The basics of affiliate marketing
There are three parties involved in any affiliate marketing arrangement: Sellers, marketers, and customers.
- Sellers provide the goods and services to be promoted.
- Marketers share information online about promoted products and earn commissions for producing sales. They often use their own blogs, websites, and social media accounts for this purpose.
- Customers learn about promoted products from marketers. Customers then choose whether to visit sellers' websites and make purchases.
Affiliate marketing relies on hyperlinks for data tracking and connecting customers with sellers. When marketers introduce, promote, and recommend products, they include unique, seller-provided links. Marketers usually direct customers to follow the link to learn more about the products on sellers' websites.
Those link clicks are tracked, along with any resulting sales. The tracking ties the activity back to marketers so agreed-upon commissions can be paid.
Note that customers may not need to buy immediately for marketers to get credit for the transaction. Sellers will define the time that can pass between link click and purchase. The Amazon (AMZN +0.05%) affiliate program requires the customer to put an item in the cart within 24 hours, for example. Say a customer visits Amazon from a marketer's affiliate link, leaves, and then returns three days later to buy something. In that case, the marketer would not earn a commission on the sale.
Affiliate sales commissions generally range from 2% to 25%, depending on the product and the gross margin it generates for the seller. Amazon pays affiliates a 20% commission on the sale of Amazon Games, but only 2% on grocery, personal, and healthcare items.
