Micro-Entrepreneurship For Dummies
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With affiliate programs, your micro-entrepreneurial business gets paid a commission when you market someone else’s product or service and they buy it. Through affiliate programs, you can earn extra revenue for your business.

After becoming an affiliate, you simply send emails to your friends and colleagues, promoting the product or service and providing a link where they can purchase it if needed. Affiliates get paid a referral fee from organizations (typically online companies) when that referral results in a sale.

The affiliate doesn’t make the sale; the affiliate simply makes the referral by getting a prospective customer to click on a link. After the prospective customer clicks on the link, she is sent to the web page that does the actual sales pitch. The affiliate earns a commission when the merchant successfully makes the sale.

Keep in mind that although affiliate marketing is about getting paid on product sales, you can get paid as an affiliate in a variety of ways, such as per action or per lead. For the merchant, paying the affiliate on a cost per action (CPA) means that the affiliate gets paid when the potential customer does a particular action, such as filling out a form or providing an email address.

If the prospective customer does buy whatever is offered, the merchant then pays a referral fee to the affiliate. Variations of this type of transaction exist, depending on the merchant that an affiliate works with. Being an affiliate marketer can be a great business for anyone, especially because it usually doesn’t cost anything and because you can do it with little more than a computer and an email address.

Differences between an affiliate and reseller

An affiliate gets paid for making the referral and isn’t responsible for other aspects of the sale (such as customer service or product distribution). On the other hand, a reseller typically buys a product from a source (such as a manufacturer) at wholesale prices and hopes to resell them at higher prices.

The reseller has a more involved role and does get involved in billing, shipping products, and answering inquiries from customers. You can think of it this way: the affiliate pre-sells (makes that introduction between the customer and the vendor), whereas the reseller actually sells.

Pros and cons of being an affiliate

Becoming an affiliate is probably the single easiest home-based online business. Even if you don’t have a home computer, you can do it from a public computer (such as at the library). Here some other reasons to consider affiliation:

  • You usually don’t have to pay anything to become an affiliate.

  • Most affiliate programs want to make sales, so they usually provide guidance and information along with sales tools, such as banners and ad copy for sites and emails.

  • You can do it full- or part-time from home. You get paid for the results you help to produce, not your time.

  • You just have to refer folks to the offer or product/service web page. You don’t have to worry about customer service or administrative support after you make the referral.

    On the flip side, affiliate marketing does have a few downsides that you need to consider before you jump onto the affiliate bandwagon:

  • You still have to sell, because simply hoping that people will click the link and go to the sales page may not work.

  • You need to build a list or find a way to reach an audience of prospects. The most successful affiliates spend a lot of time and effort building their list or garnering targeted traffic.

  • Not all merchants have integrity so you may work hard and not get paid. Other times the product may have flaws.

Types of affiliate programs

There are several types of affiliate payment methods:

  • Single tier: This means that you get paid a percentage of the sale. Commissions typically range up to 50 percent and can sometimes be much more.

  • Two tier: This type means you get paid at two levels:

    • The first level comes from sales that are directly connected to your efforts.

    • The second comes from commissions you get paid on the efforts of your subaffiliates, those individuals who have signed up through you as affiliates.

    If you’re better at recruiting than direct selling, then a two-tier program may be better for you. Another version of the two-tier program is the multi-tier programs (referred to as multi-level marketing or MLM). MLM (also called network marketing) is a marketing system that has multiple levels of commissions, and you can have many subaffiliates.

    In MLM, you can make commissions from direct sales you generate and get paid (an override) on the efforts of others that join due to your efforts as a recruiter. Because MLM is based on many levels of affiliates, you can potentially get override commissions from the efforts of many that are under you (the string of sellers or affiliates under you are referred to as your downline).

  • Residual: This type means that you get an ongoing or recurring commission because the purchased product (or service) is charged on an ongoing basis, such as membership programs that may charge monthly or quarterly fees.

When you choose an affiliate program, select one based on both style and content. Content means you choose based on what is being offered (products and/or services in a niche or topic you’re interested in) and a compensation plan that you like.

All things being equal, as a beginner, choose a product/service you really like with a compensation plan that has two levels (or tiers) or more. If the plan has two or more tiers to it, it means that others in the compensation plan have an interest in helping you succeed. As an inexperienced person, you can get the benefit of working with someone more experienced.

About This Article

This article is from the book:

About the book author:

Paul Mladjenovic is a certified financial planner, micro-entrepreneur, and home business educator with more than 25 years' experience writing and teaching about financial and business start-up topics. He owns RavingCapitalist.com and is also the author of Stock Investing For Dummies.

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