How does affiliate marketing work?

@declan_ritchie 

Affiliate marketing is a performance-based marketing strategy where businesses reward individuals or other companies (affiliates) for driving traffic or sales to their website through the affiliate's marketing efforts. Here's a basic breakdown of how it works:

1. Parties Involved: Merchant/Advertiser: The company or individual selling a product or service that wants to reach new customers. Affiliate/Publisher: The individual or organization that promotes the merchant's products in exchange for a commission. Customer: The end-user who makes a purchase or takes a desired action as a result of the affiliate's marketing efforts.
2. Affiliate Networks (optional): Some affiliate programs are facilitated through a network that acts as an intermediary between affiliates and merchants. The network provides tracking technology, payment processing, and a curated list of affiliate programs.
3. Affiliate Links: Affiliates use unique links provided by the merchant or affiliate network to track their referrals. These links contain identifiers to track customer activity and properly attribute sales or leads to the affiliate.
4. Promotion: Affiliates promote the merchant's products or services through various channels, including blogs, social media, email marketing, or paid advertising. The goal is to drive traffic and encourage potential customers to click on the affiliate links.
5. Tracking: When a potential customer clicks on an affiliate link, they are redirected to the merchant’s site. The affiliate link tracks customer activity using cookies or other technologies to monitor whether a sale or a specific action (like signing up for a newsletter) occurs.
6. Payment/Commission: If the customer completes the desired action (purchase, sign-up, etc.), the merchant verifies the transaction and pays the affiliate a commission. The commission structure can be based on: Per Sale: A percentage of the sale amount or a fixed fee. Per Lead: Payment for getting the customer to sign up or perform another pre-defined action. Per Click: Payment for each click that redirects a potential customer to the merchant’s website.
7. Reporting: Affiliates have access to dashboards that show data on clicks, conversions, and earnings, allowing them to analyze the performance of their marketing efforts and optimize their strategies.

Affiliate marketing can benefit both merchants and affiliates by leveraging the affiliate's audience to make more sales while providing affiliates with a revenue stream. It is often cost-effective since merchants only pay for actual performance (sales, leads, clicks).