Understanding The Affiliate Marketing Business Model (Part 3)

So What Is Affiliate Marketing?

You may have heard that a lot of online entrepreneurs generate a substantial onlinewhat is affiliate marketing income by using the affiliate marketing business model. But what is affiliate marketing?

In simple terms, when you are an affiliate, you promote and sell other people’s products and services online. When you make a sale, the product owner pays you a commission. It is like being a commission paid salesperson who uses the internet to find customers.

In this article, we’ll look at the different types of commission structures that are typically available with an affiliate marketing business model and what some of the affiliate marketing jargon means.

3 Examples Of Affiliate Programs That Pay

The affiliate marketing business model is based you sending potential customers to a products owner’s website via an affiliate link that is unique to you (see How To Get Started In Affiliate Marketing). When the potential customer goes to the website via your affiliate link, you can earn your commissions in 3 ways:

  •  Pay Per Sale: This is when the website visitor actually buys something from the website and you earn a percentage of the value of that sale. This is the most common way to generate income with the affiliate marketing business model.
  • Pay Per Visit: Some website owners will  pay you a commission based on the number of people you send to their website, regardless of whether those people buy anything or not.
  • Pay Per Lead: You get paid by the product owner when a visitor that you have sent to their website submits their email address in an opt-in form on the website.

Understanding The Jargon

What is affiliate marketing jargon? As with any industry, there are a fair amount of special words or expressions that are used in online affiliate marketing. Here are some of the common ones that you’ll read and hear about:

  • Conversion Rate: This is amount of people that you send to a website that actually convert into customers. Your conversion rate depends on your costs to send the traffic to the website and the commission you get per sale. Obviously, the lowest possible conversion rate is your break even point, where the costs of your advertising are exactly covered by the commission you earn.
  •  Earnings Per Click (EPC):  This is a way to measure the average earnings generated as a result of 100 clicks on an affiliate marketing link or ad. It’s as a way to measure one affiliate program against another. If a program has a $10 EPC, that means that for every 100 people you sent to a product owner’s website you should earn about  $10 in commissions on average.
  • Upsell:  This is when the product owner offers follow-up products to your referral customer. If there are upsells, back end products or one time offers, it means you can break even on your advertising costs for the initial offer, because you’ll increase your commissions on the other products. Just make sure that you will receive a percentage commission on any upsells.
  • Refund Rate: All good businesses have a refund policy and it’s no different for the affiliate marketing business model. The refund rate is normally calculated for every 100 people who buy the product and then ask for a refund. A good product should not have a refund rate of over 10%.Remember that if you product owner has to refund a customer, you won’t get paid any commission.

What Is Affiliate Marketing On ClickBank?

ClickBank is like an warehouse retailer of digital products. It is easy to use, free to join, and there are thousands of products in many different markets to promote and sell. When you are looking at products on ClickBank, you will see a few references that are important to your affiliate marketing business model.

  • Sale Price: (Initial $/Sale) This is the amount that affiliates are earning for referring customers.
  • Percentage of Sale: (Avg %/Sale) This is the average percentage commissions earned per affiliate per sale.
  • Gravity of Product: (Grav) The gravity number shows the popularity of the product. The gravity rating for the product that you want to promote should be at least 10 or more. If it is more than 100, it means that there is a lot of competition selling this product.

What Is Affiliate Marketing? Your Next Step

The affiliate marketing business model can be hugely profitable when you follow a proven process and you promote correctly. Remember that it is a real business and it will take time, effort and resources to get it off the ground.  It isn’t a hard business to learn, but you’ll still need to take the time to learn it. To get all the answers to “what is affiliate marketing?” check out this FREE presentation. It has been specifically created to show online entrepreneurs how to do affiliate marketing successfully with their own affiliate marketing business model.

Tomorrow, in part 4 of this blog-series, we’ll look at how to choose the best affiliate marketing business model to suit you.

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