Every business in the United States has to constantly work on acquiring and retaining new customers. It is not uncommon to find two similar stores in one town constantly adjusting their prices and putting in a lot of effort to offer better deals than their competition and ultimately attract as many customers as possible with the minimal loss of profit. This spirit of competition opens the door for an excellent opportunity for an average person to make some money by taking an active part in attracting new customers for a business. This practice is commonly called affiliate marketing, and refers to acting as an independent marketing affiliate for another company and being compensated if the affiliate's own actions yield new customers or higher profits for the parent company.
The practice of affiliate marketing can have many forms. It can be as simple as spreading the word among one's friends about a business and trying to convince them to at least give it a try. Often, different businesses will compensate the affiliate a fixed amount for every new customer. This is common in businesses where the profit margin and necessary work is similar from customer to customer.
For example, a landscaping business specializing in mowing small private lawns might offer a $50 dollar bonus for every future customer recommended by a current client. This is usually a win-win situation for both parties because the current client, and now technically an affiliate, is satisfied with the performance he paid for; he is very likely to recommend such business to his or her friends. Furthermore, it is not out of the ordinary to recommend businesses that one finds satisfactory to friends, but the addition of the bonus now acts as a great incentive. The people, who may sometimes feel unsure about making such recommendation, might often by swayed to do it once there is a possibility of some personal gain.
Another common affiliate marketing model is being paid not based on the number of clients that the affiliate brings in, but on the revenue generated for the company. If every customer can potentially generate revenues ranging from $1,000 to $100,000, it might be far more beneficial for the affiliate to be compensated in terms of revenue sharing. If the parent company offers 5% of the revenue generated as compensation, the affiliate can now potentially make from $50 to $5,000, thus giving him more of a reason to find new clients. Furthermore, the affiliate has an even bigger incentive to ensure that such clients do as many transactions with the parent company as possible, while always making sure to emphasize who lead them to the parent company in the first place.
The method of revenue sharing has become extremely popular with the expansion of the Internet, and now has become an integral part of the e-commerce business model. All major internet stores offer some type of affiliate program, with a defined commission fee that can be received by an affiliate, if a future customer is lead to the retailer through the affiliate's website. It is now very common to find links to different retailers in people's personal blogs or find general review articles ultimately recommending a particular manufacturer or retailer. The system in fact has gotten so big, that a lot of people have been able to turn their basic websites, into a real advertising machine ultimately turning themselves into affiliate marketers. If someone's website is seen by a lot of unique users and receives a lot of page views, becoming an affiliate for a retailer specializing in products related to the website's content can quickly turn a hobby into a real money making enterprise.
Finally, there are some affiliate advertising methods that have become either outdated or offer much lower rewards. In the early days of the internet, it was not uncommon for manufacturers and retailers to pay affiliates simply for posting ads on their personal websites. In fact, some of the amounts offered to such affiliates were truly enormous, ranging in tens of thousands of dollars per month simply for displaying a few banners.
However, this approach of compensating the affiliate simply for getting another person to see the ad quickly exemplified its faults. The high costs of such advertisements did not always translate into new customers, because the reward received by an affiliate was driven by providing ad space and not potential clients. This eventually led to the restructuring of the compensation amounts, with the current rewards for such advertising being typically a few dollars for every one thousand people who see such ad. Therefore, for an internet based affiliate marketer, revenue sharing appears to currently offer much higher rewards.
Source: http://www.streetarticles.com/internet-marketing/what-is-affiliate-and-internet-marketing
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