affiliate marketing v. mlm

Since you found this site, I’m going to take a good guess and say that you’ve either just heard about affiliate marketing and want to know how it compares to multi-level marketing.

Well I’m going to tell you about both in a minute and help you decide which one is right for you. I’ve been involved in both types of marketing so I know how they work.

Nowadays though, I’m only involved in affiliate marketing and work from home full time.

What Is Affiliate Marketing?

affiliate-marketingAffiliate marketing involves three parties – the merchant or store, the affiliate and a customer. Affiliate marketing is where the affiliate sends the customer to the merchant and is awarded an agreed percentage of the sale (commission) when the customer makes a purchase.

This can happen infinite amount of times and there are a number of different ways you can set up the process. One common way is to create a website and offer value in the form of reviews or content the visitor may be interested in.

There is no team building and you can do this from anywhere in the world.

What is Multi-Level Marketing?

MLM diagramMulti-Level Marketing (MLM) is also called network marketing because it involves getting other people to build a team in order to promote a product. The more levels you build (downlines) helps you sell more products and you’re awarded higher bonuses as your team grows.

In this set up, there is usually someone at the top (where it’s much more rewarding) and if you haven’t personally signed anyone up, then you’re at the bottom where the rewards would be very little.

People often refer to MLM as pyramid schemes although that really refers to companies that don’t have a legitimate product but rather use their revenue (from registrations) to reward top tier members.

Affiliate Marketing vs. Multi-Level Marketing

So what are some of the differences between affiliate marketing and multi-level marketing?

There are some major differences which we’ll look at below. In my opinion, affiliate marketing takes the win. See for yourself.

(1) Freedom of Choice

choice

With affiliate marketing you complete freedom to choose what you want to promote. You pick your niche market, build your website and align yourself with whichever merchant has products that’s the best match for your target audience.

You can even promote the same type of product on your website from merchants who compete with one another. It’s your business, so you have the freedom to choose how you want to run it.

With MLM you can only sell the product(s) from the company you’re involved with. If the product is crap or a hard sell, that’s too bad – your only way out is to quit the company.

Of course, you can always join more than one MLM companies but it would just dilute your efforts of recruiting prospects.

(2) No Dependency

In affiliate marketing, you’re solely in control of every aspect of your business and your income is based on your input and how many sales you’ve pushed to the merchant.

In multi-level marketing, you’re paid for sales of product but this is usually not substantial unless you build a team to get bonuses on group sales volume. The way how most MLMs are set up, they push you very hard to recruit others and reward you for this effort.

Your income in MLM is dependent on your downline and their efforts. If your downline collapses one day, you’re back to square one.

I kinda like that with affiliate marketing, if you want to hit a certain figure in sales commissions, you can put a plan in place to do so instead of depending on others to make the sales to help you reach your goals.

(3) No Recruiting

In the affiliate marketing business, if you want to duplicate your efforts, it’s usually because you want to free up some of your time or focus on your strengths while getting someone else to do tasks that they might be better at. You can hire someone to write for your website for example and pay them from your income.

There’s really no pressure – you can choose to involve others or do it all by yourself.

MLM is different. It’s selling using a network or team and you’re responsible for recruiting people you would want in your team.

This is pressure for most people as they find it hard to convince people to join their business opportunity in an industry that already has a very negative reputation.

A typical scenario is that you’ll end up “bothering” family members and friends who may not want the same things you want ie. they don’t really want to sell stuff for an MLM – that’s what you want to do.

I’d take the solo experience of being involved in affiliate marketing any day than the pressure of having to focus on sales PLUS having to convince people to do the same business that I’m doing just so that I could get to a certain level to qualify for bigger bonus checks.

(4) Lower Costs

One of the best reasons to get into affiliate marketing over other business models is the fact that it has a very low barrier of entry in terms of costs.

You don’t need much to start an affiliate marketing business and partnering with a company to promote their products is free. It makes sense too. Why should you have to pay a company so that you can spread the word about their products?

At the very least, you’ll need a domain name, web hosting and if you’re brand new, you will need access to training and support. Additional expenses might include an autoresponder to collect emails and an advertising budget if you plan on using Facebook or Google Adwords for traffic but these are totally optional.

MLM usually has much higher costs. You’ll need to pay the company a fee to become a distributor and in a lot of cases an annual fee. Then you’ll have to buy a minimum amount of product every month to qualify for commissions and/or bonuses. It is common for some people to buy product and stockpile it in their garages just to get to a certain level to qualify for bonuses because they can’t sell the product.

In MLM, the expenses are usually way higher than in affiliate marketing while it is easier to earn more with affiliate marketing without investing as much as you would in MLM.

(5) Easier to Understand Compensation

Finally, with affiliate marketing, it is easier to understand your compensation for promoting a product than with MLM.

In affiliate marketing, the merchant will usually set a fixed commission rate for products. For example, a merchant might agree to pay you 10% per sale on any of their products. Another might agree to pay $30 per sale on their software that costs $97.

There are other variations to affiliate marketing commission rates where some merchants may reward you for volume ie. send more than 100 sales per month and earn an additional 20% on all sales.

In any case, it’s easy to understand how you’ll be compensated when you’re doing affiliate marketing.

I don’t know if it’s intentional or not but most MLM compensation plans are confusing. They usually have to explain it through a 10 minute video or a 20 page document and you’d still not understand it.

You get paid from selling product and then you get paid bonuses depending on which level you’re at in the organization. But it’s not as straightforward as that. You will just not understand it as clearly as you would with affiliate marketing commission rates.

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My experience with MLM didn’t go so well as I had a hard time recruiting people and I mostly “bothered” my friends, colleagues and other family members. It came to a point where people started avoiding me or giving excuses.

When I found affiliate marketing, I was very excited at how easy it was to get going (no registration fees) and start profiting. I’ve been doing affiliate marketing ever since.

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