- Types Of Affiliate Marketing

By: Rajagopalan

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.

Due to latest web technology, the affiliate marketers are able to get their statistics and income figures the moment they make an affiliate sale. It is also possible now to use services like PayPal for payment and receipt processing. This has greatly reduced the time that an affiliate marketer has to wait for his payments to be realized 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.

In the same way as the standing of affiliate marketing has increased tremendously in recent times, the attitude of people also has become better with respect to affiliate marketing. Affiliate marketing is not considered, anymore, as a low grade method of marketing by the merchants, or as an insignificant and supplemental way of income earning by an affiliate marketer. Affiliate marketing is now considered, by many, as a sustainable source of business model and both merchants and affiliates have awarded this status to affiliate marketing in recent times.

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. PPP - Pay Per Performance affiliate marketing is the darling among merchants and is also the most sought after type by the affiliates. Under this type of affiliate program, the affiliate is paid a commission only when his referral performs an action - that is the visitor that he has referred should actually purchase a product or service from the merchant's site or when the visitor is converted to a lead for the merchant. For the merchant, this translates into a lot of cost and resource savings in terms of his own direct marketing efforts. Also, this type of affiliate marketing is highly lucrative and most rewarding for the dedicated affiliate, since commissions in PPP affiliate marketing usually is in the range of 15% to 20% of the actual product sales. And, in the case of e-products or e-goods, the merchant may offer a commission as high as 70 - 75% of the sale price to the affiliates.

A further classification of Pay-per-performance affiliate marketing can be done into two types: pay-per-sales (PPS) and pay-per-lead (PPL). Both these are very popular:

a) Pay Per Sale (PPS) - In a pay-per-sale type of affiliate marketing, the merchants pay the affiliate a certain fee whenever the visitor he has referred to the merchant's site actually buys something from the merchant's site. Affiliates are often paid on commission basis, although other merchants would opt to pay a fixed fee. But no matter what the basis of the fee is, it is generally 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 slight variation of the PPS type and is often used by insurance and finance companies and other companies 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 whose rates approximate that of the fixed fee in the PPS type. Generally, the sales conversion rate is the highest in the case of PPL, 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, 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 various levels or tiers in the affiliate network for which different affiliate payment structures are devised.

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. Most of the time, unless specified, all the 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.

Act And win. Read Rajagopalan's article, Benefiting From Two Tier Affiliate Programs to gain knowledge. Visit Top 100 Affiliate Marketing Programs.