What is the difference between MLM and network marketing?
You often hear the terms "network marketing" and "MLM" used as if they mean exactly the same thing. I often use the terms interchangeably in my posts. Have you wondered what the difference is?
In everyday usage, both terms typically refer to the same thing – a powerful [tag-tec]home based business[/tag-tec] model that capitalizes on the power of referral marketing. Here is what is generally considered the difference between MLM and network marketing.
Network Marketing – The Fine Art of Referring Others
The term "network marketing" generally means a business where you sell a product by referring it to others. For example, let’s say you decide to sign up and become an affiliate for an ebook titled "Fast Easy Ways to Make Money Online". You create an email promoting the ebook, and send it to 100 of your friends and acquaintances.
Each time someone purchases this ebook through your affiliate sales page, you make a commission. In its most basic sense, this is network marketing. You have a product, and you reach out to your circle of friends and beyond in an effort to make sales and earn money.
MLM – Referral Marketing on Steroids
MLM (short for "multilevel marketing") is a form of network marketing, but carries the potential for making money a few steps beyond. In MLM, you also have a product that you refer to others and you make money from sales of the product. In addition, you can sponsor people into your business and earn a percentage of the profit from products they sell.
This can go down several levels, depending on how much money is available for bonuses on the products. MLM is actually a form of network marketing, but network marketing is not necessarily a form of MLM.
Why MLM Became Known as "Network Marketing"
I have an opinion about this that I believe is pretty accurate. In the early days of MLM, some distributor groups adopted an approach to the business that met with controversy. This approach involved persuading prospects to attend opportunity meetings, while doing whatever it took to avoid revealing anything about the business prior to the actual meeting.
While this was justified by saying the prospect needs to see the whole picture and things like that, the term MLM soon became synonymous with this approach. Any business described as MLM met the reaction Oh, that is just like ‘Company X’. I’m not interested.
Thus, I believe the term network marketing became popular in order to avoid the misconceptions that became common when MLM was used.
Today, many people look for information about this business under both terms. Because of this, many authors and writers use the terms interchangeably when publishing information and promoting opportunities in the industry.