Oct 1, 2010

Branding over internet: Affiliate marketing

Affiliate marketing is the use by a Web site that sells products of other Web sites, called affiliates, to help market the products. Amazon.com, the book seller, created the first large-scale affiliate program and hundreds of other companies have followed since. Affiliate programs offer affiliates referral fees in return for directing potential customers into a merchant’s Web site.

Many merchants pay affiliates a referral fee for every referral that is converted into a customer (pay-per conversion). For example, Amazon pays its affiliates up to 15% commission on sales made to a converted customer. Pay-per-conversion is sometimes considered a form of pay-for-performance because it reduces the merchant’s risk of paying for referrals that do not convert into buyers. Another commonly used method is pay-per-lead, whereby affiliates are paid for referrals regardless of whether their referrals are converted into buyers.
In common one thought probe in minds that is given the prevalence of both pay-per-conversion and pay-per-lead formats, two interesting questions are as follows: (1) why do both formats continue to exist? (2) Under what conditions is one format preferred over the other? The answer is as Pay-per-conversion leads to suboptimal pricing, and therefore pay-per-lead is more profitable and efficient than pay-per-conversion. In contrast, when the merchant works with a large number of affiliates and determines the referral fee collectively for all, pay-per-lead is no longer more profitable than pay-per-conversion.
The emergence of the Internet and sophisticated customer database management systems has made the tracking and rewarding of referrals easier. Indeed, in the business-to-consumer market, there is recent growth in the use of referral rewards programs. A second type of affiliate marketing programs is one-to-one arrangements. The merchant and the affiliate negotiate a specific contract that governs the referral of customers from the affiliate site to the merchant site. One-to-one contracts are typically signed with affiliates that have access to a large number of potential customers and usually involve large sums of money, some of which are paid up-front.How to Create a Profitable Website
Affiliates in one-to-one arrangements are powerful companies that have substantial negotiating power in determining the terms of affiliate arrangement. Free riding is less of a concern because of the adverse consequences of such behavior to reputation, fear of litigation, and the loss of future business.

3 comments:

  1. affiliate marketing is better known as marketing that is done through the World Wide Web and in this the affiliate marketer promotes the manufacturer’s or advertiser’s product and is paid for driving the buyers to the manufacturer’s or the merchant’s site.

    ReplyDelete
  2. I would like to learn how to use affiliate marketing to make money. Where and how do I sign up.

    Thanks,
    Jack@the best spinner

    ReplyDelete
  3. I really like the way as you presented this useful information. I own an Internet Marketing Agency in Brisbane so it is really helpful for me. I am always looking forward for online marketing tips.
    Thanks

    ReplyDelete

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