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Affiliate Network Marketing: A Basic Explanation

Aug 17, 2007
Affiliate network marketing is a relatively new business model that has been employed by many companies. As of today, more and more companies are engaging in the said business model, let's take a look why this is so.

So what exactly is affiliate network marketing? In a nutshell, we can define it as a combination of two business models, as the name implies- network marketing and affiliate marketing.

Network marketing is also referred to as multilevel marketing or more popularly known as MLM. In network marketing, services and products are distributed to the final consumers through a network of independently contracted distributors or agents (also known as consultants). These distributors are then financially rewarded in two ways: a) from commissions and overrides from sales generation and b) for their contribution to the building up of the network by getting new 'recruits' to be downline distributors. The network marketing business model works because of the price differential that is generated from the distributor to the consumer. If the recruits of the one you recruited generate sales, you get a percentage of the price differential for the sales, and so on.

Network marketing is usually associated with pyramid or ponzi scams. This is because the main structure of the two models can be quite similar at first glance. However, if one takes a closer look at the models, there is one big and defining difference between them. The main difference between a legal network marketing firm and a pyramid scam is that the first one offers real products and services, the latter only promises opportunities and generates money from the cost of entry of the recruited members. A pyramid scam re-channels the incoming funds from the fees that newly recruited 'members' pays for entering the scheme and does not generate any kind of profits from other endeavors. The masterminds of the scam benefits while leaving most, if not all, of the downlines in financial burdens.

Affiliate marketing is similar to the business model of network marketing. Instead of directly distributing products to customers and consumers, affiliate marketing makes use of a pool of marketers to indirectly refer the products to the public and find good leads. The affiliates act as middlemen in the whole process of selling the products. They are then compensated based on their contribution in referring customers and clients to the company. A study that was made by a private research group a few years back and it revealed that 13% of all retail transactions were made possible by affiliates.

There are many companies that employ an affiliate network marketing strategy in reaching their clients. One can see this as an opportunity to be able to make real money out of the scheme. The main factor that would determine one's chance in surviving this kind of endeavor is the kind of network that he already has. A solidly-knitted social network with wide connection is the key determinant of success. One should also be aggressive and creative in marketing products and services.

With the Internet's explosive growth, it allows people to connect to the world! Your social network no longer limits yourself to the small town or city you are staying in. There is real money to be made in affiliate network marketing, and we can realize this potential if we know how to play the game.
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