You might have wondered at some point whether affiliate marketing and network marketing are the same things. You are not alone. Many others have pondered the same question.
The truth is they share some similarities while having differences as well. In this post, I lay out all these. Sometimes people refer to network marketing as multi-level marketing or a pyramid scheme, although the latter has a negative connotation.
By the end of the article, you will be well informed on which one you can pursue to start making money.
First of all, let’s get an explanation for these terms.
- Affiliate marketing
- It is a business model where an affiliate gets paid for sales by promoting products and services of an independent business. It is predominantly e-commerce focused.
- Network marketing
- It is a person-to-person relationship business model. Independent reps get paid commissions for generating sales. They can increase their income by recruiting others to sell under them.
- Multi-level marketing has been used interchangeably with network marketing. But in its strictest meaning, MLM is a sub-type of network marketing. You get to earn a percentage of the sales commissions made by recruits you directly referred into the business.
- And the levels a network marketing company uses determine the name. For example, there are single-tier, two-tier, and multi-tier models.
Most players in the network marketing arena use a hierarchical model. This pyramid structure has been the center of so much attention and debate over the years.
It is partly due to its association with illegal pyramid schemes that use the same structure.
Both these channels of distribution have elements within their models that are worth noting. Most are similar, but there are features unique to each.
A business entity produces the product or service for distribution. Distributors or affiliates do the product promotion using various strategies to generate sales.
But affiliate networks or programs, unique to affiliate marketing, act as central management points for the merchants, products, sales, commission tracking, and affiliates.
On the other hand, recruits are distinct to MLMs. You can build your pyramid within the large pyramid by recruiting others.
All these parts play different roles, but the end goal is driving sales of goods and services. Most businesses do not possess the ability to reach all potential customers, hence these in exchange for a cut of the sales made.
Since we’ve already established these are distinct business models, let’s have a look at how they differ.
Platforms for distribution utilized
Affiliate marketing is digital. Therefore it is more of a recent phenomenon that started with the internet going mainstream in the 90s. How modern you’d regard it also depends on your age!
Websites or blogs are the most used to conduct it through content marketing. Emails, social media, online ads are the other techniques.
On the contrary, MLM utilizes more traditional avenues to happen. It is more of a people-centered approach involving talking to prospects and leads.
Physical meetings and phone calls are the main ways to generate sales and build a team of referrals. You can also use the internet, but this is not as intensively as in the former case.
The costs of joining
Affiliate marketing has minimal costs to start. You might only require a domain name and web hosting. These are cheap to obtain. Additionally, you will need a keyword tool to do research, which is vital for success.
You can also outsource all functions. But that is optional. It will cost money for quality freelancers to research and develop the content needed.
Most if not all network marketing companies require qualifying purchases. It includes a starter toolkit. In addition, you might have to make minimum sales levels on a set periodic basis.
These are prohibitive to most people seeking to join MLMs.
Choice of products to promote
You can promote a vast array of goods and services in affiliate marketing. The only restriction is that the affiliate products have to be related. To promote a different class of products, you will have to use another website.
For example, cookware, clothing, and web hosting services cannot be on the same blog.
In the case of MLM, the range of products an MLM company has in its portfolio limits your choice. That’s unless you join many of them. But this will, of course, confuse your marketing efforts.
In affiliate marketing, compensation is purely on a cash basis. And these are processed through digital wallets like PayPal, Payoneer, Skrill, etc.
With MLMs, in addition to cash payments, there’s the benefit of heavily discounted products. It is meant to incentivize the sales force and attract new distributors.
Most of the time, affiliate marketing involves efforts driven by one person. The costs, rewards, and risks fall on their shoulder. But in some cases, businesses too take advantage of this opportunity.
These are like digital agencies that use their blogs to promote their affiliate links with their readers.
For success in MLMs, you’ll hardly be working on your own. You have to recruit a team of distributors. At the same time, someone above you in the hierarchy would likely have recruited you. So you’ll be working for them as others work for you.
This model in MLMs is what puts some people off. The higher you are in the hierarchy, the more money you make. And this is only a handful of the people.
There are more differences than similarities between affiliate marketing and MLMs. And the likeness can also be disparities depending on the variation of network marketing we look at.
For both, product sales determine the compensation level. The more sales you generate, the higher your commissions. Of course, this will be dependent on your efforts. Therefore, it’s crucial to develop the requisite skills needed.
In both, you’ll not be handling product inventory. Referrals buy from online stores or physical shops. A disclaimer is that in some MLMs, you might be taking hold of stock to resell.
Possibilities of scams exist for both. You can join an affiliate program or an MLM that is involved in defrauding you. While this will wreck your emotions, you have the sole responsibility of doing background checks before joining.
Both require massive efforts to succeed. There’s no free cake. However, most people seem to prefer affiliate marketing, I believe due to the flexibility.
What are examples of affiliate marketing and network marketing companies?
Affiliate marketing: ShareASale, ClickBank, Amazon Associates, Rakuten Marketing, CJ Affiliate, JVZoo.
Network marketing: Herbalife, Amway, Avon, Forever Living, Vorwerk.
Which is better between affiliate marketing and MLM?
It is a subjective decision. In my opinion, affiliate marketing is better due to its flexibility and low startup costs.
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