Affiliate marketing

As was already described in the introduction chapter, affiliate marketing is an agreement between a merchant and content providers to promote merchants' products or services at their websites. Content providers get paid only if the visitors from their website execute a specified action (Chatterjee, 2002).

Thus, in affiliate marketing, the task of content providers is not only to deliver the advertisement, but also to persuade users to convert to customers. Affiliate marketing is therefore sometimes renamed to performance marketing. (Wikipedia Affiliate marketing,

2007)

According to Libai et al., affiliate marketing can be divided into two groups - One-to-one affiliate marketing and One-to-many affiliate marketing. In one-to-one programs, a merchant signs contract with a chosen affiliate. The terms of the contract are negotiable and do not influence contracts with other affiliates. This type of the affiliate program is used for big players at the market that can attract many new buyers to the merchant's website. (Libai et al., 2003)

When using one-to-many affiliate programs, the merchant sets the same conditions for all affiliates, who can decide, whether they join the program. One-to-many program is usually used, when the merchant cooperates with many affiliates and it would be too costly to negotiate contract terms with all of them. (Ibid)

According to Chaffey, affiliate marketing is particularly beneficial to small websites, as they would not have the chance of selling to major advertisers otherwise. These websites can especially take advantage of affiliate networks. (Chaffey, 2003:344)

Companies can decide to build a private affiliate program at their website or to join third-party networks and use their technological solutions. (Hoffman & Novak, 2000). Affiliate network is "a value-added intermediary providing services, including aggregation, for affiliate merchants and affiliates." (Marketing Terms, 2007)

Although individual programs offer merchants bigger control and possibility to adjust the terms to different affiliates, third-party networks usually provide latest technological solutions and reporting tools and have a wide base of content providers. (Oberndorf, 1999).

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