Imagine scrolling through your favorite YouTuber’s latest video review of a sleek new laptop. Below the video, you notice a link with a promise: “Get $200 off using my special code!”
You click, buy the laptop, and your favorite creator earns a commission – without it costing you an extra penny.
Welcome to affiliate marketing, a digital partnership that’s transforming how products are sold online.
In this ever-evolving digital marketplace, everyone from tech reviewers to travel bloggers is turning their influence into income, one click at a time.
In this post, I’ll explore how affiliate marketing works and whether you could be part of it too. Let’s discuss the affiliate marketing process in detail.
Disclaimer: If you buy any products through links on this site, I may earn a commission. But it doesn't make any difference to your cost, and it helps me keep this blog running. So you could always read my articles for free.
What is affiliate marketing?
If you want to learn affiliate marketing basics, you need to think of affiliate marketing as your digital sales career, minus the awkward door-to-door pitches. When I first stumbled into this field, I was building websites for clients.
But instead of just designing websites, I started giving my clients choices on what kind of hosting, page builders, templates, and plugins they could use.
If they were not sure, I also recommended the ones I have used and knew to be suited to their requirements.
As I did, I realized that the companies behind these products had a way to pay people who recommended them. And that way is affiliate marketing.
How affiliate marketing works is that you partner with companies like Amazon, Shopify, or Coursera to promote their products or services. Each time someone buys through your unique tracking link, you earn a commission.
For instance, when promoting Bluehost hosting services, you could earn around $65 per sale, while Amazon typically offers 1-10% depending on the product category.
Why is this better than selling your own products? Because, unlike traditional sales, the affiliate marketing process doesn’t require you to stock inventory or handle customer service.
As you can see from my example, success in affiliate marketing comes from being genuinely helpful rather than pushy.
When I recommend something, I share both pros and cons, just like I would with a friend.
Over the years, this approach has helped me build trust with my audience while earning consistent commissions, turning my passion for small business and entrepreneurship into a reliable income stream.
How affiliate marketing works
While not a get-rich-quick scheme, affiliate marketing is a legitimate way to monetize your online presence.
How affiliate marketing works at its core is by using a simple tracking system. You sign up for affiliate programs, get unique links, and share them with your audience.
When someone clicks your link and makes a purchase, you earn a commission. To understand the affiliate marketing process, you can think of it like being a virtual salesperson for multiple stores simultaneously. Affiliate marketing involves the following key activities:
Finding the right affiliate programs
Your journey will probably start with Amazon Associates, the most beginner-friendly program. While their commission rates are modest (usually 1-10%), they offer millions of products to promote.
Later, you can expand to more specialized programs. For instance, Bluehost offers up to $65 per referral, while software companies like Semrush provide recurring commissions of around 40%.
For more information, take a look at this guide on how to find an affiliate program in your niche.
Setting up your promotional channels
Sharing links is a part of how affiliate marketing works, and to do this, you’ll need a platform. For example, I started with a simple WordPress blog. Other popular channels include:
- YouTube (like Tech reviewer MKBHD promoting dbrand skins)
- Instagram (think fitness influencers promoting Gymshark)
- Email newsletters (Morning Brew promoting trading platforms)
- Niche websites (like Wirecutter reviewing products)
Tracking and managing your links
Most affiliate networks provide dashboards to track your performance. For example, when I promote products through Commission Junction (CJ), I can see:
- Click-through rates
- Conversion rates
- Earnings per click
- Total commission earned
I also use link management tools like Pretty Links in my affiliate marketing process to make tracking links more user-friendly and manageable.
To learn more, check out this post on tracking affiliate links.
The payment structure
Commission structures vary widely. From my experience:
- Amazon pays 1-10% depending on product category
- Digital products often offer 30-50% commission
- SaaS companies might pay 20-40% recurring commission
- Travel booking sites typically offer 2-6% per reservation
For more details, read this guide on understanding the affiliate program commission structure.
Maintaining transparency and trust
The key to long-term success is honesty. I always disclose my affiliate relationships and only recommend products I’ve personally used or thoroughly researched.
For example, when I promote Ahrefs SEO tools, I share both its strengths (comprehensive backlink analysis) and limitations (steep learning curve).
Remember, how affiliate marketing works isn’t about pushing random products – it’s about connecting your audience with solutions they actually need.
Being familiar with the affiliate marketing process, I can tell you my most successful promotions have always been products that genuinely helped solve my readers’ problems.
For more information, check out this post on building trust in affiliate marketing.
Affiliate marketing benefits for merchants
As someone who’s managed affiliate programs for several e-commerce brands, I’ve been well-versed in affiliate marketing basics and seen firsthand how this marketing model can transform a business. Let me share what makes it particularly attractive for merchants.
Pay for performance only
The way traditional advertising works is quite different from how affiliate marketing works. In advertising, you pay upfront, but affiliate marketing follows a commission-based model.
When I ran the affiliate program for a fitness equipment brand, we only paid our partners when they generated actual sales. This significantly reduced our financial risk compared to our previous Facebook ad campaigns.
Expanded market reach
The role affiliate partners play in the affiliate marketing process is quite important. They help us reach audiences we never could have accessed on our own.
One of our partners, a yoga instructor with 50,000 Instagram followers, introduced our yoga mats to an entirely new demographic we hadn’t tapped into before.
Brand credibility through word-of-mouth
When authentic creators recommend your products, it carries more weight than traditional advertising.
For example, when working with a client, our sales increased by 40% after a well-known fitness blogger gave our resistance bands a detailed review.
Cost-effective scaling
With most marketing efforts, scaling means increasing your ad budget. But with affiliate marketing, you can partner with hundreds of content creators without any upfront investment. Each new partner essentially acts as an additional sales team member, working on commission.
Remember though, success requires providing your affiliates with proper tools and maintaining transparent communication about commission rates and payment terms.
Affiliate marketing benefits for affiliates
If you plan to make money online, affiliate marketing could be the perfect solution, offering several key advantages I haven’t found elsewhere.
Low startup costs
Unlike launching an e-commerce store, affiliate marketing requires minimal investment.
For example, you can start with just a $100 budget – covering your expenses to build an affiliate website or blog. No inventory, no shipping headaches, and no customer service to manage.
Flexible work arrangement
The beauty of being an affiliate marketer lies in its flexibility. You’ll have to put in a lot of time in the first few months; that’s how affiliate marketing works in the beginning. But after that, you can enjoy a flexible schedule.
You can have the luxury of writing reviews and creating content when it suits you. Some weeks you may spend 30 hours, others just 5, yet your affiliate links continue generating income.
Multiple income streams
With affiliate marketing, you’re never limited to one product or company. You can promote multiple merchants at the same time.
For example, if you are an affiliate marketer in the personal finance niche, you can promote Wealthfront for investment advice, Credit Karma for credit monitoring, and Personal Capital for budgeting tools. Each partnership adds another revenue stream to your business.
Build valuable skills
In addition to earning commissions, you will develop valuable skills with affiliate marketing. From SEO and content writing to email marketing and analytics, these skills are central to how affiliate marketing works and can open up opportunities you never expected.
For example, Brian Jackson and Kyle Byers both had successful blogs in the WordPress and marketing space, before they were hired for senior roles in Kinsta and Semrush.
Just remember – success doesn’t happen overnight. It took me six months to earn my first $100, but the learning experience was worth every minute.
Challenges of affiliate marketing for merchants
While affiliate marketing offers many benefits, running an affiliate program comes with significant challenges that merchants need to consider carefully.
Having managed affiliate programs for several years, I’ve encountered numerous obstacles that can impact both profitability and brand reputation.
Limited control over brand representation
When you work with affiliates, you essentially put your brand’s reputation in their hands; that’s just how affiliate marketing works. Even with clear guidelines and policies, affiliates may misrepresent your products or use inappropriate marketing tactics.
For example, when working with a client, one of our biggest headaches came when an affiliate started making unrealistic claims about our accounting software, promising “instant profits” to their audience.
Commission costs add up
While paying for performance sounds ideal, the cumulative cost of commissions in the affiliate marketing process can significantly impact your profit margins, especially for high-ticket items.
Beyond the basic commission structure, you’ll need to factor in network fees, transaction costs, and administrative expenses.
For example, when running our program through Commission Junction, we once paid not only the 15% affiliate commission but also network fees and transaction costs, meaning a $1000 sale could cost us nearly $180 in total fees.
Potential for fraud
Fraud remains a persistent challenge in how affiliate marketing works. Dishonest affiliates may employ various deceptive practices, from click fraud to cookie stuffing, leading to unearned commissions.
For example, we once discovered an affiliate using automated tools to generate fake clicks and sales, highlighting the importance of robust fraud detection systems.
Complex tracking and attribution
Modern customer journeys rarely follow a straight path, making proper attribution increasingly challenging in the affiliate marketing process. Customers often interact with multiple marketing channels before making a purchase, raising questions about fair commission distribution.
When multiple affiliates claim credit for the same sale, you need clear policies and sophisticated tracking systems to ensure fair compensation.
Remember, while these challenges exist, they’re manageable with proper planning, monitoring systems, clear program policies, and a good grasp of affiliate marketing basics.
The key lies in understanding these potential pitfalls before launching your program and implementing appropriate safeguards from the start.
Challenges of affiliate marketing for affiliates
While affiliate marketing offers attractive benefits, it comes with several significant challenges that can impact your success and sustainability as an affiliate marketer.
Intense competition
The low barrier to entry means you’ll face stiff competition in almost every niche. You will find yourself competing with established influencers and websites that have been building their authority for years.
Popular niches like personal finance and tech reviews are crowded with thousands of affiliates promoting similar products.
Lack of control over products and terms
As an affiliate, how affiliate marketing works for you depends a lot on the merchant’s decisions. I learned this the hard way when Amazon suddenly reduced their commission rates in 2020 – my earnings from tech product reviews dropped from 8% to 3% overnight.
In another example, Netflix once had a lucrative affiliate program, which was shut down abruptly, leaving affiliates struggling to make ends meet.
Similarly, merchants can modify their products, change prices, or even discontinue items without notice.
Delayed gratification
Building a sustainable affiliate income takes significant time and effort. In my first six months of blogging, I invested 40+ hours weekly creating content but earned less than $100 in commissions.
Many new affiliates give up before gaining traction because they underestimate the time investment required.
Revenue fluctuations
Income can be unpredictable due to seasonal trends, changing consumer preferences, and market conditions. For example, your sales may rise significantly during the holiday season, only to drop significantly when it’s over.
Understanding these challenges helps you approach affiliate marketing with realistic expectations and develop strategies to overcome them.
Final thoughts on affiliate marketing process
The affiliate marketing process is a powerful and efficient way to promote products and earn commissions.
By understanding the process, from choosing a niche to generating sales, individuals can leverage affiliate marketing to achieve their financial goals.
With the right strategy, tools, and mindset, affiliate marketers can build a successful online business. It’s essential to stay up-to-date with industry trends, best practices, and platform policies to maximize results.
By doing so, affiliate marketers can unlock the full potential of this lucrative online opportunity and achieve long-term success.
Did I miss anything in this post on how affiliate marketing works? Did you try these tips? Do you have any questions or comments? Share your thoughts below in the comments section.
