Hello, readers! Let me ask you one question: What is marketing according to you?
Marketing has numerous images associated with it. When we hear marketing, we think about billboards, newspaper advertisements, banner ads in the sidebars of websites, and so on.
We think about marketing from the tea stalls outside colleges to large digital marketing agencies. We go from leaflets to YouTube ads. All the things that we think help to increase sales come under marketing.
Marketing is the process of getting the audience interested in the products and services of a business, building a desire in them about the products and services, and convincing them to buy.
Due to the global growth of the Internet, marketing strategies have grown and evolved with time. Now marketing is not just limited to customers, sellers, salesmen, and businessmen. Marketing has evolved rapidly and new types of marketing are seeing the light of day. Businesses utilize the power of new techniques to expand and grow.
Due to the increasing number of techniques and strategies. businesses must determine the right strategy. One marketing strategy may work for one campaign, but may not be suitable for another.
Two such types of marketing are Affiliate Marketing and Network Marketing. Although many confuse the two, this post is going to help you identify the difference.
In this post, I will share what differentiates Affiliate Marketing and Network Marketing. So let’s jump in!
This is going to be a comprehensive post on Affiliate Marketing vs Network Marketing. So fasten your seat belts and read on!
(1.1) What is Network Marketing?
- Network Marketing is a business model that relies on distributors to grow a business.
- There are 3 methods by which distributors make money in Network Marketing:
- Lead Generation
- Hiring other distributors to sell products and services
- Building and Management – to teach the methods, strategies, and techniques to recruits, and motivate them to take action.
- Network Marketing is categorized as:
- Multi-tier (Multi-Level)
(1.2) Terminologies In Network Marketing
The following terms are used regularly in Network Marketing and you must acquaint yourself with them:
- Direct Sales: Network Marketing companies sell directly to their customers. The distributors are responsible for generating sales and are paid commissions for each sale.
- Distributor: The person who sells or promotes a company’s products and/or services is called a distributor. In simple words, a distributor is the salesperson of the company.
- Upline: The distributors right up to the Head of Sales are the upline. The upline gets a share of each sale made by their respective downline.
- Downline (Recruits): The people hired by the distributors are their downlines. For example, if you are a distributor or a company and you hire someone to sell with you, they are your downline.
- Sponsor: A person who recruits or adds new people to the company is called a sponsor.
- Plan: Plan is the list of all the methods by which the distributors make money. It also includes the pay range based on the number of sales and a distributor’s downline.
(1.3) Tiers Or Levels of Network Marketing
There are 3 tiers or levels in Network Marketing:
- Single-Tier Network Marketing
- Two-Tier Network Marketing
- Multi-Tier (Multi-Level) Network Marketing
Let’s see each one of them in detail:
- In single-tier Network Marketing, you sign up for a company’s program and start selling products.
- Single-tier Network Marketing is also called Referral Program or Affiliate Program.
- The distributors make money by selling the products to the customers. There is no need of having a downline in the single-tier Networking Marketing program.
- In the single-tier, distributors earn through various methods. You can explore all the methods in the below video:
(1.3.b) Two-Tier Network Marketing
- In the two-tier Network Marketing program, the distributor must have a downline.
- The earning structure for the distributor is as follows:
- The distributor will earn from the direct sales they make.
- They will earn a share of their downline’s sales.
- In the two-tier Networking Marketing program, the downline earns for each direct sale made by them. Additionally, a share of their earnings goes to their upline.
(1.3.c) Multi-Tier or Multi-Level Network Marketing
- Let me be honest: Multi-Level Marketing (MLM) is usually mistaken for a ‘pyramid scheme’ because of the similarity in structure.
- What makes Multi-Level Marketing better is that distributors sell products – genuine ones! Companies like Herbalife use MLM to scale their sales.
- A pyramid scheme, on the other hand, requires people to invest money. MLM has no investment and you can get started for free if I am not wrong.
(1.4) Advantages of Network Marketing
- Cost-Effective: To start Network Marketing, no investment is required. You may need to pay for training, but many programs are free of cost.
- Flexibility: As a distributor, you can promote a variety of products and enter new markets.
- Control: As a distributor, you can decide how you want to promote products. You can run ads, you can conduct webinars, you can cold call people, and you can use any method that you want. You have full liberty to choose your preferred method of promotion.
(1.5) Disadvantages of Network Marketing
- Difficult For Beginners: If you are new to Network Marketing, it will be difficult for you to generate sales right away. You will have to invest time to learn the skills and only then will you be able to start earning.
- No Predictability: In Network Marketing, be it single-tier, two-tier, or multi-level, you cannot say with conviction that you will generate x number of sales in 30 days. There is always uncertainty around!
Now, let’s move to the second part of this post, Affiliate Marketing.
(2.1) What Is Affiliate Marketing?
- Affiliate Marketing is the process of promoting someone else’s products and making money for each sale through your unique affiliate link.
- For example, if you are promoting laptops with $800 and a commission rate of 40%, for each sale you will make 40% of $800, which is $320.
- You will make money only if you generate sales, alright?
(2.2) Terminologies In Affiliate Marketing
- Product: It is the entity that the Affiliate Marketer promotes to her/his audience.
- Commission: It is the share of each sale paid to the Affiliate Marketer.
- Affiliate Link: Affiliate link is used to track an Affiliate Marketer’s performance, sales, commissions, etc.
(2.3) Parties Involved In Affiliate Marketing
- Vendor: The vendor is the product owner or creator. The commission rate is decided by the vendor.
- Affiliate Marketer: The Affiliate Marketer is the individual who promotes the products or services.
- Consumer: The consumers are the end-users of the products or services. The Affiliate Marketer’s job is to sell the product to the consumers and to convince them to buy.
- Affiliate Network: It is a platform that contains hundreds of products. The Affiliate Network provides tracking capability to measure the Affiliate’s performance. It also manages the payments of an Affiliate Marketer.
(2.4) How Do Affiliate Marketers Get Paid?
- Pay Per Sale: The Pay Per Sale is the standard method of paying Affiliate Marketers. Affiliates make commissions for each sale generated through their unique affiliate link.
- Pay Per Lead: In this method, Affiliate Marketers earn for each form submission on the company’s website.
- Pay Per Click: If Affiliate Marketers could send their traffic on the company’s website, they get paid. In this mode, no sales need to be made; Affiliate Marketers make money only for sending traffic.
- Pay Per Call: If an Affiliate Marketer could convince their audience to call up a company, they get paid. This mode of payment is popular in the real-estate and interior decorators business.
- Pay Per Action: If an Affiliate Marketer could encourage their audience to take a pre-specified action, they get paid. The action can be purchasing a product, booking an appointment, scheduling a call, installing a game, etc.
(2.5) Advantages of Affiliate Marketing
- Low Risk: There is no cost of joining an affiliate program and anyone can become an Affiliate Marketer for free.
- Flexibility: You can work anywhere and anytime.
- Multiple Sources of Income: Affiliate Marketers can earn from various sources.
To explore more advantages of Affiliate Marketing, you can read this post.
(2.6) Disadvantages of Affiliate Marketing
- No Negotiation: You cannot negotiate the commission rate even if you are the best-performing Affiliate Marketer.
- Possibility of Frauds: Many companies run fraud schemes and you can fall prey to them!
- Uncertainty: You can predict sales! There is no possibility of predicting the number of sales you could make in 30 days, for example.
To know the pros and cons of Affiliate Marketing, read this post.
The Differences Between Affiliate Marketing and Network Marketing
|ASPECT||AFFILIATE MARKETING||NETWORK MARKETING|
|Business Model||Affiliate Marketers make a commission for each sale.||Distributors can earn from their sales as well that of their downline.|
|Payment Modes||Affiliate Marketers earn through Pay-Per-Sale, Pay-Per-Lead, Pay-Per-Click, Pay-Per-Call, and Pay-Per-Action methods.||Network Marketers earn by promoting products at a price higher than their original cost.|
|Marketing Channels||Affiliate Marketers can promote products through social media, ads, websites, e-mail marketing, etc.||Network Marketers can promote promotes by direct selling and by downlines.|
|Started On||Affiliate Marketing was started by William J. Tobin in 1989 for PC Flowers & Gifts, an online flower shop.||Network Marketing was started in 1934 by California Vitamin Company. This company started as a direct sales company that let people use their products and sell them to their families and friends.|