Network marketing like MLM or multi level marketing has been around for ages. So has affiliate marketing. However, what works better is a matter of personal preference. Here we explain what each of these entail.
What is affiliate marketing?
Affiliate marketing is carried out online and all affiliate marketers get their compensation on each transaction. In affiliate marketing the kind of products sold are those that are purchased only one time by the customer. Thus the more the marketer sells, the more his or her chances at gaining income online. The compensation plan in affiliate marketing is purely based upon performance benchmarks. Thus the more the sales, click throughs and registrations the affiliate marketer manages to get, the more the chances of income. The actions which will result in compensation are outlined between the marketer and merchant before starting the contract.
What is network marketing?
The compensation plan in network marketing is quite similar to affiliate marketing. However, the main difference is in the number of levels through which compensations can be achieved. The sponsoring company can pay the network marketer upto several or even unlimited levels. However, the original agreement will outline the restrictions in the maximum amount of payment as well as the maximum number of levels the payout can reach. Usually individual arrangements and contracts will differ from one network marketing program to another. This makes comparison quite difficult. The network marketer earns a direct referral fee which is a result of his recommendation of a friend or acquaintance. He may also avail a leverage fee which is due to his "downlines" referring their friends and associates into the network layers. Differences between the two
There are many differences between affiliate marketing and network marketing as outlined below:
Presence of layers: While network marketing has several layers or strata of people referring other recruiters into the system, affiliate marketing is devoid of any such layers.
Ongoing effort: In affiliate marketing one needs to put in continual efforts in order to gain sustainable income on a long term basis. However in network marketing just with initial efforts, one can continue to reap long term dividends because of the leverage fees associated.
People to people: Network marketing success largely depends on the ability to have good interpersonal skills and enhancing the "downlines" more. However affiliate marketing is more of an individual effort which focuses on gaining maximum profits through individual attempts.
Types of products sold: In the case of network marketing the kind of products sold are primarily those which will be bought by customers again and again. Thus the sale is a repeat process. However in the case of affiliate marketing the type of products sold are such that customers will buy them only once.
Ease of selling: In network marketing it is more difficult to sell products to customers. It's because supply far outweighs demand. Because of the many layers and sellers trying to sell the same product, the likelihood of the product getting sold gets diminished. In the case of affiliate marketing, it is easier to sell these products especially since they involve more than one type of product. Thus there are more choices and options in an affiliate marketing program.
Stagnation: In network marketing it is very easy to reach a point of stagnation. In other words, once the layers start to increase, the chance of selling the product reduces. This can result in the network marketing chain stagnating in terms of sales. On the other hand, in the case of affiliate marketing, although initially a lot of effort and time maybe needed and sales maybe sluggish, over time the results can be exponential sales.
Downlines: In the case of network marketing, each person has two downlines. These two downlines have two persons under them and so on. However in the case of affiliate marketing, the maximum number of layers it can go to is 5.
Final thoughts
Both affiliate marketing and network marketing have their own benefits and drawbacks. No matter which marketing method you opt for, be sure to assess all compensation plans and choose the marketing tool wisely. At the end of the day, you want to maximize your profit potential and it is solely up to you to decide which model suits you best.
