“What is the Difference between Affiliate Marketing and MLM?” We get asked this question regularly, so we wanted to show you the differences between the two in our guide and share with you why we prefer the one over the other.
They are both very different business models and the main reasons we prefer the one over the other is main down to flexibility, choices and the huge cost difference.
In this guide we will detail the main differences between affiliate marketing and MLM, the pros and cons of both business models and a little bit more about our preferences.
Let’s get started, shall we?
Here are the Main Differences Between Affiliate Marketing and MLM
Before we go into any detail, I have put together this little chart that shows you the main differences between affiliate marketing and multi-level marketing:
The main reason why I like and prefer affiliate marketing better is because of the flexibility and opportunity that comes with not being tied to just one MLM company. An affiliate marketer could promote endless products from endless suppliers all for free.
Then there is the added benefit of not having to hold any stock or inventory. This means that you will not have to worry about working out profit margins when you could just earn a percentage of a sale which is really straightforward and clear.
Plus, you have the much lower costs when you are first starting your business if you choose affiliate marketing. This is because you only really need a blog to get started or even start uploading videos to YouTube as an option.
It is the ease at which you can get started with affiliate marketing that we like; it is a very simple business model and that makes it a winner for us as the best way to start an online business.
Let’s get into describing what MLM is…
What is Multi-Level Marketing?
MLM or Multi-Level Marketing can also be described as Network Marketing. It is a form of direct selling where you, as a representative or distributor, will sell products to consumers.
You will be joining a team, where you are all going to be promoting the same products and services. This also means that you are going to be stuck with the same company and products.
MLM is called Multi-Level because there are a couple of ways to earn and also there are levels you can climb to earn more money, typically on the recruitment side.
So, the two ways you will normally see with an MLM to make money is:
- Retail Commissions – Selling to Consumers
- Referral Commissions – Recruiting New Distributors
Your earnings from this kind of business will be either from buying products at wholesale and selling them at retail prices for a profit or from recruiting other people to join your network, sometimes called your downline.
Once you recruit these people into your team, you will earn commissions from each sale they make and from the people they then recruit into their team.
Done right the money is in building up that team, but it also leads many to question whether MLM is a Pyramid Scheme.
In a sense, all MLM’s compensation plans on the recruitment side does follow a Pyramid Structure.
As you recruit other distributors and they in turn, recruit their own distributors and so on, it does start to resemble this:
Now there is an element of this graphic looking like a pyramid, and we will describe shortly why it normally means the people at the top are earning a lot and the people at the bottom are earning very little.
But the main point to discuss is that the way to see if an MLM is a legit company or not is to see whether they have any products or not…
A Pyramid Scheme will only have recruiting new people as the only option to make money. A legit MLM will have products to sell and you don’t technically have to recruit anyone, although that is where the bigger money is.
What happens in Pyramid Schemes is that people pay to be part of the network, but there are no products or services to be promoted.
They earn a commission from convincing someone else to pay up to join the network, then telling them to earn any money they need to get someone else to join.
The FTC have closed down many Pyramid Schemes like Digital Altitude or MOBE, as Pyramid schemes are unsustainable as it is reliant on new people joining and not the sale of any product or service.
So, if an MLM company has products for you to promote, then you can typically say they are legit.
However, whilst MLM may be a legit business model, that doesn’t necessarily mean that they are going to earn you the money they claim you can in their sales hype.
There is a lot of pressure to make sales and recruit new distributors, you need to be ready to handle that pressure. There is also an element of seeing how competitive it is in your local area. The best time to join an MLM is when it is new or about to boom.
But most are in heavily saturated markets with expensive products and this makes it harder for you to break into the market.
There are both benefits and concerns to joining an MLM, there are a lot of negative stories about MLM. But there are also people who have become successful in this business and made a decent income.
It all depends on the product and the company as to how successful you could be. But it is like anything, the business model needs to be right for you. If you are outgoing and love sales and recruitment, then all you need is the right MLM company.
Pros & Cons of MLM
Here are the benefits and concerns about joining an MLM
- Financial Independence – a lot of people invest into becoming an independent consultant as it offers them a huge opportunity of earning a decent income. Whether they are doing it part time or full time, they have the chance to make money to meet their needs
- Growth Opportunities – In MLM, consultants are taught how they can achieve something so they can grow their network and their profits. Since they receive a percentage for the profits of their recruits, they the chance to increase their investment and earnings by training effective consultants under you
- Flexibility – many independent consultants love the fact they can work their preferred hours. Business-minded people love it when they can work as many hours as they want, so they can make more money and don’t need to follow any schedule.
- Few Benefits – when you are working as an independent consultant, you will not get the usual benefits you would get when working for a company, this includes paid leave or health insurance
- Chance of Being Caught as Part of a Pyramid Scheme – there is a chance that you get caught up in an untrustworthy company that turns out to be a pyramid scheme. This is particularly common with digital products; it is the main reason why so many people have reservations about joining this business mode. We mentioned earlier, but two huge companies got shutdown by the FTC in 2018 by the FTC. Digital Altitude & MOBE were closed down as they had no retail products and only memberships available. People paid this to get licencing rights and to earn huge commissions.
- Costs are High – the costs are high with an MLM. First there is the start-up fee to get started with the company that could cost up to $1,000. Then there is the fact that you will need to buy stock to then sell it at retail prices. You will also have to factor in that you may need to pay to store this inventory, if you haven’t got the room at home.
- 73% of People Who Join an MLM Lose Money
– You can read the article here, but on average 73% of people who join an MLM struggle to make any sales and end up walking away having lost their money or are in debt.
- Selling to Family & Friends – 65% of the people who left an MLM say it is because it felt awkward selling to friends and family. I have seen a number of MLM’s tell you that they can help you come up with a list of 100 people to sell these products to. Well, that really is only about getting you to list your friends, family members and work colleagues.
- MLM Products are Expensive – We have reviewed many MLM’s and they all seem to have the same issues. The products are really expensive and have too much competition. Especially with more and more people using the internet to find products. Sometimes the products at MLM are like 75% more expensive that better products on Amazon.
- MLM Concerns Make It Harder to Sell – There are a huge amount of MLM’s out there, all with expensive products. Some people think they are possibly a pyramid scheme or at least not legit, so they have concerns before even start your sales pitch. This makes it even harder for you to make sales.
- Stuck with One Company – this is a problem on a number of fronts. If you wanted to promote something else, you can’t. Not unless you pay up to be a distributor of another company. But then you will have two sets of costs. The other, is that if you do join the wrong company and it is outed as a scam or pyramid scheme – you will be out of pocket or even worse being questioned about being involved in one. Many innocent people lost a lot of money when Digital Altitude was closed down.
What is Affiliate Marketing?
Ok, now we have covered the MLM part, let’s talk about affiliate marketing and see how it differs from multi-level marketing.
Affiliate Marketing is very much like a “refer a friend” scheme. It is an arrangement where an online business (for example Amazon) will pay someone (an affiliate) for driving new sales to their products and/or services.
An affiliate marketer will earn a commission for each new customer sale they bring for the products and services they promote or get paid for every lead they bring to the company’s targeted site through their affiliate link.
Simply put, you promote products from a company you are an affiliate of, and if the customer follows your link and buys it, you earn a commission.
Affiliate Marketers have a lot more choices and options than someone signed up with an MLM. You can work with one company or multiple companies. You are not tied to one company. This also means you are not tied down to just one company’s product range.
Instead, you can choose from a range of products or whatever is available and related to your niche online.
Imagine all the products that Amazon sells, with just one affiliate program account you gain access to promote everything Amazon sells. Added to that, there are literally thousands of affiliate programs out there.
Affiliate Marketers do not earn recruiting like with MLM, actually there is no need to recruit as one at all. They just need to refer people because affiliate marketers do not earn commission from the work of others.
They only earn when they driver new sales for products or services they want to promote, or whatever action they need to trigger the commissions. This could be an email sign up, leads, etc.
To get started as an affiliate marketer is a much lower cost than with MLM. Signing up with most affiliate programs are free. There are a few that require you to pay, but these are not necessary. I rarely apply to those that require a fee to join.
As an affiliate marketer, you will also get to learn online skills that MLM companies rarely teach because they either focus on face-to-face sales or teaching you how to pay for ads.
Paid ads can be very expensive, especially if you don’t know enough about what you are doing with online ads.
There is no need to go down the paid ad route as an affiliate marketer until you know exactly what works or what doesn’t work. When you have a proven free traffic record, you can then use that to increase your profits by incorporating paid ads.
Pros & Cons of Affiliate Marketing
Here are the benefits and concerns of affiliate marketing:
- It Pays Well – there are a lot of people that are starting their own affiliate marketing business as it has been proven to be one of the most effective ways to make money online. That doesn’t mean that it is necessarily easy, as there is a lot of hard work needed to be put in to achieve success as it is a performance-based business (the harder you work, the more you get out). However, if you are willing to put the effort in and put that effort in, you can certainly earn money from affiliate marketing. See examples of success stories here.
- Flexibility – Being an Affiliate Marketer means that you are your own boss. You decide what your working schedule looks like and you decide what strategies you’re going to work on to achieve the goals that you have set yourself. There is also the fact that you can work whether you like and where you are most comfortable, as that is where you will be most productive. It might be your sofa, or in the garden or a local coffee shop.
- Brings A Lot of Opportunities – When you compare MLM to Affiliate Marketing, MLM means you are tied to one company. This makes it more competitive and restrictive, as you are competing with other recruits. As an affiliate, you can work with multiple companies to promote products that are relevant to your audience and niche. Affiliate Programs are free to join, so you can join as many as you need to grow and expand your business and your offering on your website.
- You Choose the Products to Promote – Like I said, with MLM you are stuck promoting their products and only their products. But as an affiliate, you get to choose the products you are going to promote. You will typically start out with the products and services you know, but as you do more research your product list will expand exponentially, and the beauty is that you do not need to buy the products to be able to sell them. Just do some thorough research and provide valuable information to your audience.
- The Costs Are Low – Most Affiliate Programs are free to sign up with, and even if there is a fee, it doesn’t normally cost a lot and is usually just a security precaution to show you are legit and actually want to be an affiliate. All you will need is a domain and web hosting, which can all be for a low fee.
- Long Working Hours & Results Will Not Be Immediate – Affiliate Marketing is not an get-rich-quick scheme. There will be a lot of hard work to be put in throughout the early stages. It will be totally worth it, but this is about a long-term approach to this business model. Many affiliates who are now earning a 6-figure income had to devote a lot of time and long hours to reach where they are now. There are many factors to building up enough trust to get your website to the top of the search results and therefore your opportunity to start making money. You will need to be both patient and persistent to achieve success with Affiliate Marketing.
- Unstable Business – there is an element of affiliate marketing being unstable at times, even for those that have been doing it for a long time. For example, an affiliate program might change without any notice or even go completely. A google update, might affect your results and knock your confidence. You are going to need to expect a few bumps along the way and you will need to remain committed and strong to succeed in this business.
- Scammers are Everywhere – People who are looking for help or how to learn affiliate marketing are being met by scams everywhere by unethical product owners. They are promising really high-income claims but fail to deliver anything that will really help people. They often promote training that is outdated and provides you with information that will actually harm your business, let alone help you earn anything. We have reviewed a number of these programs and they promise you the world but fail to deliver anything like it. People hand over their money with the belief they will help but lose confidence in affiliate marketing because of the problems. It is a sad affair, that people get caught out by these scammers.
What We Prefer & Where You Can Get Started
There are many differences between Affiliate Marketing and Multi-Level Marketing. But the main difference between them is that you have a lot more control over your business as an Affiliate Marketer.
You get to choose what niche your business is based on, and then choose the products that you are going to promote and sell.
You are the one that decides how you are going to market/promote those products.
You get to choose what your website design looks like, etc.
There is also the fact that you haven’t paid a huge start-up fee to get this started too.
With MLM, you will only be promoting the products that they sell in that company.
There is also the point that to make any real money with MLM, you are going to have to recruit people to promote and sell it on your behalf, which is not as easy as it sounds.
There is also their reliance on traditional methods of selling, namely face-to-face sales or social media marketing. These are not in keeping with how people shop these days, but many of them do not offer training on how you could use internet marketing to improve your chances.
You will also normally have had to pay a high initial start-up fee plus a monthly autoship to get started too.
These are mainly the reasons why I prefer Affiliate Marketing. We have total control over our business and therefore the income we earn.
It is hard not to compare the two and come out with the opinion that there are definitely more pros to affiliate marketing over MLM.
However, there are many examples where MLM distributors are earning a decent income but when stats show that 73% to 99% of them lose money, it shows how increasingly difficult it is becoming to be successful with MLM. You are going to have to work a lot harder at MLM, if you want to become one of that elite 1% that is earning good money.
I think the one thing MLM companies are not doing well enough is switching to modern marketing methods and offering training with it.
Here is why…
MLM expects you to sell face-to-face, this normally means selling to your friends and family as they are the only people who you know and may feel comfortable enough to promote some products too. This can have its own problem, as it can definitely be awkward doing this.
But if you applied internet marketing (the skills you would use for affiliate marketing) and built a website to promote your products you would be able to reach a much larger audience and have a much better chance of success. But MLM do not teach you this.
We recently reviewed a company called Farmasi. It is a personal care and cosmetic MLM. It has a decent product range with affordable prices (most MLM’s overcharge) and it offers a website. But no training on how to market that website. But with the right internet marketing training, it could be a good option. But it is still only one company you are tied to. The skills we have learned to get free traffic can also be applied to an MLM you want to promote.
All in all, we much prefer affiliate marketing. We love helping people and that is what affiliate marketing is based on. There are no monthly sales quotas to meet whilst learning and getting started, you have the freedom of promoting what you want to promote and, whilst it is hard work, it is nowhere near the difficulty of an MLM business opportunity.
Where to Get Started
If you want to get started in affiliate marketing, or learn the online marketing skills like we have, and don’t want to be scammed, then check out the training platform we have been using to make money with.
Our #1 Recommended Training Program has step-by-step training, affiliate marketing tools and more support than you thought could be possible to get started with. To check out some of the success stories, then what they offer, read our full Wealthy Affiliate review.
Thanks for reading our guide, if you have any questions or comments to add, then please write them in the comments section below. We will get back to you as soon as we can and good luck going forward!!