Multi – level Marketing is a strategy/marketing method whereby, a person approaches a merchant and offer to sell his products (salesperson) on merchant’s behalf. The merchant agrees, provide him/her with promotional material to market company/merchant products.
The salesperson/agent will market the products, if the buyer, ultimately buys the product/s, the he/she gets compensated. The compensation method and amount is contained in a contract signed between the agent & the company.
It doesn’t end there, in order for the agent to generate more compensation, he recruits other agents to embark on the same process. You can see from the images above, the red man, and other three red man, and the rest, all working for the first red man (Boss), three red man (Underboss), and so on.
The Boss receive his compensation for products he sold, and also compensation for recruiting Underboss, provided they recruit & sell merchant products. For recruiting other agents, you will not be paid, will only be paid if buyers buy the product.
If you work hard to recruit other agents, and it turn out that your recruits are hard working people too, you can earn huge compensation. If your agents are hard working people, you reap benefits from their effort because your compensation will be rise, without doing anything from your side. You also save on marketing cost.
Research Studies reveal that it originated in 1920, its older than the internet itself. Some believe its outdated method, but others are still using it as an alternative marketing method. The underBoss and others don’t get paid until a customer purchases.
In other words, you can recruit as many agents but if people don’t buy, you’ll will not receive compensation. It’s costly, difficult & time consuming to recruit agents. Some people don’t have interest in selling or don’t have salesperson’s skills, i.e. to convince people to embark on marketing adventure. The recruiter might be a lazy person, he joins your level do nothing, you now have a large network which is not performing.
The recruiter might misrepresent the product, i.e. present to the buyer, benefits/features which doesn’t exist. The company may suffer financially in terms of lawsuit. Thus merchant looses money instead of generating it.
It originated somewhere in 1989. Here the merchant enters into agreement with the salesperson online to sell his products in return for compensation for his efforts (product purchased).
The agent(affiliate marketer) is presented with banners, links or other marketing material. the agent goes to promote merchant products, if buyers get attracted and finally buy through the agent, he gets compensation, i.e. receives commission. The amount of commission is contained in the agreement between parties.
Unlike MLM, affiliate marketing does not have levels., the affiliate marketer does everything himself/herself. He promotes one or many products. Each sale a merchant receives, the affiliate receives a commission for that. There’s no provision to the salesperson/agent/affiliate marketer to recruit others.
It happens that the agent may convince other potential affiliate marketer to join the program, but he doesn’t receive compensation for that effort. The main aim is to recruit buyers to buy. If it happens that the new recruits buy, he will definitely receive commission, not because he recruited them, but because they purchased something.
The main purpose of affiliate marketing is to cause product to leave the shelves of the merchant (people buying). It saves the merchant advertising,/marketing costs.
The marketing costs is borne by the affiliate marketer. He’s prepared to spend money in order to drive customers to merchant products. The merchant has a fixed percentage commission.
It doesn’t pay affiliate marketers advertising costs. The affiliate marketer does his utmost best to sell products on behalf of merchant in the form of website, links, banners, articles, email, Search engine marketing. There’s no door – to – door marketing. its done online.
This type of marketing doesn’t exist offline. Its unknown whether it will ever exist. The entire cost of advertising is borne by the affiliate marketer. If the marketer has spent huge amount of money but doesn’t generate sales, the merchant is not liable for those costs.
Some affiliate marketer embark on unscrupulous methods of enticing customers, i.e. making false promises, presenting benefits/features which don’t exist. The merchant runs a risk of loosing good business reputation, sometimes lawsuit.
Whether MLM is outdated or not depends on the person using it. If MLM is effective method of marketing & generates benefits. It’s still effective marketing method. Affiliate marketing is new originated in 1989, its commonly used widely online, it has been proven that its ‘capable of generating huge profit.
One of the drawbacks of affiliate marketing recently is associated with SCAM projects. Its difficult to separate between genuine affiliate marketing and scam projects. In the final analysis, if both methods can yield good results, both can be used. if one method supersede the other with return on investment, that will be fine as well. DECISION IS LIES WITH THOSE WHO USE THEM.