Many think that Network Marketing and Affiliate Marketing are the same method of marketing using two different terms. This is not so. In this article, I shall explain clearly what is the difference between Network Marketing and Affiliate Marketing. And why this is more important than you realize.
I will also make recommendations on what you should choose, and why.
Please note, I have been involved in both, Network Marketing as well as Affiliate Marketing. The lessons I have learned can prove invaluable to you.
Be aware that another term for Network Marketing is Multilevel Marketing often referred to as MLM. Basically, they are both the same thing, although some may argue they are different.
What Network Marketing And Affiliate Marketing Have In Common
There are similarities between these two forms of selling products as shown by the following list.
- Both are systems designed to sell products to meet a need or provide solutions to the buyer and make you money.
- A steady and growing stream of customers is essential to generate income and growth.
- Hard and consistent work and focus are necessary for both to become successful. No work, no income.
- Since the cost to get started is relatively low, it is easy to quit when success doesn’t come quickly.
- Entrepreneurs have become extremely wealthy using both business models.
- The process of gaining wealth may take several years. Neither is a get-rich-quick business.
- Both approaches have the promise of generating residual income.
- It is crucial to get trained to do either business correctly.
There may be other areas of commonality but these are the major ones. Now let’s look at how they are different from each other. First I will do a summary. Then I will go into explaining both and discussing the differences in more detail.
What Is The Difference Between Network Marketing (MLM) And Affiliate Marketing (AM)
|Network Marketing (MLM)||Affiliate Marketing|
|1||You market products from one company||You can market products from many companies|
|2||You create and leverage a sales network to maximize sales||You leverage the Internet to maximize sales|
|3||You have to build a sales network by recruiting||You don’t have to recruit anyone|
|4||Your commissions are based on the sales you make and your team||Your commissions are based solely on your sales made online|
|5||Your company sets rules and guidelines you must follow||You own your company and make your own rules|
|6||You undergo training and ensure your team also gets trained||You undergo training just for yourself|
|7||Meetings for sales, recruiting, and conventions are the norm||You don’t have to attend any meetings|
|8||Minimum monthly sales are mandatory to qualify for commissions||You have no minimum sales to qualify for commissions|
|9||Your overhead costs can be very high||By contrast, your overhead costs are very low|
|10||The majority of sales in your network are generated by members||All sales originate from customers who buy through your website|
|11||You are in danger of signing up for an illegal Pyramid Ponzi scheme||You have no danger of getting involved in a Ponzi scheme|
|12||Residual income is hard to achieve||Residual income is easy to achieve|
Pause for a moment and read the similarities and differences again. Are you starting to see the contrast between Network Marketing and Affiliate Marketing? I’d like to go deeper into both forms of marketing, to come to my conclusion at the end.
How You Make Money Through Network Marketing
Members are recruited into the company by another member and placed into their downline based on the compensation plan. All members are independent distributors and are not employees of the company. You earn money in three ways.
- You sell the products at retail and earn a commission which is the difference between retail and wholesale.
- You earn a small percentage of the commissions your downline sales team makes based on the compensation plan
- When you and your team exceed preset sales volumes, you can earn a bonus.
The details of how this compensation plan works vary between companies. This is complicated and can be confusing. Special training is given by the company and other leaders to clarify how this all works.
One fact is indisputable. Your income is directly related to the sizes of the network you are able to build and the sales volume in dollars generated by yourself and your downline.
Very few are able to earn any income at all. The reality is, most of those making any money, earn very little. Rarely enough to pay for their monthly purchases to qualify for commissions.
I wrote a critical post about earning money in MLM called, “MLM Online Secrets – Your Upline Doesn’t Want You To Know.” This post explains in detail why most people fail in MLM.
How Do Most MLM Companies Make Their Money?
Most of the products are purchased by the members themselves. See how Motley Fool explains this fact.
The Common Denominator Among MLM Companies
Have you had the experience of someone trying to recruit you into an MLM company they belong to? Often this person is a family member or a good friend.
In fact, the sales training of every MLM company encourages their distributors to approach family and friends first to recruit into the company as independent distributors. When this avenue gets exhausted, and people start to avoid you, the next step is to use lead generation systems to market to.
You could get into legal trouble if these leads were not collected from individuals who are looking to enter the direct sales business, as companies like to call this sales method.
Why MLM Companies Focus Heavily On Recruiting?
It is extremely tough to earn sufficient commissions to replace your day job. Less than 5% are able to do that. Less than 1% of distributors earn a six-figure income and above.
Eventually, distributors get discouraged when they find out they are spending more money than what they are earning, and quit. If they find the products helpful, they stay on as Distributors so that they can purchase the products for personal use at wholesale prices.
Often they find themselves accumulating more products than they need and consider this expenditure a waste of their money. Then they stop buying and essentially leave the company.
Attrition rates are very high. Since the majority of sales are generated by the personal sales of distributors, new recruits are critical to maintaining sales.
Meetings And Conventions
Regional training and recruiting meetings followed by annual conventions are common practices for all MLM companies. Their aim is to create an environment for their attendees to have a good time as well as to get trained by the experts in the company.
Distributors are strongly encouraged to bring guests to these events for the prime purpose of being exposed to expertly delivered recruitment pitches. The idea is to show prospects that they do not have to recruit themselves. All they need to do is to invite people they know to these events as guests.
New products are always introduced at conventions where there is a major push for the attendees to buy in a specially laid out room at the convention.
When I attended conventions like this for several companies I had been a member of, I ended up buying a boatload of products as well as tons of new recruiting tools to use in my business to recruit others. And so did everyone else. The hype was at a fever pitch that I felt I had to buy the new products to try out and share with customers I didn’t have yet.
Companies set this up so that products would sell out to create the urgency to purchase while attending the convention. Many products did run out, and could only be back-ordered.
Do you still want to enter the MLM business? If you still do after reading what I have told you, here is a video you should watch.
I was pretty good at inviting family and friends to attend these events and conventions. They even signed up as distributors and joined the auto-ship program. This led to modest success for me in generating a monthly income.
My success streak ended when my recruits were not able to duplicate my efforts. Hence, the promise of earning enough commissions, to at least pay for their expenses, didn’t materialize. My network withered away and my commissions evaporated.
It dawned on me that this business was harder than working for a paycheck. The effort to constantly recruit was much higher than I bargained for.
Moreover, I had set up a monthly auto-ship in order to qualify for commissions. The shelves in my home were filling up with products at a greater rate than what I used. Hence, I eventually gave up on making money through MLM.
Very few are good at doing this. If you already have an established email list you have a good chance to succeed.
How To Make Money Through Affiliate Marketing
The concept is very simple and shown graphically below.
Step 1 – Choose An Interest
Using your passions to help you choose an interest is highly recommended. When you research your passions I am certain you can find related products and services that can provide solutions or meet a need for many individuals. This is where you will choose your niche.
Think how much fun you can have thinking about all the products and services you can find that can help others. Unlike MLM, you are not tied to one company. For example, you can become an Amazon Associate for free and direct customers to these products on Amazon and earn commissions when purchases are made.
Step 2 – Build A Website
Your website becomes the channel you use to create content to help your visitors who want these products make an informed decision to purchase. Once they cross that path, you conveniently have a call to action strategically placed suggesting they click a link to go to the appropriate sales page on Amazon where they can make their purchase.
Besides Amazon, there are thousands of companies that have affiliate programs. I am certain many others exist that have products and services related to your passions. Since you are not tied to one company, you can become an affiliate for many companies, within reason of course.
Building a website today is really easy. If you want to learn more about this, you can join my email list at the end and I will send you relevant information on this topic.
Step 3 – Attract Visitors
Once you have your website built and are starting to fill it with valuable content, the next step is to attract visitors I mentioned in Step 2.
There are well-established processes to do this which you can learn about. Your objective is to have your posts land on Page 1 of the search engines when someone enters a question in the search engine window looking for what you wrote about.
Step 4 – Earn Revenue (A Secret Explained)
Yay! This is the best step. Right? Once visitors land on your post, read it and find it answers their questions, they are ready to buy. Lo and behold, you insert a call to action suggesting they click a link conveniently located, that takes them directly to the exact location on Amazon where they can purchase the product.
Amazon will take care of the complete purchasing and shipping process. And Amazon will send you a check, or a deposit to your bank account. You select the method you want to get paid.
This process is common to all companies that have affiliate programs.
Would you like to know a big secret? While your customer is on Amazon and makes other purchases, you will also earn commissions on those, even if they are not related to your niche. How cool is that?
Business Expenditures For Network Marketing (MLM)
Your cost to create an affiliate marketing business is minuscule compared to MLM. Consider the following costs for MLM.
- Most MLM companies have some kind of initial membership fee.
- In order to earn commissions you will need to generate a minimum sales volume, either by making personal purchases or through sales in your network. As a newbie, the chances are you will be responsible for making these purchases.
- Local meetings always charge their distributors a small fee, typically between $10 and $20. Guests are always free.
- All MLM companies apply tremendous pressure to attend their annual conventions. They state bluntly that if you want to succeed in your business attending the convention should be mandatory. Now add in the registration fee, hotel, transportation, and meals. These conventions usually last for three days or more. You could end up out-of-pocket by over $1000 for this annual event.
Let’s be conservative in adding up these costs.
- Monthly minimum product purchases. You have to be the product of the product: $50 (Annually $600)
- Monthly meeting costs: $15: (Annually $180)
- Annual Convention: ($1000 minimum)
- Promotional and recruiting tools, including website fees (Annually $240)
- Misc costs for personal car use, gas, insurance, wear and tear: (Annually $500 minimum)
Let’s add this all up. Here is what you could end up paying when you take your MLM business seriously:
$2520 Annually OR $210 Monthly
These are very conservative calculations. For some MLM businesses, you could end up spending more than $5000 a year.
Network Marketing Income
The following stats are excerpts from an MLM marketing report by Truelist. Their sources include Fundera, Statista, and AP News.
50% of those in MLM lose money. About 23.5% break even. And only 26.5% make any profit.
Here is a mind-blowing statistic. Less than 1% of those making a profit earn six figures or more annually!
Sadly, Network Marketing is filled with distributors who are deeply connected with their company. Those who are earning a small income, continue to make their monthly minimum purchases in order to qualify. Even though what they pay is less than what they earn. Eventually, they have other more important bills to pay and quit the business.
Business Expenditures For Affiliate Marketing
This can vary, depending on whether you do all the work yourself, or outsource some of it. Outsourcing is usually recommended after you earn enough to replace your day job.
In my case, annual costs are less than $700. After paying this from my income, I earn a very nice profit. By contrast, I never made a profit in Network Marketing. Meaning, I lost money month after month until I saw the light and quit.
The vast majority of those in MLM earn little or nothing and lose money. Check the distributor earning statements of MLM companies buried in small print.
For example, when I was a distributor for USANA, the average earnings of all the distributions were less than $600 annually. Since there were many high-income earners in USANA, there were also many no-income earners too.
I stuck with USANA for far longer than I should have because I liked the company and the products immensely. I just couldn’t make that business work for me. Eventually, I quit. USANA wasn’t my first MLM company, nor was it my last.
If I had discovered Affiliate Marketing sooner, I would not have entered into the Network Marketing business.
Affiliate Marketing Income
The following stats are excerpts from an affiliate marketing report by Truelist. Their sources include Influencer Marketing Hub and Statista. The following income is after business expenses are deducted.
- Affiliate marketers make on average over $89K annually.
- The least make $58K annually.
- Those that make the most earn $155K annually. The most successful earn over $248K annually.
Let me keep this real. It is much easier and costs much less to get into Affiliate Marketing compared to Network Marketing. Hence, the early quit rate is also higher. This is a good thing. The sooner you figure out affiliate marketing is not for you, the better.
It is much harder to quit an MLM company. You are not only starting a business, but you are also joining a cult-like organization. Once you purchase your starter kit, and sales and recruiting tools and attend business meetings, psychological bonds are created that make it much harder to quit.
Unlike Network Marketing, you are not tied to one company. Although it may be easier to quit, those who persist, develop the necessary skills, and work consistently, have significant success. It may take a few years to reach these levels of income as shown above.
I Am Not Alone In Building My Affiliate Marketing Business And You Don’t Have To Be Either
How is this possible? The choice is yours. I chose to join a community that has training, tools, and support to get coaching and mentoring to help me succeed. You can go it alone, but I do not recommend it.
I have only explained the basics of Network Marketing and Affiliate Marketing, including the typical income you can earn in either. What do you think my recommendation is going to be?
Without a doubt, AFFILIATE MARKETING!
Apart from not requiring you to build a sales network and train people, other compelling reasons are:
Lower Cost Of Entry For Affiliate Marketing!
Higher Probability Of Earning A Decent Income!
Words Of Caution
I want to repeat what I stated earlier. The Dollar cost of entry into affiliate marketing is very low. Sadly, if you don’t achieve success quickly, you are more likely to quit. Unlike Network Marketing, your success is dependent mainly on you. There is no upline or company to guide you. However, there are communities you can join to fill that void.
Success is highly dependent on learning the business correctly. Then put into action daily what you learn. You have to create a plan. Then follow that plan. It takes time to learn all the steps. You will make mistakes.
Knowing this, how can you not only learn the business but get the help you need along the way? Without paying a fortune to so-called gurus? For the privilege for them to share their knowledge with you and work with you?
Fortunately, there is a way.
How To Get Into Affiliate Marketing Easily
Now that I have recommended Affiliate Marketing over Network Marketing, I want to share how you can learn all about affiliate marketing easily. Just like I and over two and a half million others have since 2005 in this amazing community.
Please fill out the form below with your name and email address and I will share how you can learn the 4-Step process to select your niche, build your website, drive traffic to your articles and make sales to earn commissions. You will also receive a valuable gift for free detailed below.
If you feel this is for you, I will invite you to join the starter program for free. You can test the system and see what it offers BEFORE you upgrade your membership.
Once you decide to take this next step, it won’t cost you anything near what you would have to spend to run a Network Marketing business. Is that fair?
To thank you for sharing your information with me, I will also provide you the digital version of the iconic book by Napoleon Hill, Think & Grow Rich, my gift to you, completely free of course.
This book teaches you what you must do in order to succeed in anything in life. Knowledge alone won’t lead to success. You have to develop the habits to apply this knowledge consistently.
Even though affiliate marketing didn’t exist at the time of Napoleon Hill, the principles he taught to develop winning habits are timeless and apply perfectly to Affiliate Marketing.
I wish you much success in your life, no matter what direction you may choose.
10 thoughts on “What Is The Difference Between Network Marketing And Affiliate Marketing?”
Thank you for the very informative article. Many people think MLM and affiliate marketing are the same. Thanks for clearing that up. A great explanation of the difference. Network marketing is very difficult to be successful in , unless you get in at the start.on the ground floor and the product or products are very new and novel to most people. Thanks again. Deanna
Thanks for commenting and for your insights. You stated something that I had overlooked. When an MLM company introduces a product that is new and unique, that can attract customers as the price at that point is not a big issue. Once it becomes commonplace like a commodity the novelty wears off which makes it more difficult to make a compelling argument to become customers as well as distributors.
I shall take your insights seriously and consider inserting that into future articles related to MLM.
Hi. first of all thanks for sharing your knowledge. through reading the MLM part, isn’t it better for people that have large communications? and another question, if I want to do affiliate marketing and make a website, then can I use links from two companies like amazon and one another? and could you name some of the companies like amazon?
Good questions. People who already have large databases of followers are more successful in MLM. However, it is important how they approach their subscribers that will make or break them. Walmart and Target are good alternatives to Amazon. They all have affiliate programs.
Thanks for your comments.
The article is spot on in describing the differences between Network and Affiliate Marketing. It has a lot of info to take in, you don’t go into detail with the numbers (which I find so many then get bored if you introduce a bunch of numbers and percentages. Many years ago I was one of the fools that tried Network Marketing because my wife wanted to try. I was able to show her that this was just a Ponzi scheme than an actual income builder.
I would suggest using small graphics to break up the content a little bit. You have to admit, that your article has a lot of information for a public that usually doesn’t even read a newspaper.
I hope this helps. Good luck my friend.
Thanks for the tips. You make some good points that I will take seriously and make some edits.
Hi and thank you for your informative post on the difference between network and affiliate marketing.
I wasn’t aware of the details of network marketing, nor the vast difference between the two forms of marketing strategy.
I’m currently 10 weeks into my very own website, niche, and affiliate marketing business. I feel assured to read about your article and know that I have made the right choice as to where is best to put my efforts to make a successful online business. The average incomes were interesting.
What is the average time frame for affiliate marketers to make these low, average, high wages? Thanks again for sharing your expertise.
Thanks so much for your response and great question. Glad that you found this helpful in validating your decision to go with affiliate marketing.
The time it takes to earn the minimum results stated depends on each individual. If you put in the effort to write at least three articles a week, use social media and email marketing to promote your posts, and use analytics to test what works and what doesn’t, people earn that level between two to three years. In that time frame, you will achieve a growing income stream.
I hope that helps.
Many people do not know the difference between network marketing and affiliate marketing, so it is good to find the descriptions here. Having worked for a multilevel marketing company, I was often told that network marketing was not the same as MLM, although I knew it was the same thing, just with 2 different terms for it.
Affiliate marketing is to me a better way of earning a living. I do find this post to be very long and one almost looses track of what it is all about. So maybe it would be good to split it into 2 separate posts? Just a suggestion. Thank you.
Thanks so much for sharing your experience with Network Marketing. I am not surprised that you also have had people tell you there is a difference between Network Marketing and MLM. There may be a subtle difference but when you get down to the process to earn money, they are the same.
I took your advice to heart regarding the focus and length. So I went through a second edit using the feedback I received from you and another person.
I removed big sections that diffused the focus and didn’t contribute to the aim of this post. I do have another post that goes into great detail about MLM and I will use an internal link for that so that there is no need to provide those details here.
I wish you all the best in your online business journey.