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The affiliate marketing business mainly involves a relationship between two actors namely the merchant and the affiliate. The merchant offers the products for sale, and the affiliates act to sell the product for the merchant and refer visitors to the merchant website. In return, the merchant pays the affiliates a commission for the contracted results or sales. The payment arrangements are normally structured as Pay Per Sale (PPS), Pay Per Click (PPC) and Pay Per Lead (PPL).

Types of affiliate Marketing

Affiliate marketing programs can be divided into four distinct classes. They include:

  • Residual income programs
  • Multi-tier affiliate programs
  • Two-tier affiliate programs
  • Single-tier affiliate programs

Residual Income Programs

In residual income affiliate marketing, the affiliate gets a commission for every sale that is made by the person referred by him. For this to work properly, the first time, the person should come from the affiliate’s pre-determined link. Then, whenever that person visits the merchant website (even without using the affiliate link), the affiliate will earn a commission for every sale they make.

Multi-Tier Affiliate Marketing

Multi-tier marketing is very similar to two-tier marketing; however, the affiliates get paid a commission for the sales made by their referred affiliates. Therefore, the affiliate gets paid if their affiliated affiliates get paid too.

Two-Tier Affiliate Programs

In two-tier affiliate marketing, the affiliate earns a commission for every action performed by the people he or she has directly referred to the merchant’s site. They can also get an additional commission when one of those people they personally referred gets paid. It is for this reason why this type of affiliate marketing is known as a two-tier affiliate program, since the affiliate earns a commission both directly and indirectly.

Single-Tier Affiliate Programs

In single-tier affiliate marketing, the affiliate earns a commission, only for driving sales or visitors to the merchant’s site. The payment arrangement is usually performance based and structured as a pay per click.

These are just some of the essential details on how affiliate licensing programs work. It is important you understand the type of affiliate marketing you are practicing, so as to develop the appropriate marketing strategies.