Affiliate Marketing: Business Model, Plan & Metrics

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

After reading this lesson, you'll learn what kind of business model and plan will work for an affiliate marketing business. Also, learn how you can measure the level of success you are having with the business.

The Affiliate Marketing Business Model

There are many types of business models out there. In this lesson, you'll learn about the affiliate marketing business model. This business model is one of the ways you can earn passive income. With affiliate marketing, you recommend products made by another company/person and you'll receive a commission whenever someone makes a purchase from your recommendation. It's considered passive income because you set up your business and then you can let it run itself. At its core, you will need time to keep your business updated and a group of loyal followers who can be potential customers. You don't have to actively process orders for the customers because the company that offers the product does this for you. But your recommendations are there, and they become advertisements to potential buyers.

The most common affiliate marketing model involves a website on the internet
affiliate marketing model

The most common affiliate marketing business model involves the use of the internet and a website. Here's a very simplified business model for you.

  • Find a profitable niche
  • Create a website for that niche
  • Recommend relevant products in that niche
  • Continue posting recommendations and useful articles/videos related to the niche

A niche is a topic of interest or a specialized market. You can have fairly large niches or you can have very specific niches. For example, ''dog lovers'' is a big niche while ''dog lovers who feed their pets only raw foods'' is a very specific niche.

Here is an example of the affiliate marketing business model at work.

Anna is starting her own affiliate marketing business. So, she researches some niches and finds out that dog lovers who feed their dogs only raw foods is a pretty profitable niche. This group of people doesn't skimp when it comes to their dog's food. They're willing to search and purchase those raw foods that are of high quality and will benefit their dog's health the most. So, Anna chose this niche for her affiliate marketing business. She then goes and creates a website geared for this group of people. Then, she begins to post informational articles about raw food along with product recommendations. She forms affiliate relationships with various raw dog food companies. These companies provide Anna a special referral link she can post on her site to recommend to others. As soon as more and more people visit her site, she begins to make passive income. Whenever a reader clicks on one of her referral links and makes a purchase, Anna gets paid a percentage of the sale. Anna keeps the business going by continuing to post informational articles along with product recommendations.

The Affiliate Planning

To make this type of business a success, you do need to plan it. You can't just pick any niche. If you pick a niche but the people in that niche aren't big on purchasing things, then your business won't succeed. You have to really research the niche you are interested in to make sure the people in your niche are looking and willing to purchase the products you recommend. Also, you need to plan and research the products you recommend. Don't just recommend any product that you find. It needs to be of high quality. If you recommend poor quality products, your readers will stop listening to your recommendations.

Also, you have to plan for the long term. Affiliate marketing is not a quick scheme for getting rich. This type of business model will not make you a lot of money at the beginning. It takes time to build up an audience, but your income does grow over time. So, you'll have to plan a way to support yourself until your affiliate marketing business grows to make enough income to support you.

Measuring Your Business

Measuring the success of your affiliate marketing business is a bit different than traditional businesses where physical products and services are sold. Instead of measuring the number of sales, you now measure the number of visitors who actually follow through on your recommendations.

Of course, you do have a monthly or weekly income goal. But you also measure just how well your affiliate business is doing by how well it converts readers/viewers into buyers.

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