Affiliate Marketing or Multi-Level Marketing – Which is Best?

Affiliate Marketing or MLM?

If you’re interested in making money online, you’re going to have to figure out how to do it.  If you’ve decided that selling retail products directly isn’t for you, then you might want to participate in selling someone else’s products.  That’s fine, and both affiliate marketing and multi-level marketing, or MLM, offer those opportunities.  Which is better?  Will you make more money with multi-level marketing?  Is it a scam?  What are the pros and cons?

affiliate marketingRegarding the two, I’ll discuss them strictly in terms of how they work on the Internet as you’re likely not interested in selling Amway door to door.  Both affiliate marketing and multi-level marketing offer the opportunity to make money by participating in helping another individual or company sell their products.  With affiliate marketing, you typically register as an affiliate at the company’s Website (or through a broker, such as Clickbank) and you’re provided with a unique link to provide to your email recipients or Website visitors that tell the company that traffic that goes to their product’s sales page comes from you.  That way, if someone clicks on your link and subsequently buys the product, you will receive credit (and commission!) for the sale.

Affiliate Marketing and Multi-Level Marketing

Commissions for affiliate marketing can vary, depending on the product.  I’ve seen products that offered commissions as low as 3% of the sales price (for high-ticket items such as diamonds) to 75% for downloadable books and information products.  Sometimes, the commission is on a sliding scale and you’ll earn a higher rate as your sales increase.  Amazon does this; you start each month at a 4% commission, but you can raise that to 8% for the month if you sell a certain number of units.  At the beginning of each month, the commission percentage resets and the process repeats.

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Multi-level marketing sometimes resembles affiliate marketing in that there are usually products for sale, and commissions are paid for referring customers who buy them.  The difference in multi-level marketing is that commissions and earnings are also (and sometimes only) contingent upon members of the organization persuading other people to join.  MLM companies usually require some sort of dues or monthly membership fees, and payouts usually rely more upon the number of people you have signed up (known as your downline) than it does for direct sales of products through an affiliate link.

In fact, in some cases, multi-level marketing programs are membership organizations that require signing up and paying dues before even having access to the products themselves.  In these cases, only the members, rather than the general public, are even permitted to buy the products.

Sometimes, there are programs that resemble both affiliate marketing and multi-level marketing, in that they have two-tiered affiliate commissions.  In such a scenario, you might earn a 50% commission for selling the company’s product, but you might also earn a small percentage (say 2% or 5%) of the commissions earned by affiliates that you sign up underneath you.  This sort of system is generally put in place to build up the number of affiliates promoting the product.  A few years ago, I was involved in such a plan as an affiliate for a Web hosting company.  The product was for sale to the public, and I received commissions for making sales to the public, but I also received modest commissions from the sales of affiliates who signed up as affiliates through my link.

Affiliate marketing is generally a straightforward proposition.  You receive a certain percentage of the sales for which you are responsible and the more you sell, the larger your commissions.  The progression is usually linear; more sales translates to proportionally larger commissions.  Companies with affiliate programs rarely talk about earnings potential, though they do mention the percentages and the payouts on their signup page.

That’s not necessarily the case with multi-level marketing and this is where things sometimes get a bit legally shaky.  Most of the multi-level marketing programs I’ve encountered devoted far more time and space to talking about earnings potential than they do about the products themselves.  One multi-level marketing product that I reviewed recently talked about how I had the potential to earn $1.7 million per year if I signed up for their program.  Ostensibly, I’d be selling their informational products about how to make money online, but in reality, in order to earn that kind of money, I’d have to sign up seven thousand people to join the company and each of them would have to be paying members who were also actively recruiting new members to join.  The greater the number of members in my downline, the greater my earnings potential…provided that everyone in my downline keeps paying their monthly fees.

This particular company rarely mentioned the products themselves on their sales page; the 20 minute video was all about earnings potential, and all of those earnings were going to come from making sales to other members.  As long as everyone keeps bringing paying members into the system, payouts go up, but eventually, we all run out of potential new recruits.

Multi-level marketing programs such as that one are, depending on where you live, either borderline illegal or completely so.  They are known as pyramid schemes, and the reason they are illegal is because they are structured in a way that makes it impossible for everyone to make money.  Only the people at the top of the chain (typically the company founders) actually make any serious money.  Everyone else is paying a monthly fee that trickles up the pyramid while struggling to sign up new members themselves.

Affiliate marketing is an ages-old system of compensating people who refer new customers to a business.  It’s a straightforward system that compensates those who drive more sales with higher commissions.  Multi-level marketing is sometimes like that, but is usually preoccupied with getting new paying members.

Affiliate Marketing and Multi-Level Marketing Summary

When you’re evaluating a product to decide whether to promote it, consider how you’re going to be compensated.  If your compensation is directly related to sales of products, you know that you’re involved in affiliate marketing and you just need to determine if the product is a good one and that you have the ability to persuade people to buy it.  If your compensation is directly related to signing up new members, rather than selling products, you’re involved in multi-level marketing, and you’re less likely to make money in the long term.

If you want to learn how to maximize your earnings while building strong affiliate marketing Websites, you should consider joining Wealthy Affiliate.  This training program will show you what you need to know through a 10 module training course.  You’ll also get access to some useful tools, a friendly forum, and even free Web hosting.  You can join Wealthy Affiliate for free.

In the end, affiliate marketing is generally a better way to make money online than multi-level marketing, which often overstates earnings potential in an attempt to appeal to people’s sense of greed.

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