What is Affiliate Management Software?
Internet Marketing Dictionary | Affiliate Management Software

Affiliate marketing software is software that lets you run an affiliate program. The key functions it needs to perform are

• Affiliate registration - the process of capturing the contact and payment details of new affiliates
   
• Affiliate reporting - the process of enabling your affiliates to find out how effective their marketing is. Ideally this would include automatic email alerts whenever a sales is made, and the ability to let your affiliates set up tracking codes within their own affiliates links so that they can identify which methods of promotion are working best.
   
• Affiliate payment processing - the process of either paying affiliates directly via an online bank account, or more commonly, the process of creating a list of commission payments to be made on a regular basis which can be processed automatically by payment systems such as PayPal.
   

Clearly that is an outline of the functionality required and more features will be needed in practice. For example, some means of reminding your affiliates of their passwords will be essential as will some means of adjusting commission rates from one affiliate to another because internet marketers like to pay superaffiliates a higher commission.

Some services like Clickbank and PayDotCom essentially provide all these functions for you in return for a charge levied on each transaction.

If you intend to work with a 2-tier affiliate system then you need to make sure that your affiliate marketing system can handle it.