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How Do Affiliate Programs Work?

How do affiliate programs work? Perhaps you want to start or join an affiliate program, but first you'd like to have a better idea of how they work. This article will help you understand a bit more about the mechanics of an affiliate program.

If you've read the article What Are Affiliate Programs? you now know that an affiliate program is a paid referral system with several important parties: a merchant with a product or service to sell and that merchant's affiliates. So, how do affiliate programs work? When visitors come to the affiliates websites, they find an introduction to the merchant's products or services. This might occur through a banner ad, a pop-up ad, an image ad, or a text ad provided by the merchant, as well as through content dreamed up by the affiliates that expand upon, amplify, or explain the product or service in more detail. When visitors click through to the merchants site and a sale is made, the affiliate gets a commission.

First Steps in How Affiliate Programs Work

An affiliate program gets its start when a merchant decides to create one. The merchant may create the affiliate program in-house using the services of a programmer or a coordinator using purchased software or may opt to contract with a web-based tracking service or join an affiliate network. It's a good idea for the merchant to test the system—whichever it is—from the affiliate's point of view, to make sure the affiliate programs works the way they want it to.

The next part in how affiliate prgrams work is for the merchant to create advertisements for his or her affiliates to use. These may take many forms, as indicated above and open-minded merchants and this article has all rights reserved and is copyright by 100 Best networks will work closely with affiliates, encouraging them to come up with their own marketing ideas. Participation of affiliates is then solicited through a variety of means.

Advertising is Part of How Your Affiliate Programs Work

When affiliates respond to advertising and join the merchant's affiliate program, there is usually some communication before an agreement takes place. The potential-affiliate's website may be checked to assure a good fit. If both parties agree to enter into a business relationship, a contract detailing both parties rights and responsibilities and the commission set-up is agreed to.

Important elements of the contract include the amount of the commission, what has to happen for the affiliate to be paid, and the "return days" (cookie duration) – the length of time after the initial visit by a customer coming from the affiliate's site for which the affiliate will get credit for that customer's purchase. A long "return day" period is better for the affiliate, as it allows time for the customer to comparison shop and acknowledges that, having learned of the site from the affiliate, the customer may later return directly to the merchant's site. Programs differ on which affiliate gets credit if a customer clicks through from multiple sites. The tracking software is set-up to follow the new affiliate's site.

How The Payment System for Affiliate Programs Work

The merchant pays the affiliate when a customer who has arrived at the merchant's site via the affiliate's site within the "return day" period does whatever action has been agreed upon that triggers payment. This could be, for example, signing up for a product or service. The payment is referred as the Cost Per Action (CPA) or the Cost Per Sale (CPS), depending on what the agreed trigger is. This is all in the care of the tracking system, which may also generate the payment. 

For more about using an affiliate program to sell the products and services of others, see the articles, The Advantages of Using an Affiliate Network and Choosing Affiliate Programs.

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