If you are like me you have often wondered whether affiliate marketing, internet marketing, network marketing, and multi-level marketing were the same or different.
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Are they similar or are there differences among them?
If they are similar, what do they share in common?
And if they are different, what sets them apart?
That is what we are going to see in this post.
So without further ado, let’s dive in and first see what they are.
What are they?
Pat Flynn’s Smart Passive Income says that “Affiliate marketing is the process of earning a commission by promoting other people’s (or company’s) products. You find a product you like, promote it to others and earn a piece of the profit for each sale that you make.”
Entrepeneur.com defines affiliate marketing as “A way for a company to sell its products by signing up individuals or companies (“affiliates”) who market the company’s products for a commission.”
And affiliatemarketingtraining.com claims it “… is a tried-and-tested method of making money using the Internet by promoting someone else’s product or service through your own website or social network.”
I think what affiliate marketing is, is clear to you now. So, let’s move on to:
According to searchenginejournal.com, internet marketing is also called online marketing. “… internet marketing is the process of promoting a business or brand and its products or services over the internet using tools that help drive traffic, leads, and sales.”
Webopedia says internet marketing “…refers to advertising and marketing efforts that use the Web and email to drive direct sales via electronic commerce, in addition to sales leads from websites or emails.
Internet marketing and online advertising efforts are typically used in conjunction with traditional types of advertising such as radio, television, newspapers and magazines.
Internet marketing is often used interchangeably with ‘content marketing’ which Content Marketing Institute defines as “A strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience — and, ultimately, to drive profitable customer action.”
With an understanding of what internet marketing is, let’s now move on to the next one.
Investopedia sees it as “…a business model that depends on person-to-person sales by independent representatives, often working from home. A network marketing business may require you to build a network of business partners or salespeople to assist with lead generation and closing sales.”
Investopedia goes further to say that, “network marketing is also known as multilevel marketing, cellular marketing, affiliate marketing, consumer-direct marketing, referral marketing, or home-based business franchising.”
And entrepreneur.com defines it as “A business model in which a distributor network is needed to build the business. Usually such businesses are also multilevel marketing in nature in that payouts occur at more than one level.”
Network marketing being clear now, we will move on to multi-level marketing.
Wikipedia says “Multi-level marketing (MLM), also called network marketing,, referral marketing, and pyramid selling, is a marketing strategy for the sale of products or services where the revenue of the MLM company is derived from a non-salaried workforce selling the company’s products/services, while the earnings of the participants are derived from a pyramid-shaped or binary compensation commission system.”
Now that we know what the four types of marketing are, let’s see how they work.
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How they work
Basically, affiliate marketing involves three parties: the merchant, the affiliate, and the customer.
As a merchant, you can offer an affiliate program to others who become your affiliates to promote your offers. They may use a blog, social media, paid advertising or other means in this wise.
The customer in need of a product or service uses a search engine to look for it.
The search returns a result and they click the affiliate link. It takes them to the merchant’s website and they buy the product or service.
The affiliate then earns a commission.
That said, let’s go to:
Webopedia gives more information on these:
“Web marketing includes e-commerce Web sites, affiliate marketing Web sites, promotional or informative Web sites, online advertising on search engines, and organic search engine results via search engine optimization (SEO).
Email marketing involves both advertising and promotional marketing efforts via e-mail messages to current and prospective customers.
Social media marketing involves both advertising and marketing (including viral marketing) efforts via social networking sites like Facebook, Twitter, YouTube and Digg.
Search engine optimization (SEO) involves the optimization of landing pages within your website to increase the number of visitors.”
With that said, let’s see:
Network marketing programs require a recruit to make a low upfront investment, usually a few hundred dollars to purchase a product starter kit.
The recruits are then encouraged to sell the product line directly to friends, family members and other personal contacts and also to recruit their own networks of other salespeople.
The creator (or “upline”) of a new tier earn commission on their own sales as well as on the sales generated by the people in the tier they built (called the “downline”).
The new tier also creates yet another tier and so on, which contributes more commission to the person in the top tier as well as those in the middle.
Matters can get murky when a network marketing network compensates participants primarily for recruiting other people rather than for selling the company’s products or services. Such a network marketing system may be considered an illegal pyramid scheme.
Although many companies are reputable network marketing operations, some have been denounced as pyramid schemes and even prosecuted by FTA and state agencies for illegal business practices.
The story above may be identical for:
I think Investopedia says it all: “Multilevel marketing (MLM) is a strategy some direct sales companies use to encourage existing distributors to recruit new distributors who are paid a percentage of their recruits’ sales. The recruits are the distributor’s “downline.” Distributors also make money through direct sales of products to customers. Amway, which sells health, beauty, and home care products, is an example of a well-known direct sales company that uses multilevel marketing.”
Now that we know how the four types of marketing work, let’s see what makes them look alike and what distinguishes them from each other.
According to affiliatemarketingtraining, multi-level marketing “Also known as MLM, or network marketing, … is a business model that has some similarities to affiliate marketing, but it’s not the same.”
So, let’s dive in and see.
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Similarities and differences between affiliate marketing and multi-level marketing
Business model and commission
When someone joins an MLM company, they are required to recruit and train others to create a downline which will enable them meet the requirements of the compensation plan.
On the contrary, affiliate marketers are not obliged to recruit anyone in order to generate revenue. They earn commission solely on sales they themselves generate.
However some affiliate programs like Wealthy Affiliate encourage their members to share their affiliate links with others and earn commission on sign-ups as well as residual income. This is paid only at one level.
Multi-level marketing demands that you pay membership fees as well as startup costs, such as investing in a starter kit containing products that you’d sell.
Affiliate marketing however doesn’t require such upfront investments.
Multi-level marketing businesses’ compensation plans are such that the money mainly goes to those at the top of the hierarchy. This is similar to a pyramid scheme, with the difference that the vast majority of MLM companies have a product to sell.
The affiliate marketer promotes a product alone and earns a commission for driving traffic, sales, or referrals. There is no network recruiting involved as is the case in MLM.
Products to promote
Affiliate marketers and multi-level marketers do not have their own products or services to sell. What they promote belongs to someone else.
With MLMs, you’re made to market specific products. This may explain why many fail in making money in MLM since it may be difficult trying to sell something you have no passion for.
Affiliate marketers however pick which of the products or services of the program or network they want to promote. Being allowed to promote what interest them, it’s no wonder those who stick to it succeed very well in affiliate marketing.
MLM companies usually require that their members use face to face meetings and home party presentations to propose the products and services to family members, friends, and colleagues.
Affiliate marketing companies on the other hand accept a wide range of promotion methods. With the exception of forbidden practices like spamming people with comments or messages, you can post your affiliate link everywhere. Some of the places are, on a website or blog, within product reviews, on social media, and in videos.
Commission structure / Compensation plans
Multi-Level Marketers can make money in two ways. One is commission from direct sales to consumers (or the difference between their purchase price as a distributor and the retail price to the end user). The second is to earn an income from the commissions made from the sales of their downlines (that is, distributors that the Multi-Level Marketer has recruited into the MLM business). You also earn a certain number of points to make money.
Affiliate Marketers generally earn a percentage of the sale they help generate for the affiliate marketing network or program.
Use of digital means
Both affiliate Marketers and Multi-Level Marketers make active use of the digital space.
In this wise, affiliate marketers build websites and/or funnels which enable them to market online. They also share their offers on social media, through email marketing and with YouTube videos.
Multi-level marketers on this score market primarily via social media.
Multi-level marketing does not allow you as much leverage as affiliate marketing.
In the former, you have to rely on a team while that is not the case in the latter.
Besides, in affiliate marketing, you get to work directly with the network, merchant or program you are promoting for. You can easily drop one company for another, or add others.
How affiliate marketers and MLM distributors move products also differ a lot.
“With affiliate marketing, users receive cash for their efforts – whether it be driving sales or signups. With network marketing, users receive points first, then cash. What they physically earn is based on a complex system tied to not just how much product they move but how that product moves within their mini-organization.” – Affiliate Marketing vs. Network Marketing
In network marketing, the number of people in your network is important. This, and the quantity of product people you signed up under you sell through their network determines the size of your commission.
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Similarities and differences between affiliate marketing and network marketing
In affiliate marketing, whenever someone purchases the products and/or services you recommend, you get paid by the merchant with whom you work directly.
But in network marketing, in addition to the merchant, you also work with the person that’s immediately above you (upline) in the network hierarchy. You’ll get paid for the products and/or services you recommend and also receive a cut of the commissions generated by the people under you (downline) in the network hierarchy.
In affiliate marketing, it’s the merchant’s responsibility, not yours, to provide affiliates with training or tools needed to promote their products and/or services.
However, in network marketing, since most of your income will come from your downline, it is in your interest to assist your new recruits in training to ensure that the downlines are secure and productive.
Most of the products that you promote in affiliate marketing are generally single payment ones (meaning, you receive one-time commission for every single sale you generate).
That’s not the case with network marketing where people are required to purchase products (such as immune system boosters, probiotics, weight management products, cosmetics, personal care products, nutritional supplements, etc.) again and again. So you’ll receive commissions from your customers over and over too.
Cost to Signup
In affiliate marketing, there’s generally no sign up fee to become an affiliate for the merchant.
However, in network marketing, there’s a cost to join the company as well as other payments for their “Starter Kit” for example.
Here, you can use the same techniques to promote products and services for both affiliate marketing and network marketing.
But that is not the case for multi-level marketing, as we saw above.
Both marketing methods have the potential to make people generate substantial incomes.
With affiliate programs, if they promote a product, they receive a cut of the sale. If it is a sign-up, they get paid a fee which is a percentage of the expected value of that new user.
For example, when an affiliate’s blog recommends a book on Amazon, they will get up to 8.5% of the sale price. But should an affiliate’s action on eBay generate a new signup, they will receive a certain dollar amount (depending on volume) for that new user. In addition, they will also be paid commission for activity that user does on the site, e.g. bids, buys, etc.
However, with a multi-level marketing company like Natura or Primerica, you pay money to join, either to buy starter kits or to set up your own independent business.
Affiliate marketing and network marketing also differ on distribution, that is to say traffic, and the proximity of that traffic.
Affiliate marketers focus on traffic from the web, where they convince perfect strangers to patronize offers they promote. But in network marketing, it’s all about the network. MLM companies like Quixtar for example encourages one-on-one selling to the exclusion of others.
This is often done through direct selling to friends, business associates, church members, etc.
So, here, the money comes from how well you can recruit others, who in turn recruit others, and so on. Not only that, but how much every recruit buys for themselves and how much they sell to their contacts.
Network marketing companies also encourage personal use contrary to affiliate marketing companies like PayDotCom that do not suggest you purchase your products through your own affiliate link.
Network marketers receive nothing for bringing in new members contrary to online marketers, especially those in lead generation. This, despite the fact that the new MLM member makes money for the company in the form of membership fees and the buying of a starter kit.
In network marketing, a select few at the top of the pyramid make all the money without really working, while the vast majority at the bottom earn little to nothing for their hard work.
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Multi-Level Marketing vs. Internet Marketing vs. Affiliate Marketing
Note that while multi-level marketing, network marketing, and affiliate marketing are business models, internet marketing however is a strategy.
As such, it is becoming a more widespread method for marketing businesses of all types, including multilevel marketing businesses and affiliate marketing businesses.
Internet marketing tactics and strategies
Internet marketing uses a range of marketing tactics and strategies such as web marketing, content marketing, email marketing, search engine marketing, social media marketing, etc.
What do Internet Marketing Companies do?
Internet marketing companies perform a certain number of services such as:
- Audio mixing and mastering
- Content marketing
- Directory submission
- Graphic design
- Reputation management
- Search engine optimization
- Video production
- Website design and development
How entrepreneurs use internet marketing
With its billions of users, the internet has become the place for entrepreneurs to market by:
- Creating content types like images, videos, blog posts, or podcasts
- Listing their businesses in directories like Yellow Pages, Yelp, Foursquare, etc.
- Maintaining a good reputation through monitoring reviews, responding, and providing a good customer experience
- Paying for advertising to increase visibility and leads
- Posting good content on social media, and
- Using search engine optimization to be found online by searchers
Some offline means you can use to inform your target audience about your products or services are to:
- Buy ad space in magazines or newspapers
- Buy television commercial slots, and
- Pay for radio commercial slots
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I hope you now know what affiliate marketing, internet marketing, network marketing, and multi-level marketing are, how they work and the similarities and differences among them.
If you have any question(s) on the topic or a contribution to make to the conversation, don’t hesitate to scroll down to the comments box below. Thank you.
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