Network marketing vs. affiliate marketing – both offer entrepreneurs ways to make money online, but which one is right for you?
To understand which business model will help you best, it’s important to know how the two are different. Network marketing is when you sell a product by talking to people in person or over the phone, while affiliate marketing is when you promote products from other companies, earning a percentage of commission on every sale.
Both have various drawbacks and benefits, but one might better suit your needs depending on exactly what you’re looking for – and how you want to earn money.
Here’s what you need to know about network marketing vs. affiliate marketing (and how to decide which is right for you).
What is Network Marketing?
Sometimes referred to as multi-level marketing or MLM, network marketing is a business model that many people rely on in an attempt to make money. Though some prefer not to use the terms interchangeably, for the sake of simplicity, we’ll describe them both the same.
With network marketing, you will be tying yourself to a product or a company. You’ll have the opportunity to earn differing levels of commission and can create a solid residual income.
With multi-level marketing, it works the same way – but you’ll recruit additional marketers who work beneath you in a “pyramid”-type structure. You’ll earn a percentage of what they earn, and what their earners earn, and so on down the line.
Essentially, you will be joining a team (and creating a sub-team) of your own to promote and support a service or product. Everyone in this network is attempting to promote the same thing, and in most cases, you’ll be hired by someone who is already part of the network marketing structure.
What is the Difference Between the Network Marketing Business Model and a Pyramid Scheme?
You will often hear network marketing referred to not only as multi-level marketing but also as a “pyramid scheme.” The last type of nomenclature is not one that is used positively but is instead looked down upon.
Multi-level marketing is, in fact, quite similar to a pyramid scheme in how it operates. However, there is a key difference.
Multi-level marketing is legal, while running a pyramid scheme is not.
As long as a service or product is legitimate, it is a legal pyramid. It is when no product or service is provided (or when the product is misconstrued or faulty) that it becomes illegal.
The problem is that many products that are promoted by network marketing companies are not exactly the “cleanest.” Many have some generous advertising that over-exaggerates the benefits or features of a product, meaning network marketers have to work hard to keep making sales.
The other problem with an MLM program is that MLM participants generally don’t make any kind of money until they’ve gotten pretty deep into the network recruitment process. It’s not necessarily product sales that earn you money when you’re part of an MLM or network marketing program – instead, it’s lead generation and building your own sales force.
It’s hard to make a decent income with an MLM unless you’re at the top of the “pyramid,” which requires a lot more personal interaction and a lot more time. Many MLM participants never make it to the top at all.
Some examples of MLM programs are:
- The Body Shop
- Mary Kay
- Avon Products
- Usborne Publishing
What is Affiliate Marketing?
Many people mistake affiliate marketing with network marketing or MLM companies or MLM programs, but they are not one and the same.
Affiliate marketing is the act of pursuing commissions from products that you “affiliate” yourself with. It generally consists of single-level commissions, meaning you will make a certain amount of a product’s sales that your customer buys.
Unlike network marketing, you won’t be working for a parent company to build a network, but instead, you will be promoting products in a more mutually beneficial way.
You will have complete control when it comes to selling products, choosing which product reviews to write, which products to promote, and which individual affiliates you want to work with. Affiliate marketing and network marketing are distinct in that with affiliate marketing; you will get paid based on your overall sales. There’s nobody working beneath you or other members that you have to report to.
You simply choose the goods you want to endorse, and you’ll get a commission for any sales you produce. Depending on the business and compensation plan that is in place, you can make money for driving sales, selling, or referring. There’s no need for recruiting people since you’ll be making money simply by recommending someone else’s product.
Now, there’s room for some shadiness here, too. It is common for people in affiliate marketing to promote products with which they have no experience – they simply sign up for the affiliate program and start trying to sell based on the product’s website description alone.
While you can go about affiliate marketing in this way, you’re only ever going to make real money if you are familiar with the products you are trying to sell. As you can imagine, it is extremely difficult to sell products and services you don’t have any firsthand experience with!
If you want to become an affiliate marketer, you’ll have to join affiliate programs that interest you. You might choose an affiliate network such as:
Network Marketing vs. Affiliate Marketing: Pros and Cons
When considering the difference between affiliate marketing and network marketing (and trying to figure out which one will be best at helping you make some extra money), it’s a good idea to weigh out the pros and cons of selling with each kind of marketing program.
Most of the time, affiliate marketing comes out on top. As long as you have your own website or sales network, joining an affiliate program is easy. Most consistently accept new members and are eager to have fresh faces promoting their services and products.
With network marketing, you often have to buy in to start selling. You can’t start making money until you purchase a starter kit, and you’ll have to meet a minimum sales amount to stay active in the network.
Although this can easily go awry, with affiliate marketing vs. network marketing, you technically don’t have to have any kind of experience with a product or service. You also don’t need to hang on to any inventory. While network marketing requires new distributors to become personally acquainted with the brand, with affiliate marketing, you could easily learn everything you need to know by browsing a product’s website.
Another difference between affiliate marketing vs. network marketing is that, with an MLM, you’ll almost always lose money. An MLM is set up so that only the person at the top of the pyramid can make any real money – it’s a gamble as to whether you’ll be able to profit since you’re dependent on the network beneath you to make enough sales to profit.
The money MLMs generate almost always goes singularly to the top – so while you’ll be told that you’re a “boss” and in charge of your own income, the reality is that the money MLMs typically offer is only a false promise at best.
That’s a major difference between affiliate marketing vs. network marketing. New affiliate marketers are in charge of all direct communications with a company. You’ll be in charge of your affiliate website and all website or person-to-person sales. You won’t’ be reporting to anyone – just yourself – in your own affiliate program.
By building an affiliate business, you’ll be able to learn the ins and outs of internet marketing in a fun way. Most affiliate programs allow you to create a passive income stream, and there’s no need to host tedious Facebook live parties, classes, or events that don’t do anything besides tire you out!
Network Marketing vs. Affiliate Marketing: Which is Better?
When deciding what type of marketing is right for you, it’s important to consider the pros and cons of each.
In network marketing, you focus on building your downline through people that are personally recruited by you. With affiliate marketing, there is no need to recruit anyone but yourself as an individual business owner because commission rates are based solely on sales made from products or services sold via web pages created by affiliates themselves.
If someone has a personal connection with who they want to recruit in their downline, then network marketing may be the best choice for them; otherwise, if they don’t have connections and prefer not having any responsibility other than running their own business online, then affiliate marketing would probably work better.
Of course, deciding to become a network marketer or an affiliate marketer can be a tough decision – so take your time! Weigh the pros and cons and consider our tips above.