I am a fan of affiliate marketing but in my experience many business owners are a little bewildered at how it can work for their business. There are two sides to affiliate marketing, firstly you can drive sales and traffic to your website the other is by actually generating a passive income from your existing website. Let's demystify both options.

Using affiliate marketing to grow your business

Affiliate marketing is basically a referral system where you reward referrers (affiliates) with commission for any business they send your way. For example if I put a link on my website to your online shop and someone clicks through and makes a purchase you would pay me for the referral. The amount you pay is determined by you as the merchant (seller).  You as the merchant can opt to pay per click, per lead or as a % of the sale value and supply a range of banners or text advertisements for me the affiliate to display on my website.

The easiest way to set up as a merchant or seller is to use a network, clixgalore and commission monster are a couple of the larger ones in Australia.  It's one central online location where merchants can load all their banners and links and hundreds of affiliates can access the information and start promoting.  The great thing is that many affiliates are ready and waiting to sell. As a merchant, it's a simple, quick and easy way to drive traffic to your website and its true pay for performance marketing.  No sales = no cost.

Making a passive income from affiliate marketing

If you have a website that has a lot of content and receives good traffic then you might want to consider looking at using affiliate marketing to generate some additional income. The best affiliate websites usually focus on a specific topic i.e. travel, technology, kids, health, parenting, cooking etc. Developing a website around a niche you know, love and are passionate about is the most successful way to affiliate market.  

You simply join a network as an affiliate and then apply to merchant programmes whose products would be of interest to your readers. Once approved you will be offered a selection of banners and text that will help you promote the merchants products. Simply chose the ones you like and you'll be given the code for the banner which includes the tracking link. Once you install the code into your webpage any clicks will be tracked and you'll be paid the nominated commission.

The actual income you make varies depending on the merchant and the products you sell. Typically most merchants pay around 10% commission.  When you sign up for merchant programmes you can see the commission rate offered.  When choosing which products to promote look for merchant websites that offer a good shopping cart and are easy to navigate from product to sale.

The wonderful thing about affiliate marketing is that once you have your content rich websites up and running you will be rewarded with a passive income for the life of the website.  Build a database to market to and you've got even more ways to generate an income.

Leah Squire is the author of "Marketing with No Money... how to get your business the attention it deserves" and founder of internet based travel company www.byokids.com.au, your family travel gurus. Leah started BYOkids just over 3 years ago with $1000 and a marketing budget of zero. The now multi-million dollar company was awarded best new business in Australia 2007 and best micro business in Australia. Leah writes and speaks regularly on a variety of topics including marketing strategies for small business, women in business, affiliate marketing and social media.

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