What is Affiliate Marketing
Affiliate Marketing is a strategy where businesses pay commission to individual or organization for promoting their products or services. It began in1990s through refferal.
Key players in affiliate marketing
1. Affiliate- An affiliate is an individual or company that promotes another company ‘s products or services to their audience and earns a commission for sales generated through their unique tracking link.
2. Merchant- They are also known as adveritsers.A merchant is the organisation or company who increase the sales of a product or service.They take advantage to expand thier reach.
3. Affiliate Network-It is a platform that acts as a middlemen between merchant and affiliate to facilitate m digital marketing partnership.
4. Consumers- A consumer is aperson who completes a desired action such as to purchase a product or signup in a service.
Models
1.Cost per action(CPC)- is a pricing model where advertisers pay when a specific action is completed like purchase, app install, or sign-up. It’s a performance-based model that ensures advertisers pay for actual conversions and traffic.
cost per action = Total marketing cost/number of action
2.Cost per lead(CPL)- It measures how much is the cost to acquire a potential customer (lead) through marketing efforts. A lead is typically someone who has shown interest by filling out a form, subscribing to a newsletter, or requesting a quote.
CPL= Total campaign spend/number of leads generated
3.Cost per click(CPC)-Cost per click is the amount an advertiser pays each time a user clicks on their ad. It’s commonly used in Pay per click models like Google Ads or Facebook Ads.
CPC= Total ad spend/total clicks
- Example: Spending ₹2,000 for 500 clicks results in a CPC of ₹4.
CPC is a key metric for driving traffic and is influenced by factors like keyword competition, ad quality,etc
4.Cost per sale (CPS)-It is also called as cost per conversion .It is used in ecoomerce and paid advertising.
CPS=Total marketing and sales cost / no of sales
Example:
If a company spends ₹50,000 on a campaign and generates 250 sales:
- CPS = ₹50,000 ÷ 250 =Rs. 200 per sale
This means the company pays ₹200 in marketing costs for each sale it earns.
Why Cost per sale(CPS) matters?
Measures ROI: CPS shows how efficiently your ad spend converts into actual revenue.
Budget Optimization: Helps identify which campaigns or channels are most cost-effective.
Performance Benchmarking: You can compare CPS across different campaigns, products, or time periods.
Affiliate Marketing: In CPS-based affiliate programs, affiliates are paid only when a sale occurs, making it a low-risk model for advertisers.
| Metric | What It Tracks | When to Use |
|---|---|---|
| CPC (Cost Per Click) | Cost per ad click | When driving traffic is the goal |
| CPL (Cost Per Lead) | Cost per lead generated | For lead generation campaigns |
| CPA (Cost Per Action) | Cost per specific action (sale, sign-up, etc.) | For performance-based campaigns |
| CPS (Cost Per Sale) | Cost per completed sale | When revenue is the primary goal |
How to Reduce CPS
- Improve conversion rates with better landing pages and CTAs
- Target high-intent audiences using refined ad targeting
- Optimize ad creatives to increase engagement
- Use retargeting to convert warm leads
- Test and iterate campaigns to find the most effective strategies.
SMART
1.Specific:Target a small segment of the market.(e.g. bamboo chopper made for eco friendly consumers.)
2. Measurable:Track key performance indicators like Return On Ad spend like 4:1.
3.Relevant:Update your goals with your business strategy and market trends.(ex: promote a outline and shape of garment ).
4.Achievable:Set realistic goal according to budget and resources.Ex: promoting an affordable bamboo chopper.
5. Timely: Set deadlines like by jan 1,2026 i have to write two post on affiliate marketing.