Affiliate Marketing vs. MLM: What’s The Difference

Confused about affiliate marketing versus multi-level marketing (MLM)?

Affiliate marketing and MLM (Multi-Level Marketing) are two different ways businesses can sell their products through partners.

Affiliate marketing is when you pay someone a commission to promote your products directly to customers. MLM, on the other hand, focuses on building networks of distributors who recruit other sellers beneath them.

In this article, I’ll explain exactly how each model works, what makes them different, and which one might work better for your business.

What is Multi-Level Marketing (MLM)

Multi-Level Marketing (MLM) is a business model where companies sell products through a network of distributors, who earn money in two ways: by selling products and by recruiting new distributors.

Here’s how MLM works:

Let’s say Sarah joins an MLM company that sells vitamins. She can make money by selling these vitamins to her friends and family. But she can also make extra money by recruiting Jenny to sell vitamins too. Now Sarah gets a small cut of Jenny’s sales. If Jenny recruits Tom, Sarah gets a tiny piece of Tom’s sales too.

This creates layers of sellers, which is why it’s called “multi-level.”

Companies choose MLM because it helps them sell products without spending money on regular advertising or stores. Instead, they use personal recommendations from their distributors.

This works especially well for products that need explanation or demonstration, like skincare routines or health supplements.

Pros and Cons of Multi-Level Marketing (MLM)

Let’s look at what’s good and bad about using MLM for your business.

The Good Stuff (Pros):

• Low Starting Costs → Starting an MLM program is much cheaper than opening stores or hiring a large sales team. You mainly need a product and a plan to manage your distributors.
• Fast Growth Through Word of Mouth → Your products can reach more people quickly because each distributor tells their friends and family. It’s like having hundreds of salespeople working for you, but you only pay when they make sales.
• Motivated Sellers → Distributors work harder because they earn more when they sell more. Since they’re not paid a salary, you don’t lose money if they don’t make sales. The data shows MLM companies can grow to billions in sales using this model.
• Built-in Product Education → Your distributors explain products directly to customers. This works great for items that need demonstration, like beauty products or health supplements. About 34.7% of MLM sales come from wellness products because they benefit from this personal touch.

The Not-So-Good Stuff (Cons):

• Reputation Risks → Some people don’t trust MLMs because they confuse them with pyramid schemes. This can hurt your brand’s image and make it harder to attract good distributors.
• High Turnover Rate → Distributors often quit when they don’t make enough money. The average MLM seller makes about $35,430 per year, but many make much less. You’ll need to keep finding new distributors.
• Hard to Control Quality → When many people sell your product, it’s tough to control how they present it. Some might make false promises or use pushy sales tactics that can damage your brand.
• Limited Growth in Small Markets → If too many people sell your product in one area, they start competing. This can lead to unhappy distributors and fewer sales for everyone.

What is Affiliate Marketing

Affiliate marketing is a performance-based marketing model where businesses pay individuals (affiliates) to promote their products and only pay them when they make a sale.

Here’s a simple example.

Let’s say you own an online store that sells camping gear. You partner with Sarah, who runs a popular camping blog. You give Sarah special links to your products. When she writes about camping tips, she includes these links.

If her readers click the link and buy a tent from your store, Sarah gets a percentage of that sale, maybe 10%. So for a $200 tent, she earns $20, and you make $180.

Big companies like Amazon use affiliate marketing because it’s simple: they only pay when someone makes a sale.

Last year, businesses made $15 for every $1 they spent on affiliate marketing, which is why 81% of brands now use it.

How much do businesses pay affiliates? It depends on what you sell:

• Digital products like courses: Usually 30-50% of the sale
• Physical products like clothes: Often 5-15% of the sale
• Subscription services: Anywhere from 20-100% of the first payment

Pros and Cons of Affiliate Marketing

Let’s look at what’s good and bad about using affiliate marketing for your business.

The Good Stuff (Pros):

• Only Pay When You Make Money → You don’t spend money on ads hoping they work. You only pay affiliates when they bring you sales. This makes it a safe way to grow your business.
• Reach More Customers → Your products get shown to new audiences through trusted websites and influencers. These people already have followers who trust their recommendations.
• Easy to Set Up and Run → Most affiliate programs run automatically. Once you set up the tracking links and commission rates, everything happens by itself – from tracking sales to paying affiliates.
• Build Trust Through Others → When respected bloggers or experts recommend your products, people trust it more than regular ads. It’s like getting a friend’s recommendation.

The Not-So-Good Stuff (Cons):

• Less Control Over Marketing → You can’t always control how affiliates talk about your products. Some might make promises you can’t keep or use marketing tactics you don’t like.
• Possible Brand Issues → If an affiliate does something shady, it can make your business look bad. You need to watch who promotes your products.
• Price Competition → Some affiliates might focus too much on price comparisons. This can make customers choose based on price instead of quality.
• Commission Costs Add Up → While you only pay for results, good affiliates expect good commission rates. These costs need to be built into your product prices.

What’s The Difference Between Affiliate Marketing And MLM

Affiliate marketing is straightforward. Businesses give affiliate links to people (affiliates) who promote their products. When someone buys through that link, the affiliate gets a commission.

There’s no recruiting, no teams, and no layers of payment. Just simple promotion and commission.

MLM works by building teams of sellers. Participants sell products and recruit others to join under them. They earn a commission from the sales their recruits make. As the recruits bring in more people, the original participant also earns a portion of those sales.

This creates many layers of people all earning from the work of others.

The key difference is this: affiliate marketing pays for direct sales only, while MLM pays for both sales and recruitment.

This means affiliate marketing is easier to track and manage, making it popular with online businesses. On the other hand, MLM needs more detailed tracking to manage who recruited whom and how payments are shared, making it more suitable for products that involve direct selling.

Which is Better: Affiliate Marketing Or Multi-Level Marketing (MLM)

It’s not about one being better than the other, they both have their strengths.

Affiliate marketing works great for simple setups where businesses want to drive sales through direct referrals. MLM, on the other hand, shines when a tiered system is needed to encourage affiliates to bring in more affiliates.

Combining both can often be the best strategy. MLM-like structures solve one of the biggest problems in affiliate marketing: finding and keeping good affiliates.

Many affiliate programs fail because recruitment freezes. With a multi-tier structure, affiliates are rewarded not just for their direct sales but also for recruiting others, motivating them to grow your network.

This gives businesses three advantages:

This gives businesses three advantages:

• They only pay commissions when sales are made.
• Affiliates actively recruit others, expanding the network.
• Sales increase as the network grows.

On WordPress, combining affiliate marketing with MLM-like strategies is incredibly simple using AffiliateWP’s Multi-Tier Commissions addon. It enables you to set up a multi-tier commission structure, where affiliates earn from both their own referrals and the sales made by their recruits.

It’s easy to use, encourages affiliates to expand their networks, and boosts product reach and sales effortlessly.

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