What is affiliate marketing? How it works, step by step

Affiliate marketing in one sentence

Affiliate marketing is a simple agreement: someone recommends what you sell, and when that recommendation brings a sale, you pay them a commission. You do not pay for an audience or for a click, you pay for a result.

That is what sets it apart from advertising. An ad is paid for before you know whether it brought anything; an affiliate commission is paid afterwards, and only on what was sold. The risk changes sides: the affiliate puts in their time and their audience, the merchant puts in a share of sales they would not have had without them.

Three players: the merchant, the affiliate, the buyer

• The merchant sells a product or a service — subscription software, a course, an online store — and decides what they pay for a recommended sale.
• The affiliate recommends: a content creator, a niche blog, a consultant, a newsletter, or simply a happy customer. They get a link or a code carrying their name.
• The buyer follows that link or enters that code, and buys at the same price as anyone else — sometimes less, when the code carries a discount.

Between the three you need a tool: something that knows, at the moment of payment, who brought the buyer. That is the job of affiliate software.

How a sale is tied to its affiliate

Three signals connect a sale to the person who recommended it, and a good program uses all of them.

• The link. The buyer clicks the affiliate's link; a cookie is set, and the sale that follows within the attribution window goes to them. At Meritt that window is sixty days by default, adjustable per plan and per affiliate.
• The discount code. The buyer enters the affiliate's code at checkout. There is no click and no cookie: the payment system says which code was used, and the sale is credited.
• The customer. Once the first sale is attributed, the customer is tied to their affiliate. Subscription renewals follow with no cookie, on every device.

The link is the most fragile of the three when it runs through a domain ad blockers know. That is why Meritt serves links from the merchant's own domain: a link that looks like a page of your site has nothing to block. The article on ad blockers details the mechanism, and the one on the attribution window what really lasts over time.

Ways to pay an affiliate

The commission is set per plan, and a program can have several: one for creators, one for partners, one for customers who refer.

• A percentage of the sale, the most common. It can be computed on the amount paid, or on the amount net of payment fees and taxes.
• A fixed amount per sale, when the basket is always the same.
• Recurring, lifetime or limited for a subscription: the affiliate earns their share on every renewal, forever or for a set number of months.
• Sub-affiliation: an affiliate who recruits others earns a share of their sales, without reducing theirs.

Paying affiliates

A sale can be refunded. That is why a commission is not payable the same day: it waits for a validation period to end, covering the time during which a buyer can ask for a refund. After that, it joins the next payout batch.

The payout itself leaves a merchant's account for the affiliate's. With Meritt, funds go from your PayPal or Wise account to the affiliate's, never through us, and every payout has its document: a self-billed invoice in the affiliate's name if they agreed to it, a receipt otherwise. The article on affiliate invoices explains who issues it, and why.

Affiliates, referrals and influencers

The three words describe the same mechanism, with a different audience.

• Affiliate marketing is aimed at people who publish: sites, channels, newsletters.
• Referral programs are aimed at your customers, who recommend to people they know.
• Influencer marketing is aimed at creators, often with a discount code in their name.

One tool can run all three, on plans with different terms. See the page on referral program software.

Where to start

An affiliate program comes down to four decisions: what you pay, on which terms, with which tool, and who you offer it to first. The guide on how to start an affiliate program takes them in order, from the commission plan to the first payout.

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