Affiliate marketing has become increasingly popular in recent years. Alongside SEO, PPC, PR, content marketing and linkbuilding, it is now arguably an essential part of performance marketing. 

But, is it something you should get involved in? And how does the process work? Let’s take a detailed look, starting with the very basics. 

What is Affiliate Marketing? 

Affiliate marketing involves an individual (known as an affiliate) earning commission by promoting a company’s product or services to their followers, readers or viewers.  

Each affiliate is given their own unique tracking link and they’re guaranteed a payout for each sale generated via that link. As the company can track exactly how many products each of their affiliates has sold via each unique link, they can see who the top performers are and end relationships with any affiliates who are not providing value. 

The most popular form of affiliate marketing is influencer marketing. If you log onto Instagram and see your favourite influencer recommending a product and telling you about an exclusive link, the brand they’re representing is using affiliate marketing to sell products. 

But, affiliate marketing also takes place on blogs, videos, lists and reviews. You may see affiliate links on things like blog posts advertising the ‘top 10 providers’ of a certain service or product. 

Read: How much do you make from affiliate marketing?

How Does Affiliate Marketing Work? 

All affiliate schemes are different. For example, while a company that sells makeup may approach influencers on Instagram and ask them to share Reels about the products and promote them, a company selling software may instead approach a blog owner/review site and ask them for coverage. 

However, generally speaking, the majority of affiliate marketing partnerships are formed and run using this structure: 

  1. The Affiliate Chooses a Product or the Business Selects an Influencer 

In order for an affiliate marketing partnership to form, one party needs to approach the other and suggest a collaboration. 

Normally, this involves a company selecting people who they believe would be a good representative for their brand. Obviously, this can take many different forms based on the product or service on offer. For example, someone offering a SaaS product will likely reach out to bloggers and reviewers and ask for their product to be included in a ‘best of’ list, while clothing brands will approach Instagrammers and popular TikTok accounts. 

On occasion, an influencer with a large following may approach a brand they’re already fond of and ask them if they’d be willing to engage in a partnership. 

  1. A Payment Structure is Confirmed 

If it’s believed that the partnership will be mutually beneficial, payment terms will be discussed. 

With the majority of affiliate marketing, payment involves either a fixed fee for each sale/signup or a percentage of the basket value. However, some affiliates are instead paid each time someone clicks on a link (regardless of whether they convert) and a small minority are paid simply to post about the brand and promote the link. It’s also possible that the affiliate is paid in free products. 

  1. An Affiliate Link is Provided 

No matter what the payment structure, the affiliate is provided with their own unique link that they need to promote and include in their content. 

Remember, how this link is included within content could take many forms. It could be embedded within an Instagram bio, added to an X post, shared via email or included within a blog post or list.  

  1. The Customer Clicks and Makes a Purchase 

At this stage, the company’s target customers should be viewing the content that has been created by the affiliate. If the partnership is authentic, this will generate sales. 

Convinced by the affiliate’s words or video, a customer will click on the unique link and make a purchase. 

  1. The Affiliate Earns Commission 

After a predetermined period of time (usually a month), the company will report on affiliate performance and look at how many sales each of their affiliate partnerships has generated. 

They will then pay each of their affiliates the agreed amount of commission, based on the number of sales they generated through their unique code. 

How Affiliate Marketing Works: The Final Word 

When set up correctly, affiliate marketing works well for both the business in question and the affiliate. 

For affiliate marketing to work for both parties, a special link with a unique identifier must be used. If not, it’s impossible for the company to track which affiliate referred each customer. 

Added to this, the business and the affiliate must both ensure that they’re entering into genuine relationships that will be mutually beneficial. If the product/service promotion appears unnatural (like a beauty blogger suddenly recommending a VPN), then customers will be turned away. 

Finally, for the partnership to truly flourish, both parties need to make money. For this reason, it’s usually best to agree to pay the affiliate a fixed percentage of basket value per transaction generated via their link. If required, this commission rate can fluctuate based on performance in order to incentivise the affiliate. 

Keep the above in mind and you should have no problem creating an effective affiliate marketing programme for your company.