Management Information System (MIS) Practice Exam

What is the practice of paying businesses that refer customers known as?

1. Subscription marketing

2. Affiliate marketing

3. Viral marketing

4. Buzz marketing

The correct answer is: Affiliate marketing

Affiliate marketing is the practice of paying businesses, or affiliates, for referring customers to another business's products or services. This model relies on creating partnerships where affiliates promote a company's offerings in exchange for a commission on sales generated through their referrals. This system is beneficial for both parties: the business increases its reach and sales through the affiliate's network, while the affiliate earns money based on their ability to drive traffic and conversions. In contrast, subscription marketing entails customers paying a regular fee to receive services or products over time, rather than focusing on referrals. Viral marketing involves creating content designed to spread rapidly through social sharing, aiming for organic growth without direct incentives for individuals to share. Buzz marketing strategizes to generate excitement and conversation around a product or brand through unconventional means, aiming to create word-of-mouth promotion. Thus, affiliate marketing clearly stands out as the method specifically related to compensating businesses for customer referrals.