Multi-Level Marketing (MLM) and Affiliate Marketing are both very popular start at home business ideas. These two businesses are suitable for those who wish to make some extra money part-time or full time for financial and time freedom.
In this post, I am going to show you the similarities, the differences, the pros and cons of these two businesses.
What is Multi Level Marketing (MLM)?
Multi-Level Marketing (MLM), also known as network marketing is a business that involve selling of
products or services through a network of distributors. You earn a commission by selling the company’s products or services.
You will also earn money by recruiting people into the company. Those people recruit by you are your downlines. You trained your downlines to do the same – selling company’s products and recruits new people.
The company will pay you commission for the sales made by your downlines. This is the benefits for recruiting more people to your team.
Multi-Level Marketing involves direct contact with people to sell the products. If you like talking to people, you will enjoy and be successful in this business.
All MLM companies have their own commission system. You have to achieve certain amount of sales to qualify for commission and bonuses.
Some MLM companies are Avon, Market America, Mary Kay, Herbalife
Does MLM look like Pyramid Scheme?
The answer is YES.
MLM is a legitimate business model and Pyramid Scheme is illegal.
How do we differentiate the two?
For MLM, your make money by selling products and services, at the same time, you recruit and trained people (downlines) to do the same. You earn commission when your downlines make a sale.
For Pyramid Scheme, you make money by recruiting people only. There are no products or services to sell. The people at the top make lots of money and the people at the bottom are losing money.
What is Affiliate Marketing?
Affiliate Marketing is you provide customers to somebody’s products. You look for customers online through your website and the merchant provides the products. If your customers make a purchase through your site, you earn your commission. The amount of commissions varies with different companies, products and services.
For affiliate marketing, there is no inventory or shipping to worry about. You are actually selling other people’s products and make money on every sale.
You can choose to promote anything you like. Any products or services that can help others solve their problem will be a good choice. There is great potential in this business. If you are willing to learn the skill for affiliate marketing, you will be surprised to see what you can attain.
The above program shows how affiliate marketing works.
You build a website on your niche, hobby or anything you are passionate about. You create the content. In your content you can promote any affiliate products or services.
When customers find your website, interested in your products or services and make a purchase through your affiliate link, you have a sale and you earn commission.
Some companies who employ affiliate marketing are Amazon, EBay, Walmart, Nike
Similarities between MLM and Affiliate Marketing
- you do not need to have any prior experience to get started.
- Both involves selling other people’s products in order to earn commissions.
Differences between MLM and Affiliate Marketing
- You make money from MLM by selling products and also from recruiting others to do the same. Affiliate marketing just selling products.
- MLM are people business. You need to make direct contact with your customer to promote the products. Affiliate marketing promotes products online.
- MLM has restrictions. Usually it allows you to sell only one company products. With affiliate marketing, you can sell any products from any affiliate companies.
- MLM has many levels that depends on your total sale amount and the number of downlines. There are no levels in affiliate marketing.
Pros and Cons for MLM
- easy to start as home business
- minimum amount of technical skill
- good for little side cash as part-time job
- can benefit from long term gain by leveraging other people (downlines) work
- advancement to higher level
- you might spend time training your team members but get no sale results
- team members will leave the company
- many conference calls to support team members
- at leadership level, there are restrictions to promote multiple MLM
- challenging for those people who are not good at connecting and talking to people to promote products
- damage relationship with friends and relatives by promoting stuffs to them
- it takes many years to build a large team
- the MLM company might shut down and all your hard work and income will be gone
- cannot automate the business, this is people-people business
Pros and Cons for Affiliate Marketing
- all sales are done online, do not need to phone or meet people
- can automate the business
- very low start-up cost
- no need to be an expert to get started, you learn along the way
- do not need to quit your job, start as a part-time project
- spend all your time on yourself, do not need to train others
- do not need warm markets like friends and relative to sell to them
- many affiliate marketing program do the work for you, you just learn how to generate traffic to your website
- no customer service is required. All post-sale query handled by the merchant
- can scale up with paid advertising, increase sale quickly
- learn skills that can create your own products and market them
- can promote anything you want
- generating passive income. Earn money while you sleep
- can have multiple stream of income
- have to learn online marketing skill
- some level of computer skills
- have to follow the rules from affiliate marketing programs
- difficult to establish customer base
- If you don’t treat it like a business, there will be no sales
- need paid advertising at some time
As you can see, there are pros and cons for MLM and affiliate marketing. There are groups of people doing very well in either one business. There are also people who are very successful in both the MLM and affiliate marketing.
In my opinion, if you are good at networking, talking, face-to-face meeting with people, you will like MLM.
On the other hand, if you like to work online with computer, affiliate marketing will suit you better.
I choose affiliate marketing because I am not good at networking and meeting with people. Also, I like to work online where I can automate my business.
To be successful in these two businesses, hard work and persistence are two important factors.
These two start at home business ideas will not make you rich overnight. It takes time to build the business. Once the business is running well, you can make money while you sleep :).
If you choose MLM, you really have to take your time to do your research to identify what MLM program is good for you and which one you
need to avoid.
If you choose affiliate marketing, you’ll need to look for a system that will provide you with good training and support. There are many affiliate marketing systems in the market. The one that I am using now to build my online business is Wealthy Affiliate.
I hope you find the information in this post helpful and now you have a better understanding for MLM and affiliate marketing.
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If you have any questions about MLM or affiliate marketing, please feel free to leave them below.
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