Page 231 - Electronic Commerce

Chapter 4

entrants to identify unserved market segments and attain dominance. A tool that many
new, low-budget Web sites are using to generate revenue is affiliate marketing. In affiliate
marketing, one firm’s Web site—the affiliate firm’s—includes descriptions, reviews,
ratings, or other information about a product that is linked to another firm’s site that
offers the item for sale. For every visitor who follows a link from the affiliate’s site to the
206 seller’s site, the affiliate site receives a commission. The affiliate site also obtains the
benefit of the selling site’s brand in exchange for the referral.
The affiliate saves the expense of handling inventory, advertising and promoting the
product, and processing the transaction. In fact, the affiliate risks no funds whatsoever.
Amazon.com was one of the first companies to create a successful affiliate program on the
Web. Most of Amazon.com’s affiliate sites are devoted to a specific issue, hobby, or other
interest. Affiliate sites choose books or other items that are related to their visitors’ interests
and include links to the seller’s site on their Web pages. Books, music, and video products
are naturals for this type of shared promotional activity, but sellers of other products and
services also use affiliate marketing programs to attract new customers to their Web sites.

Affiliate Commissions
Affiliate commissions can be based on several variables. In the pay-per-click model, the
affiliate earns a commission each time a site visitor clicks the link and loads the seller’s
page. This is similar to the click-through model of charging for banner advertising, and the
rates paid per thousand click-throughs are similar to those paid for banner ads.
In the pay-per-conversion model, the affiliate earns a commission each time a site
visitor is converted from a visitor into either a qualified prospect or a customer. An
example of a seller that might use the qualified prospect definition is a credit card-issuing
bank. The bank might decide that its best strategy is to pay affiliates only when the visitor
turns out to be a good credit risk. Alternatively, the bank might decide it wants to pay the
affiliate only if the visitor is approved for the card and then accepts the card (completes
the sale). A site that pays its affiliates on completed sales usually pays a percentage of the
sale amount rather than a fixed amount per conversion. Some sites use a combination of
these methods to pay their affiliates. Commissions on completed sales range from 5 percent to
20 percent of the sale amount, depending on variables such as the type of product, the strength
of the product’s brand, how profitable the product is, and the size of an average order.
You can learn more about affiliate programs by visiting an affiliate program broker site
that offers affiliate program opportunities for a number of Web sites. An affiliate program
broker is a company that serves as a clearinghouse or marketplace for sites that run
affiliate programs and sites that want to become affiliates. These brokers also often provide
software, management consulting, and brokerage services to affiliate program operators.
Rakuten LinkShare and Commission Junction are two popular affiliate program brokers.
Other companies offer affiliate program brokering along with other marketing services.

Cause Marketing
One of the more interesting marketing approaches made possible by the Web is cause
marketing, which is an affiliate marketing program that benefits a charitable organization
(and, thus, supports a “cause”). In cause marketing, the affiliate site is created to benefit

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