Affiliate marketing operates on a performance-based model, where a merchant rewards affiliates for generating visitors, customers, or sales through their affiliate link or referral. Here’s how it works:

1. Merchant sets up an affiliate program: The merchant establishes an affiliate program, assigning unique affiliate links or tracking codes to each affiliate.

2. Affiliate promotes the merchant’s product or service: Affiliates promote the merchant’s offerings through various channels like websites, blogs, social media, or advertising.

3. Customer clicks the affiliate link: When a customer clicks on the affiliate link, they’re directed to the merchant’s website.

4. Customer completes a purchase: If the customer makes a purchase on the merchant’s website, the sale is tracked using the affiliate link or tracking code.

5. Affiliate earns a commission: The merchant compensates the affiliate with a commission for the sale or conversion generated through their referral link.

Commissions can be a percentage of the sale amount, a fixed sum per sale, or a combination. Typically, commission rates and program terms are set by the merchant.

Affiliate marketing benefits both parties. Merchants gain exposure to new customers and pay solely for results, while affiliates earn income by promoting products or services without the need to create or own them.