Multi-level marketing is network marketing that is commonly anchored on affiliate marketing. Affiliate, meaning partner or colleague or associate or member, is more known as distributor or sales agent. Modern corporate, I think, coined affiliate to shred out the conventional perceptions on distributors or sales agent as sellers who only are up to extract and earn money from people. Affiliates are simply networks of sellers to do direct and indirect selling, which is collectively known as affiliate marketing.
Affiliate marketing starts with recruitment. Whether by invitation, sponsoring, open product presentation and walk-in, companies either contract recruits as employed or independent affiliates. Like any organizations, affiliates also follow structured hierarchy of uplines and downlines. People who recruit, sponsor and train people are often the uplines. Recruits are the downlines. In a cohesive hierarchy, they limitlessly recruit one person to another and build the network. This network is the core success factor of multi-level marketing. Companies thereby invest in structured multi-level compensation plans to build the network.
Big companies who are into affiliate marketing rarely cost recruits. Some even offer free membership or affiliations just to build the network. The cost often is cheap. They usually come in product package purchase, which the recruit could sell and earn because of the discounted price of the package. The “buy-in-for-membership” is the basic strategic enabling mechanism of affiliate marketing to build the network.
Expanding the network of affiliates offers more compensation plans. They often are additional incentives, commissions, benefits and privileges in both cash and non-cash basis. Revenue shares, rebates, higher product discounts, affiliate level upgrades, complementary products and services are the common compensations. Some are free travels, awards and free exclusive training.
Affiliate marketing is incentive-base. It will never succeed without a hefty incentive scheme. The higher incentive base, the larger network of affiliates and higher sales.
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