Today we are gonna see Affiliate marketing vs Multi-level-market (MLM), the differences, the advantages, and the cons of affiliate marketing and multi-level marketing. Both can be a highly beneficial way to create some passive income.
1. What is MLM
Multi-level marketing (MLM), also called pyramid selling, network marketing, and referral marketing, 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.
Although each MLM company dictates its own specific financial compensation plan for the payout of any earnings to their respective participants. The common feature that is found across all MLMs is that the compensation plans theoretically pay out to participants only from two potential revenue streams. The first is paid out from commissions of sales made by the participants directly to their own retail customers. The second is paid out from commissions based upon the wholesale purchases made by other distributors below the participant who have recruited those other participants into the MLM; in the organizational hierarchy of MLMs, these participants are referred to as one’s down line distributors.
MLM salespeople or consultants are, therefore, expected to sell products directly to end-user retail consumers by means of relationship referrals and word of mouth marketing, but most importantly they are incentivized to recruit others to join the company’s distribution chain as fellow salespeople so that these can become down line distributors. Read more here.
a. Advantages of being an MLM consultant:
There are a lot of advantages to being a consultant for an MLM company, here we are gonna list the most important ones.
– There is not a big amount of risk.
When starting a business, we are all scared of the risk involved, we can lose our investment, we may not be profitable for a long period of time, and so on… But when you become a consultant, you have the advantage of using the company brand. And reputation and your investment are not as important as it could be if you were starting afresh.
You get the benefit of a well-established company, using quality products (mostly they are eco-friendly products) that is in high demand.
The money risk is not too high, with $200 or less, you can join an MLM company, get the training you will need on the products, and the sales techniques accepted by the company, and you are good to go!
– High-quality products.
All the MLM companies have that in common, they aim to produce high-quality products or services. A lot of them produce natural beauty for health and beauty. And the products are appreciated by all the users. The customer’s feedback is 80% positive.
As a consultant, you need to learn how to take advantage of that. And you need to be the first consumer of your products in order to know how to establish trust with your customers. If you are using them, you will know exactly how to address their concern and direct them to the right position.
Because your consumer’s needs come first if your consumer is helped by the products. Then they will be your best ambassador and even the best downlines. So, the goal is to know your product in order to build your network.
– The passive income potential.
There is no limit on the amount that you can make with an MLM company. It will all depend on your efforts. So, you need to sell more and push your downlines to sell more. Your goal is to finalize your customers. Have them buy from you every month or regularly. That will ensure you get passive income.
You reach the passive income after you have planted the seeds. When you succeed to get regular clients, you may sit at home and you will be sure that they will come to buy and you will pocket your commission.
And when your downlines also succeed to do the same, you can be sure that your passive or residual income will be consistent. Doing that takes time and a lot of efforts but it is very possible.
– No inventory.
You do not need to keep an inventory of the products with you or in a store. You can keep the samples which totally needed. Many companies do not allow their consultant to display the products in a shop or an online store because the business model is to sell directly to the consumer.
So already from the business model, the inventor is kept by the company and some do not sell pass a certain quantity to one consultant.
This is why starting an MLM marketing business is easy, your starting fee always includes a starter kit to help you use or start your business but after that, you do not have to keep an inventory.
b. Cons of an MLM marketing business.
We are gonna talk about the ones that can break your business.
Many people reject the idea of joining an MLM business. Because business is not for anyone and sometimes because they are comfortable in their lives and do not need to start a new venture. They may also be rejecting your products.
That is why being an MLM consultant demands to work hard in order to get new leads all the time. You need leads to sell your products and lead to recruits downlines. Many people find that it is too much work and give up.
– It takes time to make money.
As much as 90% of people joining MLM do not make money at all, and the few remaining make money after a long period of time.
I joined an affiliate marketing and for a whole year, I did not make even $5 of commission. But I was working hard, chasing leads, and getting rejections. So, yes it takes time and courage.
– Sponsors or uplines are not always helpful.
Many sponsors do not take care of their teams. Once you are in the business, you may find yourself all alone in a new world.
So, finding the right sponsor is a major key to your success in the MLM world. A sponsor can train you to follow his/her footsteps toward success.
– Creating a network.
It is never easy to make contact with new people, share about your business, and convince them to join.
Many people are shy and prefer to work in solo, but for you to succeed in an MLM business, you need to conquer your fear. Because a great party of your revenue comes from your network.
So, you need to be able to find hard-working people, those who are motivated to create a business. Otherwise, your network will not be successful.
It is not easy to be successful in an MLM business without a network, maybe you should consider affiliate marketing.
2. Affiliate marketing.
Here is the post that I wrote about affiliate marketing
It will give you a practical idea of affiliate marketing. Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts.
When you choose your affiliate product, you will advertise it by your own means and you will get a commission every time the customer makes a purchase.
a. Advantages of an affiliate marketer.
We shall take some of the advantages that make affiliate marketing a great business.
– No big investment needed.
The only investment you will need is to buy ads in order to convert fast. But if you already have decent traffic to your website, you can start making sales without having to buy any ads.
The affiliate networks do not make a publisher pay any fee to join a program but they only require you to have a place to display the offer. That is why most of them require a 3-month-old website per example because it has already certain organic traffic.
– No inventory or customer support needed.
You can choose to market physical products, but you do not need to handle them or keep an inventory. The supplier will take care of all the process for your customers.
All you have to do is display the products, the customer will be prompt to the supplier’s website to finish the checkout and you can just wait for your commission in due time.
– No experience required.
You do not need to have a certain experience in marketing or experience with the product to become an affiliate.
Most of the time, the affiliate network offers training to help you improve your skills. And the affiliate tools are available for you to use as needed. You will not create your own tools or new methods, everything is laid out for you to apply and succeed.
– Truly your own boss.
You do not have a boss to instruct you on your monthly objective. You work and earn as you worked. Your success depends totally upon your hard work. So, if you want to make a million, you need to work hard.
b. Cons of affiliate marketing.
Some few things can make affiliate marketing not everyone’s cup of tea.
– You do not control the marketing program.
You do not own the affiliate network or products. Accept their terms and conditions and play by the rules.
You will be a victim of affiliate product leaving the network or pausing their campaign when you are still running a marketing campaign. You really do not control much in this business.
– Your income is not guaranteed.
This is a performance-based business, you can only earn what you work for. There is not a guaranteed residual income.
– High competition.
Because it is easy to start, many people are doing affiliate marketing. The competition is high and it is not easy to succeed.
You need to choose the right product and develop a unique marketing campaign that will stand out and give a market share.
3. Differences between MLM and affiliate marketing.
We have seen many similarities between the two. Now let talk about what differentiates them and which one is more suitable as a business model. Here are the differences:
– No starter fee for affiliate marketing.
Almost all the MLM requires a starter fee to join the program. It may be for you to purchase a starter kit or just to join.
For some that can be a good thing, it helps them commit to success because they have paid and do not want to lose their money. But for others that could be a deal-breaker because they do not have such an amount to risk.
An affiliate marketer does not need to pay any fee in order to start his/her business.
– No face to face sales.
Some MLM requires a face to face transaction in order to sell or recruit a downline. Which is not always convenient, especially if your client does not live close by. It does not allow you to grow your business beyond a certain area.
In affiliate marketing, the face to face part doesn’t exist. You act like the middle man, you do not need to meet either of the two parts in a transaction.
– There are no minimal sales to qualify.
An affiliate marketer is not required to qualify in order to get his/her commission. You get what you have made and that is it.
But certain MLM companies require from their consultant to qualify in order to get their commission. If your downlines made money and you did not per example, you will have to make a certain amount of sales in order to benefit from what your team has done.
– More products.
When you join an affiliate network, you have a huge variety of products to chose from, you can create a dedicated marketing channel to advertise whatever you want.
IN an MLM company you can only advertise their product, for dome it is a long variety of product but for most, it is a very limited list of products to choose from.
What is the best option between Affiliate marketing vs Multi-level-market (MLM)?
Affiliate marketing is hands down the best option. But in order to succeed you need to learn the best practice of affiliate marketing. Now, you can choose to join the online university where I study, it is a wealthy affiliate.
You ill get comprehensive training on affiliate marketing, simple step by step training that you can take from the comfort of your home. You will be able to get the knowledge you need in order to create an online affiliate marketing that can touch and help people all over the world.
So, join Wealthy Affiliate!