Ever since we had products for sale in the offline world, we had

sales agents. You know the ones - the multi-product travelling

sales "reps" carrying products and business cards from different

manufacturers. They made sales without having to carry inventory,

handle payments, and sign contracts. Their focus was to make the

sale by getting the order, which was then processed by the

manufacturer.

In the online world we now have the same model, with a twist.

Instead of agents we have affiliates. Affiliates are highly

targeted pay-for-performance sales agents which pre-sell your

customer and are paid a commission when the desired event occurs.

The most common reward is pay-for-sale, where the merchant pays

the affiliate who referred the paying customer.

Affiliates are treated as a complementary sales channel. The

merchant still receives their own direct traffic and makes his

own sales in parallel to the affiliate channel. The twist is that

the affiliate doesn't need to handle the order. This is taken

care of by the merchant, who has a tracking system to determine

which affiliate sent the business to them. These tracking systems

typically start with what are called affiliate links, which are

the links that the affiliate puts on their site or in an email.

What's an affiliate link look like? There are several variations,

but most have the affiliate link embedded in the linking URL.

E.g. If you ever see a link like

"www.some_clever_merchant.com/shop/?affid=1232" you can be pretty

sure that the affiliate with id 1232 will receive money from

some_clever_merchant when someone buys after clicking that link.

Other affiliate links are more complex, encrypted, or set up so

that the referring domain is tracked so no affiliate id is even

needed in the link. Some sites will cloak their links so that the

curious surfer can't detect that they have clicked or are about

to click an affiliate link.

Amazon has one of the oldest affiliate programs. The Amazon

Associate program rewards sites whenever someone purchases a book

or Amazon product after being sent to Amazon via an affiliate

link.

Other affiliate business models can be:

• "Pay per click" - the merchant pays the affiliate for the

traffic they send them

• "Pay per lead" - the affiliate sends traffic to the merchant,

where the prospects register their interest and a possible

sale occurs later. The merchant pays for the registration

information - usually some sort of application form on the

merchant's site.

• "Pay per subscription" - the merchant has recurring revenue

from the customer and the affiliate benefits accordingly

Merchants who are new to e-commerce usually don't establish an

affiliate network as the first channel. Like the offline world,

merchants typically build their own sales force first and fine-

tune their sales and marketing strategy before taking on dealers

and independent agents. The key for a new merchant is to ensure

that their e-commerce platform will support an affiliate strategy

later on. For merchants having a well tuned e-business, an

affiliate channel has been shown to add 20-30% to their existing

online sales.

However, it's not a free ride and many merchants end up with

failed affiliate strategies due to their lack of investment in

other related areas. The merchant needs to invest in a tracking

system, which is usually an outsourced affiliate network or an

in-house affiliate software system. Another expense to consider

is having sufficient human resources to recruit, screen, manage,

and motivate the affiliates. Without a good support system in

place, the affiliates will not produce the desired results.

What types of businesses use affiliate strategies? It is usually

any online business that sells products which can be pre-sold by

an affiliate. Service businesses can also benefit from an

affiliate program via a pay-per-lead program. If the service

business has recurring revenue from a customer, they need to

consider if they want the affiliate to receive a recurring

commission - it depends on the industry and what the competition

is doing.

Once a merchant has decided to establish an affiliate strategy,

they need to define the unique aspects of their affiliate

offering. Some questions to answer are:

• What are the benefits to the affiliate?

• What is the competition doing?

• What is the pay-for-performance model?

• What criteria should be used to screen the new affiliates?

• Who will manage the affiliates and motivate them?

• How are the affiliate to be paid and does your e-commerce

system support the accounting required?

• What affiliate management features do I need? Which ones will

differentiate me from my competition?

• What affiliate software tracking system or network should be

used?

An affiliate strategy done right can increase your online sales.

There are over 20 affiliate software packages – hosted, in-house,

and networks to choose from. There are over 200 features in

affiliate software and network offerings. Selecting the correct

affiliate software will depend on your strategy and desired

features. With the proper analysis of your strategy, selection of

the correct affiliate tracking system, and an investment into the

affiliate management resources required you will be well on your

way to boosting your online sales.