Affiliate marketing is also known as pay per performance, is the setting up your own affiliate program in-house or using a 3rd party network can be an excellent way of generating sales with the added bonus you only pay out per lead or per sale.
By making a series of banners and/ or text links available to other sites they are able to advertise your product and service to their visitors and drive traffic to your site. Tracking software monitors where your sales/ leads can from and you pay the referrer for per conversion. A common acronym used is CPA (Cost Per Action).
In-house or a network?
Setting up on a 3rd party network such as Commission Junction or TradeDoubler requires a significant financial commitment through network fees and a deposit to cover future commission. However, you do get access to a large base of affiliates and all the technical aspects (tracking and reporting etc) are dealt with for you.
If you decide to go for an in-house solution there are a lot of affiliate software solutions to pick from and they are a far cheaper option than the networks. However you will have to manage all technical tracking queries and the number of possible affiliates will be much lower.
Why should people advertise your site?
You should view your affiliate program as being in competition with all your direct and indirect competitors’ affiliate programs for maximum exposure on affiliate’s websites. With this in mind give affiliates a strong reason to first list your site and second to list it prominently. Affiliates like high commission rates, personal contact and competitions related to earning more money e.g. “March’s top seller earns 50% more commission” etc.