Inspired by David Meerman Scott‘s older (but, nonetheless, genius) post on social media marketing, today I would like to take a stab at explaining affiliate marketing in just 88 words:

• You can strive for visibility in search engines (Search Engine Marketing)
• You can earn attention by creating engaging social content (Social Media Marketing)
• You can bug your customer through email (Email Marketing)
• You can market through mobile devices (Mobile Marketing)
• You can buy text links or banners (Display Advertising)
• You can employ traditional channels (PR, TV, radio, print)

Or you can embrace all of these by starting an Affiliate Marketing program, equipping independent marketers to promote you through all of the above and get compensated on performance basis.

I’ve defined affiliate marketing several times before, but besides the performance basis, it seems that never in my blog have I really underscored something I’ve talked about in my latest book — the fact that affiliate marketing is really not a marketing channel, or a type of marketing. On page 9 of my book you’ll read:

“It exists on the crossroads of all other types of online marketing… It is more appropriate to understand it as a special marketing context, the undergirding principle of which is its performance-based remunerating model. This model works with any time of marketing: display, contextual, video, social media, and other types of advertising, as well as search engine marketing (SEM), email marketing, and other methods. The only difference with the pre-affiliate model is that advertisers post-pay and do it for the actions of their choice, as opposed to pre-paying for the actions of the publisher’s choice.”

Note: in the above quote, advertisers = merchants, vendors, businesses, while publishers = affiliates [more here].

Only one thing must be corrected in the above quote — affiliate marketing now embraces not only the “online” marketing contexts, but also the offline ones (e.g.: radio/TV, print, direct mail, telephone marketing, etc).

When a friend or family member asks you: “So, what exactly is it that you do for living?” what do you reply? How do you explain affiliate marketing to someone who has never heard of it?

I love how Eric Nagel puts it in the header of his blog: defining “affiliate marketer” as one who “makes money by making other companies money.” Eloquent and so true!

One of my personal favorite analogies is an ice cream truck one:

Short Explanation

You’re a kid. It’s a hot summer day. You know that an ice-cream truck passes your neighborhood, but stops on a street just around the corner. You work out a deal with the ice-cream truck driver where he would pay you a 20% commission of every ice-cream sold to the kids that you bring to him. You’re an affiliate/performance marketer now.

Longer Explanation

You’re a kid. It’s a hot summer day. You both possess the knowledge of the ice-cream truck’s route, and have access to and means of influencing the ice-cream truck’s primary target audience. You agree with the ice-cream truck’s driver on a remuneration he would pay you 20% of every sale for every customer you refer to him. The guy is interested in growing his business even more, and agrees to pay you a 30% commission if your monthly referred sales exceed 20, and 40% if you send more than 50 sales/month… So there you have it. We’ve also covered an example of a performance-based incentive.

How do you explain affiliate marketing to friends, family, or someone who has never heard of it?

I am sure, at one point or another, you have you have received a referral marketing type offer from a company you’ve worked with. I certainly have been getting these on an ongoing basis. The most aggressive ones have been those from DirecTV, and they advertise their offer on their website as well:

Last week my propane supplier got into it too, and I received the following flier with my newest AmeriGas bill:

In a sense, affiliate marketing is exactly that (referral marketing): when there is a sale/lead referral, the referrer gets paid. But in most cases affiliate marketing is actually a tad better: it’s not a store (or an account) credit that you get, but real pay/cash. I would therefore argue that it is not the referral marketing that is the most powerful form advertising but affiliate marketing (which may well be treated as your next level/new generation referral marketing).

I see people arriving at my blog in their search for a definition of affiliate marketing. Since I’ve not made any blog posts specifically on this, I have decided to put together one today. Here’s my definition of it:

Affiliate marketing is basically performance-based marketing, whereby affiliates/partners promote a merchant’s product/service and get remunerated for every sale, visit, or subscription sent to the merchant. The most frequently used payment arrangements include: pay-per-sale, pay-per-lead, and pay-per-click compensations. Affiliate marketing is one of the most powerful and effective customer acquisition tools available to an online merchant today. You decide what commission to pay, and pay only when results (sales, leads and/or clicks) are obvious.

Affiliate marketing owes its birth and first developments to CDNow.com and Amazon.com. Back in November, 1994 CDNow started its Buyweb Program — the first online marketing program of its kind at that time. Amazon continued this pattern in July 1996 with its Associates Program. Amazon claims that currently the number of their affiliates worldwide exceeds 1 million associates. (A Practical Guide to Affiliate Marketing, p. 11)

The two main parties involved in the affiliate relationship are the merchant (sometimes also called “advertiser”), and the affiliate (sometimes called “publisher”). There are different ways to run, manage and promote affiliate programs, which involve more parties in the relationship, but the two main participants (without which the existence of the very marketing channel would’ve not been possible) are: (a) the party that has the product (or service), and (b) the party that knows how to sell it.

A year ago, when I ran an ABestWeb contest for the best definition of affiliate marketing, Chris, who ended up winning the first prize, summarized things both eloquently and beautifully. He defined affiliate marketing as “the art of doing a merchant’s marketing better than they can, and profiting from it.” Many successful affiliates (also known as super affiliates) are truly better experts in what they do that most of the merchants that they promote. Consequently, they can market e-tailers’ products/services in such a way that merchants get incremental business, while they themselves make a good living off the per sale commission they get.

If you are reading this post as an online marketer who may want to become an affiliate, feel free to drop me an email and I’ll be happy to guide you. You will find this video of help, but for an advice tailored to your needs, shoot me an e-mail, and I will be happy to find good matches for your website, PPC campaign, or any other online marketing initiative.