Most individuals and businesses who are new to affiliate marketing don't know what major key terms mean.

You might not realize it yet, but not knowing what these terms mean can cost you a lot of money because a lack of understanding can cap your earnings as an affiliate.

And if you're a business, it can also limit the way you make the most out of your affiliates to increase your sales.

Now that we know that it applies in both ways, if you’re new to affiliate marketing (business or individual) and you are trying to undertand what these terms are to expand your understanding and make more money or sales, then you've come to the right place.

Table of content

• Core concepts
• Performance Metric concepts
• Tracking & Attribution concepts
• Conversion & Optimization concepts
• Platforms & Infrastructure concepts

Before we get right into it, if you're a merchant on Shopify who's starting affiliate marketing from scratch, our step-by-step guide to launching an affiliate program on Shopify walks through how most of these terms apply in practice.

It's also worth knowing the common mistakes that quietly cost beginners money before you launch.

Core concepts

These core concepts are the foundational ideas of how affiliate marketing works.

1. Affiliate Marketing: A performance-based marketing model where individuals (affiliates) earn a commission by promoting a company’s products or services.

2. Program template: A set of rules/settings such as commission percentage, custom commission rules for certain products or collections, coupon system, program progression or even turning it into a Multi-level-marketing program (see Programs guide)

3. Affiliate Network: A platform that connects businesses with affiliates and manages tracking, reporting, and payments.

4. Merchant (Advertiser): The business that creates and owns the product or service being promoted.

5. Affiliate: An individual or company that promotes a merchant’s product or service in exchange for a commission.

6. Referrals: Users or customers who are directed to a product or service through an affiliate's promotional efforts.

7. Self-Referrals: The practice of an affiliate attempting to earn commission by purchasing through their own affiliate link. Most platforms (including Affilitrak — see the Settings guide) include controls to block this.

8. MLM (Multi-Level Marketing) Program: A marketing model where participants earn commissions not only from their own sales but also from the sales generated by people they recruit into the program. The Programs guide covers how MLM/network programs are configured.

Performance Metrics concepts

These concepts deal with how success and effectiveness are measured in affiliate marketing.

1. EPC (Earnings Per Click): A metric that shows the average earnings generated per click on an affiliate link.

2. CTR (Click-Through Rate): The percentage of users who click on an affiliate link compared to how many people saw it.

3. Monthly Revenue: The total amount of revenue generated within a one-month period from affiliate-driven traffic or conversions.

Tracking & Attribution concepts

These concepts are used to define how performance is measured by merchants and credited to affiliates.

1. Affiliate Link: A unique tracking URL assigned to an affiliate to monitor traffic and conversions.

2. Affiliate cookie: s a string of text that acts as a tracking system which is stored in the browser of whoever clicks an affiliates.

3. Cookie Duration: The time period during which an affiliate can earn commission after a user clicks their link. (Deep dive: how cookie duration affects earnings). On Shopify, 30 days is the default most programs never change, and it captures 96.8% of attributable orders.

4. Coupon code: A unique promotional code assigned to an affiliate that tracks conversions and attributes sales when used during checkout. Coupon templates and per-affiliate codes are managed inside Programs.

5. Affiliate Portal: A centralized dashboard or interface where affiliates can access links, track perfomance, view commissions and manage their activity within an affiliate program.

Conversion & Optimization concepts

These are elements that directly impact whether traffic turns into revenue.

1. Commission: The monetary reward paid to an affiliate for generating a specific action, such as a sale, lead, or click. 10% is the most common Shopify rate we measured.

2. Commission Structure: The way affiliates are paid for their performance. (How to design one in Affilitrak.)

3. Landing Page: A standalone webpage designed to convert visitors into customers or leads. Affiliates still send 54.2% of Shopify referral visits to the homepage rather than a product or collection page.

4. Royalty mode (Revenue Share): A commission model where affiliates earn ongoing payments for as long as a referred customer continues to generate revenue.

5. Program Ladder: A tiered reward structure within an affiliate program where affiliates earn higher commissions or benefits as they reach specific performance levels. (How ladders work in Affilitrak.)

6. Product Discounts: Price reductions applied to specific products to incentivize purchases and improve conversion rates.

7. Order Discounts: Discounts applied to the total value of a customer's order, often based on conditions such as minimum spend.

8. Shipping Discounts: Promotional offers that reduce or eliminate shipping costs to encourage customers to complete a purchase.

9. Welcome coupon: A promotional discount offered to new users or first-time customers to ecnourage initial conversion.

Platforms & Infrastructure concepts

These concepts includes tools and systems that enable affiliate marketing.

1. Affiliate Network: A platform that connects businesses (merchants) with affiliates and manages tracking, reporting, and payments (example is the marketplace feature on Affilitrak)

2. Affiliate Software: Software used by companies to run and manage their own affiliate programs without a third-party network. (Affilitrak is one, and its help center walks through setup for programs, payouts, tracking, and the affiliate portal.)

3. Affiliate Marketplace: A centralized platform or section within a platform where affiliates can browse, compare, and join multiple affiliate programs. (Affilitrak runs its own, see the Affilitrak marketplace.)

4. Affiliate Management: The proccess of recruiting, onboarding, supporting, and optimizing affiliates within a program to maximize perfomance and compliance. (Affilitrak's affiliate management guide.)