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There are several different types of affiliate marketing, differentiated by the methods used and the ways in which affiliates are paid. The most basic affiliate marketing programs, however, fall under two categories: Pay-Per-Click (PPC), and Pay-Per-Performance (PPP).
Pay Per Click (PPC)
PPC is the most popular type of affiliate marketing for affiliates with small websites, and it is likely the easiest way for affiliates to earn income. With this affiliate marketing method, the merchant pays his affiliate whenever a visitor is referred to his site, meaning that someone clicks through the merchant’s banner or text ads. The affiliate gets paid, usually a fixed amount, even if the referred visitor does not purchase anything from the merchant’s site. With this method the typical fees for PPC affiliate programs are small, usually not exceeding a dollar or so for every click.
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Pay Per Performance (PPP)
PPP affiliate marketing is the most popular method among merchants, as well as being the most lucrative method for the affiliates. With this method of affiliate program, the merchant only pays the affiliate when his referral results in an action—when the referred visitor actually buys something from the merchant’s site or becomes a lead. This translates into considerable savings for the merchant, and it becomes very lucrative for the dedicated affiliate, as commissions in PPP affiliate marketing can be in the range of 15% to 20% of the actual product sales.
Pay-Per-Performance affiliate marketing can be further classified into two popular types: Pay-Per-Sale (PPS) and Pay-Per-Lead (PPL).
Pay Per Sale (PPS)
In a pay-per-sale method of affiliate marketing, the merchant pays the affiliate a fee when the referred visitor to the merchant’s site actually buys something from the merchant’s site. Affiliates are usually paid on a commission basis, although some merchants will opt to pay a fixed fee. But whatever the basis of the fee, it is nearly always higher than the fee paid to affiliates in a pay-per-click affiliate program.
Pay Per Lead (PPL)
The pay-per-lead method of affiliate marketing is a slight variation of the PPS type, most often used by insurance and finance companies, or other companies which rely on leads for their company to grow. In this type of affiliate marketing, the affiliate is paid when a referred visitor to the merchant’s site completes an application or other form related to the business of the company. Compensation for this method of affiliate marketing is based on a fixed fee, approximating that of the fixed fee in the PPS type.
Other types of affiliate marketing are based on the depth of an affiliate network, and thus are classified as single-tier, two-tier, and multi-tier affiliate marketing.
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, and payments are made based on those tiers. In a single-tier affiliate marketing program, the affiliates are only paid based on the direct sales or traffic referred to the merchant. The methods we outlined previously, i.e., PPC, PPP, PPS and PPL, all fall into the single-tier classification.
There are two primary compensation methods that are associated with affiliate marketing:
CPA (Cost per Action) – This is based on the advertisement generating enough interest that the clicker actually buys or registers at the site.
CPS (Cost per Sale) – This is based strictly on sales. The affiliate is paid if the clicker actually purchases something on the advertised site. Since the cost-per-sale system has very little or no risk at all for either party, it is the preferred method.
Cost per Click (CPC) or Cost per Mil (CPM), basically pays the affiliate according to how many clicks the advertising on the site generates, or even by merely having the advertisement published on the website. Because of the increased use of click fraud and other questionable tactics, which are risks to the advertiser, CPC is now rarely used for affiliate marketing.
Affiliate marketing is frequently run by affiliate networks, composed of two functional bodies – the group affiliates and the group merchants. Each has their particular function and role when it comes to affiliate marketing. The affiliate network acts as a third party between the merchant and the associated affiliates. The network also provides the technology to deliver the merchant’s campaigns and offers and collects commission fees from the merchant, then paying the affiliates which are part of the program. Affiliate networks often provide targeted, best-seller items and personal support to their affiliates, and they often offer sales promotions which will benefit both the network and the affiliate.
Affiliate marketing is a beneficial situation for both the merchant and the affiliate. If they work together, they create definite advantages to both sides. Besides the fact that it makes sense, it is an easy and relatively inexpensive way for an affiliate marketer to start a business, and she can be up and running within a matter of days. The next thing to consider is…..how to get traffic and make your offer stand out from all the others!
