I have to start this particular article with this disclaimer. I have nothing against MLM (Multi-Level Marketing) or those who have found their niche within it, unless they don’t know what the word ‘NO’ means or they don’t realize that a funeral is not the right place to sell toiletries or washing powder (why did those two come to mind?)
I’ve have been seeing Affiliate Marketing compared to MLM for years now and to be quite honest, I really thought that the difference between the two was so obvious that a comparison could never be made. Not so! People, who obviously don’t understand what Affiliates do and how their programs work, are assuming that it is just another ‘MLM’ business model. Nothing could be further from the truth.
So, my mission today is to demonstrate the (obvious) difference to those who would compare the two, once and for all.
Firstly, the popular MLM business models that have been around for years, long before the advent of the Internet, are well known to most people, at least, I assume they are to those that make the comparison I speak of. Otherwise, on what do they base the assertion that they are the same or even similar? The two most well known MLM businesses, we’ll call them the two “A’s”, in fact, both market very good quality products and, by all accounts, service their customers very well. I think the aspect or idea of MLM that causes some Affiliates to often be concerned about the comparison is the memory of the MLMer who tried to sell perfume or hand cleaner at a Baptism.
Basically, without going into huge amounts of detail, MLM is a network (also known as ‘Network Marketing’) of distributors, who SELL products to the distributors they have recruited. The distributors make profit on the products they sell to their ‘underlings’, and so on down an often very long line. Some Affiliates DO have massive ‘Downlines’ and they do make sizeable sums from the ‘residual’ commissions generated by those who joined under them however, Affiliate Marketing is NOT an MLM model, even if there is a ‘Downline’.
In Affiliate Marketing there is no dependence on those who join underneath for you to earn a good income. It is a business model in it’s own right and doesn’t rely on the ‘Downline’ to generate the bulk of the income. Residual commissions are usually very small and are simply an encouragement and reward by the merchant for those Affiliates who bring others into the ‘fold’. Conversely, in MLM you need to have your ‘underlings’ selling in order to make the decent money.
The major difference, and in my opinion, the whole difference, is that Affiliates don’t BUY products from their ‘sponsor’, who buy from their ‘sponsor’, and so on up the line (as is the case in a true MLM type business). Affiliates, regardless of where they are in the Downline, simply refer customers directly to the merchant, who is the only one who does any selling at all. All are paid the same commissions by the merchant. There is no discrimination between an Affiliate who has no downline and one who has hundreds (like the bigger discount that MLMer’s get for buying more product), nor is there usually any difference in commission between an Affiliate who refers more customers. Affiliates also do not touch the product, it is delivered directly by the merchant, whether it be downloaded or physically shipped.
In the nutshell, an Affiliate is in fact, an Agent (not unlike, say…an Insurance or Real Estate Agent), who is paid a fee for introducing a buyer to a seller. A ‘spotter’ for the merchant, if you like. Affiliates are an advertising tool used by merchants because of the great amount of website visitors that their products can be exposed to.
So, I CANNOT see how the two can be compared.
There are fundamental differences in the business model and the activities of those working the program. There is also absolutely no similarity in the way in which the products are sold and distributed. Basically, products are NOT sold or distributed by Affiliates, at all. The merchant does all this after the customer has been referred. Again, not so in a true MLM model, where products are physically sold (even at ‘parties’) and usually delivered by the MLMer.
No cash, checks or credit cards are seen or handled by Affiliates, who have no need of these often-cumbersome aspects of any business. MLMers collect payment and generally use that to pay for the goods that they have purchased from their ‘sponsor’ and resold. The number of hands that MLM products pass through before they get to a user can be astounding. Not so in Affiliate Marketing. The goods are sold once, from the merchant to the buyer. Finito.
NO, to be honest, I simply cannot see how there can be any confusion. Regardless of what the real reason is for these comparisons, one thing is certain; Affiliates do not like being told they are involved in MLM. Perhaps MLMer’s feel the same way about Affiliate Programs. I don’t know, but I’m sure both are all very nice people 🙂