Affiliate Marketing Versus Network Marketing (MLM): Income formula Revealed!

Both affiliate marketing and network marketing pay people for referring a product or service. What then is the difference between affiliate marketing and network marketing?

The difference is best explained in terms of the way compensation is structured to pay for performance. Because of the many hybrid forms of compensation payments available now on the internet, to a newbie scouting for business opportunities, it is easy to get confused over the many terms and definitions used. In evaluating compensation plans, it is essential to understand the subtle difference between the two models. You want to find out?which model yields more income?

What is affiliate marketing? Affiliate marketing is usually done online. In its simplest form, affiliate marketers are compensated on a one time transaction only. Unlike products offered in a MLM business, affiliate products are often ones that a customer would only need to purchase one time. Thus, the more the affiliate marketer sell, the more they make. This is quite akin to direct sales albeit made via the internet.

Affiliate marketing has a compensation plan based on performance measures. For instance, if the affiliate marketer is successful in the form of sales, clicks, registrations, etc, he/she gets rewarded. The desired action as a means of compensation is already pre-agreed upon by the affiliate merchant and him/her.

In a short space of time, the affiliate marketing model has also evolved to a 2 level (or in some cases, up to 5 levels) compensation plan. In the popular 2-tier version, for instance, you (as an affiliate of a particular e-book merchant) will earn commission when you sell a book to person A and if person A signs up to be an affiliate and manages to sell to person A1, you get compensated too, in addition to person A.

Let's now go on to talk about what network marketing is. In the network marketing model, the compensation plan works in a similar fashion, except that compensation by the sponsoring company can be paid up to several, several or unlimited levels. The number of levels and restrictions in terms of payout is very much dependent on the arrangement offered. As arrangements can vary from one company to the next, this makes comparisons of the various compensation plans available out there difficult. So be sure to read all the fine print!

At any level, a network marketer has the potential to earn a direct referral fee for directly recommending someone and a leverage fee when one of his/her "downlines" is successful for referring friends to the same network. In the popular binary plan adopted by many network marketing companies, each person in the network has two "legs" or "downlines". If more people get referred to the network, they automatically go below the "legs".

Ongoing customer use is what creates the real residual income in network marketing. The MLM business can generate earnings for a very long time even after the initial years of hard work and investment. With a solid network, residual income is assured at each renewal period of a "downline". If the product or service involved in is one that has to be reordered at each renewal period, income should just keep coming in like clock work.

How does the difference in affiliate marketing and network marketing translate into in terms of building your customer relationships and your earnings power? In the network marketing model, to ensure that your "downlines" renew at each period, you must ensure that you build up a good relationship with them. It is essentially a people-build-people and a leader-build-leader business. The ability to generate huge sums of money is increased exponentially when the network grows. The potential to make huge sums of money is thus greater here if you can employ the efforts of others to help grow the business vis-à-vis the affiliate marketing model. In affiliate marketing, your earnings ability is limited by your own direct sales plus an additional of 1, 2 or up to 5 levels of leveraging efforts.

Having described the above, it would seem that to maximise your income, it is best to join online network marketing programs as opposed to affiliate programs.

Nope...I don't think that's really the case either.

Affiliate marketing is best described as an entry to online network marketing. Affiliate products are easier to sell, likely to involve one rather than an array of products and therefore, less expensive. For instance, an e-book is likely to have an associated affiliate program while access to a membership site of digital products is more likely to pay for recurrent renewals of membership.

In conclusion, there is always no harm in joining different programs whether affiliate or network marketing ones. Just be sure that you understand how you are paid and channel your efforts accordingly. Afterall, your goal is to build multiple sources of income. You have a choice to represent what or which combination of products/programs work best for yourself.

Evelyn Lim is an online business entrepreneur. She publishes a Free Weekly Newsletter "Mapping You to Success" for aspiring e-biz owners. The aim of her publication is to equip readers with the skills to acquire multiple sources of online income. To subscribe to her newsletter, visit http://www.e-BizMap.com

---

How To Hold On To Your Customers Like Hell And Make Them Pay You Again And Again!

With the years competition online, has become fierce. Studies shows... Read More

Aesthetics and Web Marketing

For four years I worked in the editorial department of... Read More

How to Build an Asset Out of Giving Stuff Away for Free

We all do it I guess: give something away for... Read More

A Few Things I?ve Learned About Doing Business On The Internet!

A few things I've learned about doing business on the... Read More

Beware the Click Without the Conversion

Why is this funny?Because in essence, a "click-through" places money... Read More

Internet Marketing Basics

Almost all of the articles on Internet marketing lacks coverage... Read More

How to Turn Your Articles into a Viral Traffic Stampede

By writing articles you can send targeted traffic to your... Read More

10 Marketing Tips for Entrepreneurs

Nothing happens in business until a sale is made. Marketing... Read More

The First Steps In Ideal Internet Marketing

The first steps in defining your ideal marketing plan determining... Read More

Website Sales: 10 Scorching Hot Offers That Sell Like Crazy

One of the best ways to increase your sales is... Read More

What is Pay Per Call? How does it work?

Pay Per Call is the next wave of advertising on... Read More

5 Keys To Making Money Online

Would you believe there are tens of thousands of people... Read More

How To Make Readers Desperately and Uncontrollably Wanting To Buy Your Product

Are you looking for ways of persuading your web site... Read More

Why Have An Internet Marketing Business?

"The Internet Gold Rush is under way" Bill Gates, chairman... Read More

Persistence Pays ? Sweet Rewards of Dogged Marketing

No doubt, online marketing is the fastest way to get... Read More

10 Things the Work at Home Online Business Owner can Do to Improve their Search Engine Rankings

Search engine theory is great but most Web Masters Say... Read More

How SPAM Sells Sex, Greed, and Survival

The unsolicited email people react to most is what yells... Read More

How To Identify Ideal Money Making Web Opportunities

I was winding my way up the levels of a... Read More

The Seven Tips That Ensure Your Success Online

Whether you are now looking for opportunities to start your... Read More

Become a Star: 10 Do-It-Yourself Publicity Techniques to Build Buzz for Your Online Business

Public relations is popular because it is very cost-effective and... Read More

FFA Links and Free Classified Ads Dont Work

There are many ways to initiate traffic to your website,... Read More

Why Your Online Advertising Traffic Leaves as Soon as It Arrives

Online advertising traffic leaves when advertisers don't make it... Read More

Who You Trust and Who You Dont!

For the last couple weeks I have been running a... Read More

Trust, the Key to Success

Not everyone is comfortable putting their personal information online. It... Read More

Guide To Free Advertising

When I first started my internet home business, I realized... Read More

How to Earn at Least One Dollar for Every Website Visitor

The path toward success in Internet marketing can be a... Read More

Interactive Content ? Blogs, Forums, and Feedback ? What Does Your Web Site Need?

The business principle of continued contact and online relationship building... Read More

10 Things You Should Try To Barter For Before Buying

1. Information Products - it could be ebooks, "how to"... Read More

Don?t Let Legitimate Email Marketing Campaigns Suffer A Junk Mail Fate

Volume-based filtering may be pre-sorting your marketing messages to the... Read More

How to Market Your Web Site with Ethical Linking

Your web site's search engine rankings are determined in part... Read More

Internet Marketing Help

If you're looking for Internet marketing help you've come to... Read More

How To Use Pop-Ups Effectively To Generate More Profits!

What I'm about to explain to you will change to... Read More

How Old is Too Old?

How does a 74-year-old newbie break into the world of... Read More