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Before we can talk about affiliate programs, it is a good idea to define exactly what an “affiliate model” is, in web terms.

Using Rappa’s E-Business Classification Models, we can define an affiliate model as the following:

“..the affiliate model provides purchase opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of percentage of revenue) to affiliated partner sites. The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model - if an affiliate does not generate sales, it represents no cost to the merchant. The affiliate model is inherently well suited to the web, which explains its popularity. Variations include banner exchange, pay-per-click, and revenue sharing programs.”

So in layman terms, let others do the legwork when it comes to marketing your product.

An affiliate program allows for you give opportunities for other web savvy people to market your product for you for a percentage of the price for which the product sells for. The normal percentages given out to affiliates can range from 10% to 30% of the selling price of the product. These affiliates act as “salespeople” for your website and take a cut for the sales that they facilitate. It is as easy as that! This is most commonly done by the distribution of free web banners that your company would create and then offer to your affiliates. It is very important to maintain the integrity of your product and the favourable “look” that you wish to maintain. That is why it is a good idea to keep a tight grip on the affiliates websites and always have the right to refuse them entry into your program. This will be discussed further in the following sections.

Another form of an affiliate marketing program is for paying for the amount of click throughs your get to your site through another company site. An example of this is Overture.com. You can pay for certain key words that relate to your site, and anytime that key word is looked up through a search engine and your site is found and clicked on, that company receives that agreed upon price per click-through. These company’s work to optimize your website to place it higher in the search engines, and hence more likely to click through and purchase. This can get quite pricey, as the average click through to buy percentages range from less that 1% to 30%, and prices for key words can range from $.01 to $6.00 A CLICK! This type of marketing should be thoroughly researched before starting and a clear budget should be outlines and ROI numbers evaluated. For certain businesses, it is the only kind of marketing they do and provides them with millions in revenue.