (PPP) – PPP affiliate marketing is well liked among merchants and is also the most rewarding type for the affiliates. In this type of affiliate program, the merchant pays the affiliate only when his referral converts into an action – that is whenever the visitor he has referred actually buys something from the merchant’s site or when the visitor becomes a lead. This means that the merchant saves a lot on his own direct marketing efforts. On the other hand, this type of affiliate marketing becomes financially most rewarding for the dedicated affiliate, for commissions in PPP affiliate marketing usually comes in the range of 15% to 20% of the actual product sales. And, in the case of e-products or e-goods, the affiliate commission can go as high as 70 – 75% of the sale price.
Pay-per-performance affiliate marketing can further be classified into two types: pay-per-sales (PPS) and pay-per-lead (PPL). Both these are highly popular.
a) Pay Per Sale (PPS) – In a pay-per-sale type of affiliate marketing, the affiliates get the commission from the merchants whenever the visitor he has referred to the merchant’s site actually buys something from the merchant’s site. Affiliates are often paid on percentage basis, although some merchants may opt to pay a fixed fee. But, whatever be the basis of the fee, it is generally much higher than the fee paid to affiliates in a pay-per-click affiliate program.
b) Pay Per Lead (PPL) – The pay-per-lead type of affiliate marketing is a variation of the Pay Per Sale type and is often used by companies like insurance, finance and credit card who rely on leads for their company to grow. In this type of affiliate marketing, the affiliate is paid whenever the visitor he referred to the merchant’s site fills up an application form or any similar form related to the business of the company. Compensation for this type of affiliate marketing is based on a fixed fee. The sales conversion rate is the highest in the case of Pay Per Lead type, because, the visitor is not required to purchase anything but only complete a non-financial transaction, like, filling up an application form, subscribing to a newsletter, filling a survery, etc.
Aside from these three specific types of affiliate marketing, a lot of other affiliate marketing types exist. If the classification is based on the depth of the affiliate network, it can be classified as single-tier, two-tier, and multi-tier affiliate marketing. There is also another type of affiliate marketing that pays the affiliate each time the customer he has referred purchases something from the merchant’s site.
Single-Tier, Two-Tier, and Multi-Tier Affiliate Marketing
These types of affiliate marketing are based on the different levels or tiers in the affiliate network by which payments are made.
A) Single Tier – In a single-tier affiliate marketing program, the affiliates are paid based on the direct sales or traffic he has referred to the merchant and nothing more. Affiliate marketing types mentioned earlier (i.e. PPS, PPL, and PPC) fall under the single-tier classification.
B) Two Tier – In two-tier affiliate marketing programs, the affiliate is not only paid for the direct traffic or sales that he refers to the merchant’s site, but also on every traffic or sales referred by various other affiliates who joined the affiliate program through his recommendation.
C) Multi Tier – Multi-tier affiliate marketing works the same way, although the affiliate gets additional commission for several layers of sub-affiliates who get registered under him over a period of time. For example, let us consider our affiliate as A. Then, B purchases from A’s site so B becomes the sub-affiliate of A. Whenever a visitor purchases through B’s recommendation, then B gets a main commission and A gets a smaller percentage of commission for the effort of B. In the next layer, when C becomes a sub-affiliate of B, then C gets main commission, B gets a smaller percentage of commission for the effort of C and A also gets an even smaller percentage of commission for the efforts of C. This sort of a multi-layer may go on endlessly or the MLM merchant may restrict the layers to, maybe, 5, 10, 15, etc.
D) Residual Income Affiliate Marketing – In this type, the affiliate gets paid not only once for every customer he has referred to the merchant’s site. Rather, the affiliate is also paid whenever the customer he has referred returns to the site and purchase another product. Compensation for such type of affiliate marketing is based on either sales percentage commission or fixed fee basis.
Every affiliate marketer finds that these different affiliate marketing methods work differently for each of them. For instance, multi tier affiliate marketing, also called Multi-Level Marketing (MLM) is a highly difficult type of internet marketing and it does not work for everyone. As a matter of fact, many legitimate marketers consider MLM as illegal or something which is undesirable.
Every affiliate marketer has to try out various methods and decide which works best for him. He should then concentrate on those affiliate marketing methods which is suitable for his style of online business building.
