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What is Profit Sharing?
Profit sharing is when a company develop a policy that gives employees a portion of the company's profits. This can be paid out in cash,
company stock, or some other form of a qualified planed contribution. When a company share it's profits, it works to motivate and encourage
loyalty to the company from either employees or affiliates who work to promote the copmpany.
Companies can choose to give the same percentage of profits to every individual worker (affiliate), regardless of income generated, or, the
company may calculate profit sharing using a percentage method, where each affiliate's compensation is divided by the total compensation.
Profit Sharing in affiliate marketing
Profit sharing in affiliate marketing is where affiliates earn a percentage of the revenue generated from sales or leads they help produce for a merchant.
This is a form of revenue sharing where the affiliate's commission comes from the price of the product with no added cost to the consumer.
Essentially, the affiliate promotes the products or services provided by the merchant, and when they make a sale or other desired action (like a sign-up),
the affiliate receive an agreed upon percentage of the revenue generated.
Affiliate Promotion: The affiliate can use various methods to promote the merchant's products. Some common methods are: blog posts, social media,
email marketing, free and or paid advertising. Each affiliate is provided with a unique tracking link. This specific code is used to track the referrals
and sales action. When the potential customer clicks on the affiliate's link and completes a purchase or desired action such signing up for a service,
the merchant can track the contribution of the affiliate. The merchant then pays the affiliate a Commission Payment, the pre-agreed percentage of the
sale or a fixed amount for the specific action.
The Key Concepts of Revenue Sharing in Affiliate marketing is that the revenue is fundamentally shared with the affiliate. Thus, the profit is shared
between the merchant and the affiliate. This is a No Risk, No Ownership way for an affiliate promote which they did not have to create, and they don't
have to handle inventory. This allows for flexibility for both merchants and affiliates by allowing them to choose partners and programs that align with
their goals. It is also a cost-effective way for the merchants to reach a wider audience and generate sales because they only pay when a successful
conversion occurs.
Note: the affiliate will earn a commission for each sale generated through their unique link.
The affiliate receive a percentage of the ongoing revenue generated from the customer which they referred to the merchant (Shared Revenue).
Now consider a blogger who partner with a supplement company through an affiliate program, then review and promote a fitness product on their website.
The blogger includes an affiliate link in their review.
When a reader clicks the link and purchases the product, the blogger earns a commission on that sale.
Therefore, profit sharing in affiliate marketing is a mutually beneficial arrangement where affiliates promote products or services in return
for a share of the revenue generated. The affiliate is contributing to the merchant's overall sales and marketing efforts which the merchant is
happy to pay the affiliate a portion of the earned revenue.
