Is a 2-Tier Program Affiliate or MLM?
by Clay Mabbitt
What is an affiliate program?
An affiliate program pays a sales-based commission to participants when they attract paying customers to the business. Such a program is free to participate in as an affiliate. If you bring in sales, you will receive income from the program. If you fail to bring in sales, you have only lost whatever money you may have spent in your unsuccessful marketing attempts.
What is MLM (Multi-Level Marketing)?
Multi-level marketing (also known as network marketing) programs operate on a similar principle of paying people who are not traditional employees of the company to drum up business. Although the offline world of MLM has programs with varying reputations and degrees of success, the online MLM industry is reputed to consist mostly of scams. If you introduce someone to the business as a seller (as opposed to a customer) you can earn money either directly for referring them or indirectly as commissions for sales that they make. Depending on the number of levels in the program, you may also earn money when one of your referred sellers introduces a new seller to the program.
Sounds pretty clear, right?
Time to add another layer of complexity. A 2-tier program rewards you for customers you attract and the customers that are attracted by any seller you directly refer to the program. If based on the definitions above, you're thinking that a 2-tier program sounds like an MLM with 2 levels, you're absolutely right. Unfortunately, the definition of MLM with which we're working doesn't tell the whole story.
What is MLM really?
Much of the negative reputation that both online and offline MLM programs have earned can be attributed to the fact that most require a fee to participate in the program. The fee may be one-time or (more commonly) ongoing, but to participate in the program you must pay this fee regardless of whether or not you earn any money. Since the vast majority of people who participate in these programs never see a profit, someone pursuing this type of marketing can and usually does actually lose money in the attempt.
So where does a 2-tier program fall?
Almost every program that describes itself as 2-tier, does not require any fee to participate. Given the definition of affiliate programs and our more detailed definition of MLM above, a 2-tier program does not comfortably fit in either category. So what is it? A 2-tier program is actually a multi-level affiliate program. What do I mean by that? Like MLM, you will be rewarded for introducing new sellers to the program, usually by receiving a small percent of their commissions. Like an affiliate program, your profit is based on the sales you and your referrals generate as opposed to membership fees or referral bonuses. As with an affiliate program, participation in a 2-tier program is also completely free.
Distinguishing multi-level affiliate programs from MLM
In theory, if a program meets the two requirements of basing revenue on sales and allowing free participation, it is a multi-level affiliate program whether it has 1,2, or 10 tiers. Conversely, a program that only offers 2 tiers but charges a membership fee is an MLM attempting to disguise itself. So when investigating online income opportunities, don't get caught up in the hype of the number of levels a program offers. The real litmus test of a sound compensation plan: your revenue should be based on sales. When you get a check, either you brought in a paying customer or someone in your downline did.
| DISCLAIMER: The content provided in this article is not warranted or guaranteed by Developer Shed, Inc. The content provided is intended for entertainment and/or educational purposes in order to introduce to the reader key ideas, concepts, and/or product reviews. As such it is incumbent upon the reader to employ real-world tactics for security and implementation of best practices. We are not liable for any negative consequences that may result from implementing any information covered in our articles or tutorials. If this is a hardware review, it is not recommended to open and/or modify your hardware. |
More Affiliate Promotion Articles
More By Developer Shed
 developerWorks - FREE Tools!
|
Join this Rational Talks to You teleconference, featuring Paul Boustany and Mark Krasovich, to speak to the experts about becoming a Rational ClearCase power user. Get a chance to ask your questions and learn tips and tricks for using Rational ClearCase in Agile development
FREE! Go There Now!
|
|
|
|
Learn to enable users to both rate existing animations and to combine existing animations into new snippets. This is the third in a series of three tutorials that chronicle the building of a site that enables collaborative discussion and animation building using Domino and OpenLaszlo.
FREE! Go There Now!
|
|
|
|
Visit IBM developerWorks to download a free trial of the latest release of IBM Lotus Sametime Standard V8.0. Lotus Sametime Standard V8.0 is a platform for unified communications and collaboration that combines security features with an extensible, open solution including integrated Voice over IP, geographic location awareness, mobile clients, and a robust Business Partner community offering telephony and video integration.
FREE! Go There Now!
|
|
|
|
Join us for this web seminar to learn how you can defend your web applications from attack. Learn about the 3 most common web application attacks, including how they occur and what can be done to prevent them. We’ll also discuss manual versus automated approaches for scanning and identifying web application vulnerabilities and how IBM Rational AppScan, an automated vulnerability scanner, can help you automate more of what you are doing manually today.
FREE! Go There Now!
|
|
|
|
Join this Rational Talks to You teleconference on December 11 at 1:00 pm ET to get tips on building your own plugins with Rational Method Composer. Get your questions answered!
FREE! Go There Now!
|
|
|
|
Join this Rational Talks to You teleconference on December 6 at 1:00 pm ET to participate in an agile application development discussion and get your questions answered on using IBM Rational Method Composer in a distributed environment.Get your questions answered!
FREE! Go There Now!
|
|
|
|
Learn the basics of the IBM Customer Information Control System (CICS). With a hands-on exercise, learn how to get your first CICS application up and running on your desktop using TXSeries V6.1 for Windows. The tutorial shows you how to download and install a free trial version of TXSeries V6.1.
FREE! Go There Now!
|
|
|
|
Get a free trial download of the latest version of IBM Rational Tester for SOA Quality V7.0.1, a functional and regression testing tool that enables the creation, comprehension, modification and execution of testing GUI-less Web services.
FREE! Go There Now!
|
|
|
|
Join this webcast to learn how IBM Rational's Functional Testing solution enables you to implement automation your way, at your pace, with your existing staff. In this webcast, you’ll learn how you can eliminate redundancy of manual test scripts, reduce errors, and increase test coverage through test automation. After this presentation you will understand how IBM Rational Functional Testing solution can streamline your manual testing and make test automation easily attainable.
FREE! Go There Now!
|
|
|
|
With IBM Rational Systems Development Solution, you can deliver products faster with higher quality. Within this kit, Read the “Model Driven Systems Development” white paper to see how to improve product quality and communication. Then check out the rest of the e-Kit to learn more about important topics that can affect the success of any software project through customer examples, tutorials, informative Webcasts, and best practices for designing, building and managing systems. From start to finish, at every stage in your projects, Rational Systems Development Solution can help your company reach its full potential.
FREE! Go There Now!
|
|
|
|
All FREE IBM® developerWorks Tools!
|
