What is affiliate marketing for small business owners?

Starting an affiliate marketing program isn't as simple as slapping an ad on a website and watching the dough roll in.

Read on to learn what affiliate marketing is and how to launch an effective marketing program for your small business.

What is affiliate marketing?

Affiliate marketing is a marketing strategy in which an advertiser (e.g., an online business) pays a commission to a third-party "affiliate" every time the affiliate's marketing efforts lead to the desired conversion for the advertiser.

Depending on the marketing model, that conversion could be the sale of a product, or service, or software download.

The leading benefit of affiliate marketing is that it lets you piggyback on the marketing efforts and user base of the marketer. Accordingly, it means spending less time or money on marketing efforts of your own. This leverage allows you to market to newer and broader audiences than you would have reached through traditional marketing.

What are the different affiliate marketing models?

The most popular affiliate marketing models are pay-per-click or pay-per-performance. Let's take a look at each of these affiliate marketing models in greater detail.

Pay-per-click

In this marketing model, advertisers pay affiliate marketers when a referral on the affiliate's website leads a user to click through a text link or an ad graphic or banner to the advertiser's site. Users generally don't have to buy anything on the advertiser's website to earn a commission. This situation makes it easier for a marketer with a lower-traffic commerce site to still succeed in affiliate marketing.

Pay-per-performance

In this affiliate marketing model, advertisers only pay affiliate marketers when his efforts result in a lead or sale. There are two main types of pay-per-performance affiliate marketing models:

Pay-per-lead

Affiliate marketers get paid when users perform an action that causes him to become a lead (e.g., download trial software or fill out an application).

This model is more practical among affiliate marketers that operate in sectors in which gaining leads is a high priority. For example, the finance and real estate industries.

Pay-per-sale

This is the most lucrative conversion, so it's the one that every online business wants. That said, it's harder for affiliate marketers to earn a commission. The fact is, they only get paid when the referred user buys a product or service.

How can a small business start an affiliate marketing program?

Follow these tips to set up an affiliate marketing program in which you serve as the advertiser:

• Have a product or service up for sale: If you want to play the role of the advertiser in the affiliate marketing program, your business needs products or services of its own.
  
• Determine which affiliate marketing model you want to deploy: Keep in mind that as an advertiser, pay-per-performance models can help reign in your spending. Simply, because you only pay out for tangible leads or sales as opposed to clicks that may not result in a prospect or a sale.
  
• Choose an affiliate platform: Platforms such as Refersion or AffiliateWP will enable you to track your affiliates, clicks or sales from referrals and affiliate payouts.
  
• Invite affiliate marketers: Depending on the chosen platform, you may already have a built-in affiliate network from which you can recruit affiliate marketers. After joining, participating affiliates will need to add trackable affiliate links, banners, etc. to their website to start promoting your products or services.
  
• Track performance: Using the tools in the affiliate program, you will need to track the performance of the program. As well as making adjustments to ensure that it remains lucrative for your business.
  

Don't have products or services of your own or don't have the budget or need to start an affiliate program of your own? Consider becoming an affiliate marketer that promotes another advertiser's products or services. The process is as simple as finding an affiliate niche (e.g., smartphones), identifying suitable businesses to partner with and joining their affiliate program (usually through an "Affiliates" link on the business's website).