What is the difference between Network Marketing, Direct Marketing, Multilevel Marketing and Affiliate Marketing?

There’s a point of confusion that arises among home-business entrepreneurs when it comes to using common terms like ”network marketing.” Sometimes new terms are coined because the old ones are tarnished in some way or because an organization simply wants to appear different. Most of the time, however, these terms are simply misused and misunderstood.

The dangerous side effect of not understanding these terms is often manifested in that marketers apply the wrong strategy for their objectives or end up trying to build on weaknesses rather than the strengths of these various marketing methods.

Starting a successful business begins with a clear understanding of what you are getting involved with. Let’s define the difference between Network Marketing, Direct Marketing, Multilevel Marketing and Affiliate Marketing.

So let’s define these terms for the sake of the home-business entrepreneur.

The Role of Marketing

Before we subdivide this subject, it’s important to understand the core nature of all marketing. Marketing at its most basic level is about being able to match a company’s product or service with the needs and wants of a target audience and do so in a way that ensures profitability.

Marketing involves all the commercial functions that are required to transfer a product or service from the producer to the consumer. This includes advertising, packaging, public relations, and even the human element of customer interaction. Marketing is everything a company does to acquire customers and maintain a relationship with them.

No matter what we call it, we can never forget that our job as a marketer is to get the attention of a target market so that we can sell something to that target audience that they want and need in a way that allows us to earn a profit on our efforts.

Network Marketing

As the term suggests, network marketing is simply marketing through a network of personal connections or relationships.

The term Network Marketing was first made popular through the 1982 book Megatrends by John Nesbit. In it the author predicts that as our world becomes more high-tech, more consumers will rely on personal connections to make decisions. Essentially, the overload of marketing information requires each individual to filter more information from the world around them. This increases the importance of high-touch skills such as communication, listening, problem solving and public speaking.

Mr. Nesbit predicted that businesses would increasingly rely on passing their marketing messages through their networks of personal connections and thus the term was born. It was quickly picked up by a number of key Amway distributors and spread like a wildfire among distributors for multilevel marketing companies.

It’s important to point out that network marketing is employed by many different types of businesses – not just multilevel marketing. From Real Estate and Insurance agents to Health Clubs, many businesses use Network Marketing to gain new customers and clients. While it most often involves word of mouth, it’s different from pure word of mouth in that network marketing involves some form of recognition or incentive for the word of mouth promotion.

Direct Marketing

Direct Marketing is a method of selling a product or service directly to the end consumer usually by the producer or a marketing agent. The key difference between Direct Marketing and other marketing methods is that the direct marketer selects the individuals who will receive the promotion and is the direct recipient of the response. This response may be a purchase, and inquiry or a referral that can be traced back to the original marketing effort.

Direct Marketing relies heavily on measurable and trackable methods of response frequently associated with mail order but can include any direct sales method including door to door, telemarketing, newspaper inserts, and Internet advertising. Direct Marketing relies heavily on the use of lists and customer databases.

Multilevel Marketing

Multilevel Marketing is a term that describes a structure of marketing and compensation that’s designed to create a sales force by compensating promoters not only their personal sales but also on the sales of other promoters they introduced to the company.

The foundational principle for Multilevel Marketing is the belief that a multilevel compensation structure is more efficient and effective than traditional sales structures. The basic premise is that a successful sales person is more apt to recruit and train other successful sales persons when they have a direct stake in that person’s success. In this way a multilevel structure provides a framework for top producers to create large sales organizations by replicating their activities through a network of promoters.

A key component in the success of Multilevel organizations is in the creation of marketing tactics that are  duplicatable. This requires that the marketing methods employed are simple to learn and personal in nature to minimize competition in high-visibility channels often employed by Direct Marketers. For this reason most Multilevel Marketing companies employ some level of Network Marketing to market their product and services.

Affiliate Marketing

Affiliate Marketing is primarily an Internet based marketing practice in which a business rewards a marketer for sales (or other actions such as clicks, visitors, etc.) made through their marketing efforts. The affiliate is usually free to market a product or service any way they wish – within the confines of the terms of their agreement with their affiliate network or company – which often includes restrictions on the use of trademarks and competitive advertising.

The main reason companies look to affiliates is to connect with a source of traffic within their target market that they would not otherwise have access to. An ideal affiliate already has an audience or a unique ability to reach a certain audience. They are seeking to monetize that audience by offering relevant products and services to them. This can make for an ideal business relationship.

The Line of Demarcation

Most marketers employ multiple strategies to reach their overall marketing goals. It’s important, however, to understand the overall role of marketing and how each of of these subcategories fit in.

For example, creating a landing page and a PPC ad campaign would be considered Direct Marketing while calling a prospect on the phone and building a personal relationship would fall under Network Marketing.

This is important to realize because there are many so-called experts that confuse the two and cause a lot of people to apply the right effort in the wrong place or vice versa. In some cases entire programs are even deliberately mislabeled. The reality is that some good strategies when applied to the wrong business model become ticking bombs ready to destroy the very business they build. Here’s prime example…

Multilevel Marketing companies tend to employ Network Marketing strategies to create sales organizations and move their products and services to consumers. Marketing through these personal connections is very duplicatable once an effective way of connecting with the target audience has been discovered. Many times as businesses grow marketers will venture outside of their warm market and start to advertise. There’s nothing wrong with this Direct Marketing strategy. However, it can quickly get out of hand when the same or very similar offers are advertised in the same places. It doesn’t take long to this system to collapse – because Direct Marketing strategies are less duplicatable than Network Marketing strategies.

There are literally millions of Network Marketers that are wondering why they are not getting responses to their ads, social media efforts or other promotion. 9 times out of 10 it boils down to competition. In the face of competition the Direct Marketer must continually differentiate themselves from everyone else. In a Multilevel Marketing company, this is easier said than done since everyone in that same company is marketing the same product or services.

The solution is to know when Direct Marketing makes sense and when Network Marketing strategies are more productive. Network Marketing by it’s very nature bypasses much of the competition because it focuses on personal connection rather than getting the attention of the prospect against a backdrop of advertising noise.

Here’s to your success

Bill

My thanks to André Vatke as the contributor to this article