Affiliate Marketing Versus Network Marketing

Both affiliate marketing and network marketing pay people for referring a product or service. What then is the difference between affiliate marketing and network marketing?

The difference is best explained in terms of the way compensation is structured to pay for performance. Because of the many hybrid forms of compensation payments available now on the internet, to a newbie scouting for business opportunities, it is easy to get confused over the many terms and definitions used. In evaluating compensation plans, it is essential to understand the subtle difference between the two models. Ultimately, you want to understand'which model yields more income?

What is affiliate marketing? Affiliate marketing is usually done online. In its simplest form, affiliate marketers are compensated on a one time transaction only. Unlike products offered in a MLM business, affiliate products are often ones that a customer would only need to purchase one time. Thus, the more the affiliate marketer sell, the more they make. This is quite akin to direct sales albeit made via the internet.

Affiliate marketing has a compensation plan based on performance measures. For instance, if the affiliate marketer is successful in the form of sales, clicks, registrations, etc, he/she gets rewarded. The desired action as a means of compensation is already pre-agreed upon by the affiliate merchant and him/her.

In a short space of time, the affiliate marketing model has also evolved to a 2 level (or in some cases, up to 5 levels) compensation plan. In the popular 2-tier version, for instance, you (as an affiliate of a particular e-book merchant) will earn commission when you sell a book to person A and if person A signs up to be an affiliate and manages to sell to person A1, you get compensated too, in addition to person A.

Let's now go on to talk about what network marketing is. In the network marketing model, the compensation plan works in a similar fashion, except that compensation by the sponsoring company can be paid up to several, several or unlimited levels. The number of levels and restrictions in terms of payout is very much dependent on the arrangement offered. As arrangements can vary from one company to the next, this makes comparisons of the various compensation plans available out there difficult. So be sure to read all the fine print!

At any level, a network marketer has the potential to earn a direct referral fee for directly recommending someone and a leverage fee when one of his/her 'downlines' is successful for referring friends to the same network. In the popular binary plan adopted by many network marketing companies, each person in the network has two 'legs' or 'downlines'. If more people get referred to the network, they automatically go below the 'legs'.

Ongoing customer use is what creates the real residual income in network marketing. The MLM business can generate earnings for a very long time even after the initial years of hard work and investment. With a solid network, residual income is assured at each renewal period of a 'downline'. If the product or service involved in is one that has to be reordered at each renewal period, income should just keep coming in like clock work.

How does the difference in affiliate marketing and network marketing translate into in terms of building your customer relationships and your earnings power? In the network marketing model, to ensure that your 'downlines' renew at each period, you must ensure that you build up a good relationship with them. It is essentially a people-build-people and a leader-build-leader business. The ability to generate huge sums of money is increased exponentially when the network grows. The potential to make huge sums of money is thus greater here if you can employ the efforts of others to help grow the business vis-?-vis the affiliate marketing model. In affiliate marketing, your earnings ability is limited by your own direct sales plus an additional of 1, 2 or up to 5 levels of leveraging efforts.

Having described the above, it would seem that to maximise your income, it is best to join online network marketing programs as opposed to affiliate programs.

any question feel free to contact me

Akila Wedasinghe

akilasameera@gmail.com

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Comments

Marianne McEachern   Marketing Tips from Your Guruette On The Net Great article!! Some people are not great at developing downlines, in which case I would say affiliate marketing might be better for them than Network marketing. Both can be done online and off. Great article!! Feb 25th 2011 04:30

Ron W.   Administrator Very nice and informative page... covers most of what people here are doing. Feb 25th 2011 05:40

Corey Blackmur   Blackmur Global Akila, let's not forget that "network marketing" is also about the product, not just the pay structure. Without a product that offers value to a customer or a downline member, your business won't last in the long term. Also referring to affiliate marketing - there are some products that can lead into ongoing monthly recurring income by way of monthly membership plans as well. Great article - nice read......... Feb 25th 2011 07:09

Cindy Bolley   HHCTB? Another great post... In fact about the best comparison I have read between the differences of Affiliate and Network marketing. I think the success of an affiliate marketer depends on their own ability to be a self-motivator. Network marketing is working toward your retirement Affiliate marketing is more about saving for your retirement Cindy Feb 25th 2011 07:26

Steve C.   Online Marketer This article is very well written and the information can be used by most everyone. Thank you/ Feb 25th 2011 08:13

Adriana Auguste    Very interesting & knowledge is power! Feb 25th 2011 08:25

Corey Blackmur   Blackmur Global @ Adriana - on your comment - "knowledge is power" - I would add to that - Knowledge is Power when used effectively and with integrity" - just 2 cents...........have a great day Feb 25th 2011 08:34

Trond Hov   Business developer Nicely written, I have been in both games for 12 years and seen a lot of both bad and goods in both setups. But the affiliate grows steady, the Network marketing can get a buzz that makes your head spin :-)-- The Power of good networking cant be compared with Affiliates- Feb 25th 2011 08:34

Louis H.   Affiliate Marketer Excellent overview of the difference between the two marketing platforms, Both have a good, and bad depending on the product or the persons ability to sponsor affiliates, but in either case if you are motivates you will do well. Feb 25th 2011 08:59

Jibril Babangida Bala   Consultant. Very good write-up,but in network marketing one can only earn a commission if he/she buy his/her own as a personal order while in affiliate marketing you don't need to buy to earn a commission what is require there is to send someone to your site and a commission will be earn base on what the site owner offers,it is a rule that must make a sale,so that is why may people like affiliate marketing. Feb 25th 2011 09:13

Jan Chem   Engineer, Entrepreneur, Educator Well, your article is very informative to take a difference between an affiliate and network marketing.. but for me those people who doesnt know to invite a lot of people, affiliate marketing works best. Feb 25th 2011 09:40

Pastor David Turnipseed   Get Paid into $1299 position Just by bringing in 6 Very informative,bullet points well thought out ,info I can use. Feb 25th 2011 09:47

Akila Wedasinghe   Professional thank you for all the comments.but if somebody looking for a serious money i would recommend network marketing for them.always remember successful mean not how my money you make.succeesul mean how many people's live better of bez of you.according to that affiliate marketing can't even close to network marketing. Feb 25th 2011 09:48

Toshiba Burton   Social Media Consultant Very good points in this article thanks for sharing Feb 25th 2011 11:22

R. Weatherly   Business Professional Nice Article, I done both, and you can keep Network Marketing. I still have products piled up in my bedroom. Feb 25th 2011 11:30

Peter M.   Pro Internet Marketer nice info.. Feb 25th 2011 13:53

Chukwuekwu Okonta   Forensic accountant Made things clearer to understand. Feb 25th 2011 22:05

Ahmed Uzair   Web Designer and Internet Marketer very helpful information for me.. Thanx Feb 26th 2011 04:46

Ron Lester    Nice info. I'm a bit surprised you didn't mention that network marketing is more focused on building your own business. In most cases, you have to focus on recruiting(hiring quality people) members, and have to purchase a certain amount of product every month. In network marketing, there are two reasons to have product on hand. Personal usage or for customer samples. I think it's important for folks, who desire a serious income in network marketing, to realize they're going to need to spend money to make money. Returns of investment are usually far greater with network marketing. Affiliate marketing is easier to earn an income with. However, with affiliate marketing payments are usually substantially smaller. Payments are more consistent, usually received once or twice a month. It's also important that folks understand affiliate marketing will require more research. They need to figure out a niche, what company's they want to represent, and creative ways to make themselves stand out. Blogs and personal websites are how affiliate marketers make the most money. With affiliate marketing, quantity should their main focus. I say quantity, because the affiliate marketers need to focus on web traffic. Especially, since some affiliate programs pay out on unique visitors or impressions. In recap, network marketing is more focused on quality while affiliate marketing is more focused on quantity. Feb 26th 2011 07:02

Jibril Babangida Bala   Consultant. Correct idea,thanks Ron569 for more info. Feb 26th 2011 07:30

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