How Affiliate Marketing Works: The 5-Step Process (With a 25% Commission Example)

Here’s a number that makes affiliate marketing concrete: lemlist’s affiliate program pays 25% commission for 12 months on every license bought through your referral link, and it tracks clicks with a 30-day cookie. One referral on an annual plan keeps paying you for a full year. That’s the whole model in one sentence.

If you have never done it, affiliate marketing may sound tricky. You may wonder if it’s even legit. It is. It’s a real way to earn passive income and promote products you already use.

The affiliate industry is also brutally competitive, and gaining traction takes work.

In this article, I’ll walk you through the exact mechanism behind affiliate marketing: the five steps, how the money actually reaches your bank account, who the players are, and the challenges nobody warns you about. I’ll use lemlist’s own program as a worked example throughout, because real numbers beat hypotheticals.

How does affiliate marketing work?

In case you wonder what affiliate marketing is, it’s a straightforward process.

Typically, affiliate marketing works in this way:

1 Step: Apply to the affiliate program

First, you apply to the affiliate program you picked and wait for the company to approve you.

When choosing a program, identify your niche and target audience first.

Evaluate the commission rates, cookie durations, and the reputation of the company you’re about to promote.

Depending on the affiliate marketing type you want to do, try the product or service yourself (especially relevant in an involved affiliate relationship) to see if you really like it.

If you’re just starting out, joining a well-known network is a reasonable move. Amazon Associates and ShareASale are the two most common entry points, and you can compare more options in our roundup of the best affiliate programs.

Example: how lemlist’s own affiliate program applies these steps

You apply at lemlist’s affiliate program page. Once you’re approved, you get a referral link hosted on PartnerStack, the network that runs the program. Anyone who clicks that link is tracked for 30 days. If they buy a license in that window, you earn 25% of what they pay, every month, for 12 months. Same five steps described here, with concrete numbers attached.

2 Step: Acquire affiliate links

Upon approval, you’ll get a welcome email with login details and program guidelines.

Log in to your affiliate dashboard and get familiar with the tools and resources available.

This is where you set up your payment method (bank transfer, PayPal, etc.) and your tax information.

Once you’re in, you receive unique links to promote the company’s service.

You can also generate your own tracking links for the specific products you want to push.

Browse the merchant’s product catalog inside the affiliate portal and choose what you’ll promote.

These unique links carry tracking IDs that attribute any sales or actions back to you.

Optionally, grab the banners, widgets, or other promotional materials the merchant provides.

3 Step: Create and promote content

Sharing affiliate content on your channels is easier said than done.

That’s why planning your affiliate marketing strategy around your audience and channels (blog, social media, email marketing, YouTube, etc.) is key to success.

Create high-quality, relevant content: product reviews, tutorials, comparisons, listicles.

Incorporate your affiliate links naturally, and be transparent about the affiliate relationship with your audience.

If you do unattached or involved affiliate marketing, you’ll lean on SEO to make your content discoverable on search engines.

Driving traffic to your channels matters most when you don’t have a solid follower base yet.

You may also consider paid advertising like Google Ads or Facebook Ads to bring in targeted traffic.

The method I’ve seen move the needle fastest is using multiple communication channels at once. Don’t rely solely on your blog or website.

Use social selling on LinkedIn, build authority on social media channels, send out regular newsletters, participate in webinars, create podcasts, attend workshops, share reviews and personal experiences you have with products, film YouTube videos, Instagram reels, and more.

This multichannel tactic is what the most successful affiliate marketers around the world actually do.

4 Step: Customer conversion

This step is when the customer sees your affiliate link, gets interested, clicks, and buys.

When customers click your affiliate links, they land on the merchant’s website.

If they complete a purchase or a desired action (signing up for a trial, for instance), the tracking system attributes the conversion to you.

Use the detailed reports in your affiliate dashboard to see sales, conversions, and commissions.

5 Step: Get paid

You earn money based on the program’s commission structure.

You can review your earnings in the affiliate dashboard.

Most merchants follow a payment schedule (monthly, bi-monthly, or quarterly) with a minimum payout threshold.

Payments are then processed and sent through the method you chose.

How do you get paid in affiliate marketing?

Commission structures come in a few shapes. Some programs pay you a percentage of the sale amount made through your link. Others pay a fixed fee for each sale generated. A third model, payment per action (PPA), pays you for specific actions like sign-ups, clicks, or leads, whether or not a sale follows.

lemlist sits in the first category, with a twist on duration: 25% of each license purchased through your referral link, paid for 12 months rather than once. Recurring commission changes the math on how many referrals you need to build real income.

Use the affiliate dashboard provided by the merchant or network to:

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  Monitor real-time data on clicks, conversions, sales, and earnings.

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  Review detailed reports on performance metrics to understand which products or campaigns are performing well.

Sometimes there’s a minimum payout threshold, meaning you have to earn a certain amount before any money moves. The amount varies by platform, and thresholds commonly fall in the $50–$100 range depending on the program.

If your earnings don’t meet the minimum in a given period, they carry over to the next payment cycle until the threshold is met.

When you get paid also depends on the payment schedule of the specific program. Payments usually go out on a fixed rhythm:

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  Once a month, which is the most common setup.

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  Twice a month, on a bi-monthly cycle.

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  Four times a year, on a quarterly cycle.

Understand the pay cycle and the payment dates so you can plan your finances. Earnings generated in January might only be paid out at the end of February.

The last step is payment processing. You can usually pick a preferred method:

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  Direct bank transfer (EFT/ACH), where earnings land straight in your bank account.

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  PayPal, where payments go to your PayPal balance and you withdraw from there.

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  Physical checks sent by mail, which some merchants still offer.

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  Wire transfers or digital wallet transfers, depending on the program.

Make sure your payment details are entered correctly in the affiliate dashboard to avoid delays. That means your bank account information or a linked PayPal account.

Then there are transaction fees, which quietly eat into what you take home.

Be aware of any fees tied to your chosen method. PayPal may charge for receiving money, deducted from your earnings. Banks might charge for international transfers or other services.

You’ll also need to provide tax information to the merchant or network. For U.S. affiliates that usually means a W-9, or an equivalent form if you’re based elsewhere.

Keep thorough records of your earnings for tax purposes. If you’re a U.S.-based affiliate earning above a certain amount, you’ll receive a 1099. The Form 1099 and W-9 requirements are published by the IRS, and they’re worth reading before your first payout rather than after.

Who is involved in the affiliate marketing process?

There are four players in affiliate marketing:

1. The affiliate is the individual or entity that promotes the company’s product or service.

Once accepted, the affiliate gets a unique link or set of links connected to the company’s products. These links track performance using cookies.

The affiliate earns a commission based on the agreed terms, whether that’s a percentage of the sale, a fixed fee, or a payment for another action like a click or a sign-up.

2. The merchant is the entity selling the product or service the affiliate promotes. The merchant provides what’s actually for sale.

The merchant builds the affiliate program to get others promoting their products. They set the terms: commission rates, payment methods, cookie duration.

The merchant tracks sales or conversions driven by affiliate links and pays out the agreed commissions.

3. The affiliate network sits between the affiliate and the merchant’s program. It hosts the links, handles the tracking, consolidates reporting, and often processes payouts. PartnerStack and ShareASale are two examples. lemlist runs its own program on PartnerStack, which is why affiliates manage their links and commissions there rather than inside lemlist itself. Not every program uses a network, but most mid-sized and larger ones do.

4. The customer is the person who buys through an affiliate. Merchants partner with affiliates to reach that affiliate’s audience and turn it into revenue.

Common challenges in affiliate marketing (and how to get past them)

The hardest part isn’t the application or the links. It’s traffic.

Most people who join an affiliate program have no audience yet. They publish a review, drop the link, and wait. Nothing happens, because SEO takes months and social following takes longer. I’ve watched plenty of affiliates quit at this exact point.

The way out is to stop waiting for traffic and go get it. Instead of hoping the right people find your content, identify who would genuinely benefit from the product and reach them directly. Build a targeted list, send a short email that leads with the problem the tool solves, follow up on LinkedIn, and include your link only once the conversation justifies it. That’s multichannel outreach applied to affiliate promotion, and it works far faster than organic alone.

Two other challenges show up repeatedly.

Cookie windows expire. A 30-day window like lemlist’s is generous, but a prospect who clicks and buys 40 days later earns you nothing. Time your follow-ups inside the window.

Approval isn’t guaranteed. Programs reject applicants with thin content or no clear niche. Fix your positioning before you apply rather than after you get declined.

Final thoughts

Affiliate marketing is a mechanism, not a mystery. You join a program, get a tracked link, put it in front of people who actually need the product, and get paid on a schedule once you clear the threshold.

The part that separates affiliates who earn from affiliates who don’t is distribution. Everything else is paperwork.

If you want a program with recurring commission to test this on, lemlist’s affiliate program pays 25% for 12 months per license, tracked with a 30-day cookie, and it’s an easy product to recommend honestly. lemlist is rated 4.6/5 from over 2,000 reviews on G2, so you’re not putting your credibility behind something unproven.

And if you’d rather use the outreach side to drive affiliate traffic, build your first multichannel sequence and start a 14-day free trial.