Affiliate marketing and Multi-level marketing (otherwise known as MLM) are two different marketing strategies which are most often confused to be similar, but in actual fact, these two methods are much more distinct.
Based on definition, Affiliate Marketing is a marketing strategy involving three different parties – the Merchant/business owner, the Affiliate and the Customer. The Merchant agrees to reward the affiliate with some percentage when he successfully refers a customer to frequent his store and make a purchase. The reward of the affiliate marketer is usually based on his own personal effort of bringing customers to the merchant, hence affiliate marketing could be referred to as a form of performance–based marketing.
Multi-level marketing (MLM) on its end is also referred to as Network Marketing. It involves a chain of people who are linked up to form a team in order to promote a particular product. Multi-level Marketing could be likened to a pyramid scheme as there is usually someone at the top of the chain, often known as the up-line who has a couple of people under him, known as his downlines, and he gets certain percentage from each of their purchases. The rewards gotten from MLM solely depends on the position of the individual on the chain or Network. The upline tends to get more than those below him due to the fact that he gets a percentage from his own direct referrals, the referrals of his referrals, and the cycle keeps going on and on.
Though both of these marketing systems involve selling products, but the involvement of the marketers with the products varies. Some of the key differences between these two forms of marketing strategies are going to be discussed under the sub-headings below.
1. METHOD OF SALES
The mode of sales of these two marketing forms differs a whole lot in the sense that one deals with direct sales while the other doesn’t.
Multi-level Marketing: In Multi-level marketing, the marketer on his part would have been an existing customer with the company before he is being paid on basis of how much people he has recruited into the structure. Every individual on the Multi-level marketing network tries to promote exactly the same product.
Affiliate Marketing: In Affiliate marketing however, the marketer doesn’t get to purchase any goods whatsoever from the company/merchant he is affiliated with, neither does he have to be an integral part of their network. He’s much more like a distant marketer who isn’t directly involved with the company, but aims at referring people to the company.
2. LEVEL OF DEPENDENCE
There is a difference in how dependent these marketing strategies are on certain factors.
Multi-level Marketing: In Multi-level marketing the income of the marketer is much dependent on his downlines and the level of their inputs. Though the marketer is being paid for his successful sales, but he gets increased net commissions when he recruits new members and also gets the newly recruited members to recruit others to expand the matrix system. The strength of the marketer lies in how much downline he has, and it is his sole responsibility to ensure the structure doesn’t collapse.
Affiliate Marketing: In affiliate marketing, the marketer is independent regarding the control of the business. He/She is in sole control of every aspect of the business as the income is determinant of his level of input. The commission he gets is determined by how much customers he has successfully directed or recruited to the merchant.
3. MEMBERSHIP COST
Affiliate marketing: Membership in affiliate marketing is most at times at a low start-up cost or even totally free. An affiliate business could be started without having to make a huge initial investment and most affiliate programs can be joined for free. The marketer doesn’t need to pay to the merchant, but he rather collects a certain percentage on products sold.
Multi-level Marketing: In the case of multi-level marketing, the marketer is compulsorily required to pay membership fee to the company. Aside the membership fee, the marketer is also required to buy products on autoship, which is a more of a compulsory standing order in network marketing. This simply implies that the membership of the marketer is being renewed on an agreed regular basis, which is mostly monthly.
4. FREEDOM OF CHOICE OF PRODUCTS
Multi-level Marketing: In this system, the marketer doesn’t have the complete control on his choice of product. He only sells the product(s) of the company he is involved with.
Affiliate Marketing: An affiliate marketer has the freedom to choose whatever product he wants to promote. He has the privilege to choose convenient categories or niches of products he wants to market. He can promote different products from different merchants at the same time conveniently.
In summary, the mode of operation of these two marketing systems are totally different, except for the fact that products are involved in both. MLM basically deals with creating a network or structure by getting referrals into the system, while affiliate marketing involves the marketer advertising products on behalf of a merchant. The MLM marketer has direct involvement with the goods or products being sold, while the affiliate marketer has no involvement whatsoever with the products being marketed.