So What’s The Difference Between MLM And Network Marketing? The Facts.

what is the difference between mlm and network marketingVery often when people approach you with a business “opportunity” of some sort, the word “network marketing” or “MLM” almost inevitably comes up.

These 2 terms are so synonymous with one another that it wasn’t until recently, that someone asked me the difference between the two, that upon research, I had discovered there were in fact things that separated them and in this article, we are going to figure this out.

Truth be told, until I was asked about this, I must plead ignorance, because I really though there were NO differences between these business models. Did my opinion change after learning more?

Not quite, if nothing else, it evolved, but the bottom line is that both are almost always interconnected and function as 2 sides of a coin basically. Let me explain:

What exactly is MLM? 

It is basically a business model that relies on referring people into a referral program that in of itself has multi tiers of referral opportunities. What this means is that if I refer someone into an MLM and they refer someone else, I can get that “someone else’s” commissions through my original referral. There are issues I have with this model, which is why I do not engage with it.

Here is what I do for business instead: Affiliate marketing.

In these specific kinds of programs, this example would be considered a 2 or 3 tier referral program since we have 2-3 levels of referrals going on: Myself, my referral, and their referral. 

In addition, in many of these programs, the tier program can span further down, in many cases to 7 or above levels, where things can REALLY get confusing, but to those who are unaware, may seem extremely lucrative.

Very often, when we get this deep into an MLM program, we also get into the very shady areas of it, where people start to make assumptions that it’s a pyramid scheme and frankly, I am of the opinion that ANY multi tiered referral program is downright, borderline a pyramid scheme. And I actually make the distinction here so if you are interested in pyramid schemes and how to identify them, that article will greatly help you.

Alright, so what’s network marketing (NM) then?

It is a type of business model where a company generally markets directly to what they call “distributors”. What these people are, are basically those who are looking to become business people of their own and sell products of the company on their own time and generate businesses of their own. It’s almost like a franchise…

For example:

Say there is a company that sells wellness products. Instead of marketing to the general public, they pitch themselves to people who would “distribute” their wellness products and approach those people saying they have great opportunities if they buy their products and sell them.

Most of the time, you will see people practicing NM by trying to sell products they purchased from the main company to their friends and family. 

Here are some of the reasons many network companies practice this form of selling/marketing:

1) By selling to distributors, they essentially guarantee an initial sale. If they only sell distributors products that they can then resell, it doesn’t matter to them if the distributor sell those things or not, by that time, the product is off the company’s hands, a profit is made and they basically broke even at least.

2) Very often network companies do, what I like to call “force” distributors to “talking” their network of buyers they sell the product to, to become a recurring buyer. So if I sell a wellness product to someone, I can also talk them into continuing to buy the same wellness product on and on to guarantee myself and the network company a consistent profit. Many times, these companies also like to set quotas for distributors to have in order to at least have them and a certain amount of people they sell their product to be on their re-billing orders to keep the profits coming in.

3) People that get sold the product by the distributor can also then become a distributor for the said company and keep points 1 and 2 coming along. 

4) Most (I’d actually say all) of the companies I have seen with this, also offer a referral business model which doesn’t involve buying and distributing the product/s, but referring people into the network marketing company through an MLM model (and that’s where things begin to slide…).

Back to comparing Network Marketing and MLM. Here’s the truth:

Comparing these 2 businesses is like comparing oranges and citruses

While they are different by definition and in SPECIFIC practice, very often, one is connected to the other which is why there is so much confusion and mistaken association when someone approaches you with a NM opportunity that turns out to be an MLM.

In reality, what we have is a program that has products it sells to distributors but in addition has a referral program attached to it which is an extra way the distributor can make money (that’s where the MLM shows itself).

  • I have personally never seen a NM company without an MLM added to it.
  • BUT I have seen an MLM being pitched without any actual product and THAT is almost ALWAYS a pyramid scheme. Note: Always LOOK for a real product existing in ANY company you see. If you just find that there’s a referral program, be very, very careful. Often digital programs don’t have physical products. In those cases, look to see if the digital program has service that have tangible value that’s attached to it. 

My final thoughts:

Theoretically, some would argue this approach to business is not only ethical, but it makes everyone money. I argue differently and believe, through my own experiences that:

Most products offered by network marketing companies are scams because they are essentially knockoffs of better products and they also get sold to distributors for much more. So basically inflated knock offs. Add the MLM and the pyramid scheme starts to take shape. 

I am all for GOOD valued products being sold and being sold for a good price, but when they are not, and the quality is bad, and you are forced to buy and re-sell more products for access to the network marketing company + the MLM model is in place, well that just ruins the whole thing.

This is why I am all for affiliate marketing being the better, more ethical practice. 

One other thing to keep in mind is that most of those other businesses fail, but they fail because distributors fail to make the sales quotas and/or the people they sell to usually don’t buy it in the amounts they need to in order to make the distributor a profit, so their business fails.

And/or in many cases, the MLM is also hard to sell to people because it relies on the stimulus of more referrals coming in and so it eventually falls. 

Now I know that many people will “cite” that most regular businesses fail too, but I assure you, there are distinctions as to why THAT happens vs why THESE specific business models fail and most of the time, it’s because of the reasons I just stated. 

Here is the bottom line:

As someone who is a businessman and has seen his fair share of different selling models, which ones work and how to make consistent income from home, I know about what it takes to have a good business that REALLY makes people happy and again, I go back to the whole affiliate marketing thing or at least having your own product to sell.

network marketing vs mlm vs affiliate marketing

Whatever option you choose, I would personally steer far away from NM and the other model and stick to being an affiliate instead and if that’s what you want to do, then there’s no better way learn it and to do it through Wealthy Affiliate, the program I learned from. 

Now I know there will be fans of the other models that will disagree and agree with me and I’d love to hear from you guys, but as long as it’s a calm debate. 

36 thoughts on “So What’s The Difference Between MLM And Network Marketing? The Facts.”

  1. I tried to sell live insurace, it was an MLM. I felt I was being slightly sleazy. Yes I made commissions but my boss made it off of me, then her boss.

    There are many jobs, that are MLM and NM that are around, and when you try to tell someone that it does not sound right and they get made, they even get madder when they can’t make the money or because it just did not just work like they thought it would.

    • Good point on the sleazy sellers getting angrier when you call them out or don’t trust them, it’s also a big sign you shouldn’t go further. A good sales person should understand the worries of someone they’re trying to sell to and be calm about it. But when it comes to MLM, no matter how good a sales person is, it doesn’t really change the issue, which is that an MLM business is a tough and deceptive one to build, at least in my personal opinion.

  2. I was recently approached by a multi-level marketing company to join in their “team.” My gut instincts told me that this wasn’t a good idea and after reading this article, I’m glad I didn’t.

    You substantiated my apprehension by your very thorough explanation of MLM and network marketing. I thoroughly believe in the benefits of affiliate marketing and I’m very happy I got involved in that arena, as opposed to the other marketing platforms.

    Thanks for your very thorough article. I learned what I needed to know and enjoyed reading your post.

    Sue

  3. I’ve been approached by many friends, acquaintances and random strangers about various MLM and NM businesses. I knew it was never right for me, but nearly got sucked in just trying to find something that would bring in some extra income. Thankfully, I was introduced to affiliate marketing, which to me is much more legit. I agree with most everything you say. I’m new to Wealthy Affiliate, but it’s a great legit community of people just trying to learn how to grow a business, and I truly value that.

    • This is true Jasmine, on all fronts, including WA and what you said about people trying to sell you into a NM or MLM business. I assure you, they are mainly interested in their own monetary gain from these offers, so you were right not get into it!

  4. I’d have to agree with you about either of these businesses. I was involved some time ago with one of these businesses that relied on me pitching to friends, family, etc… There were products involved, but the crux was on building the “network”. Long story short, the crux of the business was really the higher ups selling their unique “motivational materials” to those lower down the chain. They preached it like a religion. Left a bitter taste in my mouth. Thankfully I found affiliate marketing, and couldn’t be happier.
    Thanks for the article!

    • I really hope you didn’t lose any friends and family though getting involved with this business Jay because you are absolutely right in how many of them try to create some sort of cult like network, rather than an actual, productive network and pitch motivational, nonsense talk, vs actual products and services of substance. 

  5. Hi, I am so pleased to say I learned so much from this post today, thank you very much. Before this post, I really thought MLM’s and NM were one and the same but now I know better. So according to you, which one is better between the MLM and the NM. Which one do you personally recommend?

  6. Hi!

    I have been a non-active seller for ForeverLiving and DOTerra. I’ve kept the DOTerra one for the great products, but do realize there are probably better products that aren’t a knock-off product. I bet that is the case with them at least. 

    Are those two companies considered network marketing or MLM?

    I never liked going to the events (luckily the first one was for free for new members), because they would cost a lot of money, but above all I felt they were trying to “brainwash” people. It felt very shady…when I was there…like they were all so proud to be big sellers.

    If I want to sell a product, I have to really believe in it. I have also been part of some pyramid scheme websites, that have scammed me for some money. I’d rather do affiliate marketing and build a sustainable business online than trying to gain a higher rank by buying network marketing products.

    Steven

    • Forever Living I believe is both a NM and MLM program Steven. I am not sure about the other. What you said about these types of companies holding events to try and brainwash people is familiar to me.

      A lot of their tactics at these events aren’t necessarily meant to educate you on building a business, but more so to “show off”, like you said what the big members are making to get other people at the event to buy whatever packages or “opportunities” there are. By doing so, the people buying think that this is the best way to achieve the same success and this has been a successful selling model for NM and MLM type companies for years. 

      I am glad to hear you’ve moved away from those places and decided to do affiliate marketing instead. You will find that there is much more flexibility and you are not bound by the same “reigns” to do what the company you are promoting for, wants you to do. 

  7. This is a revelation, as I always thought that network marketing and multilevel marketing companies were the same. I do not like any of them but I would say that NM companies are the lesser of two evils. At least if the product is any good and you have a receptive market, some progress could be made especially if you are good at sales. MLM’S on the other hand are on the shady side of things and could lead to the loss of family, associates or even your freedom. Thanks for the heads up.

    • I agree with everything you mentioned, even the grey side of promoting a product from a NM company Everton. My experience has shown me these companies rarely carry any good products and in addition, they are also a lot more expensive typically. 

  8. Thanks for introducing me to what MLM actually is. I often hear this term online about different websites. Many times, it is associated with scams. I didn’t know what it actually meant before I read this post.

    After reading your post, can I safely conclude that many MLM sites are scams? Or is that only an assumption?

    • In my experience, most MLM companies are scams because they are often interwoven with pyramid schemes. I did write about the differences between them, but honestly, very rarely will you ever find an MLM that ISN’T a pyramid scheme.

      I won’t say they are all scams, but you should know how to distinguish them if you’re planning on joining one. Personally, I would stay away from this industry completely. 

  9. I fell prey to one of these groups just last year. Was called Dynamico, a guy from church turned me on to them. I went in about 400 bucks or so on inflated priced energy shots. They did work like a charm, but too expensive compared to 5 Hour Energy or a red bull.

    Do you know of any MLM involving charities?

    • Hi Jeff, I can’t honestly imagine MLM and charity work mixing together, it just doesn’t make sense because one is completely profit oriented, while the other is none profit oriented. I do get your point and question, but I would not put too much faith in finding an MLM that has products you can somehow pitch or give away to a charity.

      Typically MLM products are overpriced knockoffs of better, cheaper products on the market. I’m not saying your scenario was like that, but you did say the product you bought seemed like the 5 hour energy drink. So in most cases, it would be extremely difficult for you to sell something more expensive and less marketable than the 5 hour energy drink alternative.

      For you that’s bad, but for the MLM that just sold you the product, it is not and that’s how most of them function in my experience and why overall, getting involved with network marketing and MLM in general is a waste of money in my opinion.

  10. MLMs are the worst. Still occasionally one will come along that intrigues me. I even sold Transamerica for a little while. I loved helping people as a financial advisor, but the MLM structure ultimately turned me off. 

    I get that some people are motivated by going to over priced social events that are misnamed as training, but that’s not for me. Just let me sell instead of pushing me to pay $500 bucks to spend a weekend watching people mindlessly cheer about how much money they think everyone else is making because it’s going to be phenomenal for my business.

    I’m glad companies like Wealthy Affiliate exist. I stumbled upon them a few weeks ago and have absolutely loved the training.

    • I love the way you described your experiences with MLMs and the social events you talked about. You really nailed it in that people are almost entranced and converted into the MLM “religion” in these events, and what’s worse, is that they pay huge sums for it too. In the end, the creators make a few hundred or thousand per person and move to the next event. It is a horrible cycle! 

  11. When I was 18 years old I got pitched one of these MLM programs. I joined but quit after some time because some of the things I had to do were way out of my comfort zone.

    Then again, I think there are a few companies that are legit which you can actually make some money from. But you need to be honest with yourself about some of the things you have to do to succeed. If you are not comfortable being a salesperson then it’s probably not for you.

    Leslie

  12. As someone who has always turned to the internet to seek out opportunities, I myself have been the victim of MLM schemes.

    I was always a little sceptical, but I almost always fell for their sales pitches of promised riches.

    Thanks for making the distinction between these two industries.

    Now I know where to draw the line in the future!

    Regards

    Geoff

  13. I used to be asked a lot about MLM and pyramid schemes. I’d explain that pyramid schemes are actually illegal, and they happen when cash is exchanged but no actual service has been provided.

    However had anyone asked me about the differences between NM and MLM, I’d have been without an answer. Until now that is. Very well written post. Thank you!

  14. Sadly, I have been sucker to a few MLM programs. they do a great job of selling you on how easy it is to make money and to sell the product. I never really last too long in those programs because I refuse to push these onto friends and family.

    Great comparison! I never thought there was a difference between the two. Now I see I was pretty much correct.

  15. More and more people join mlms everyday, but what really frustrates me is that they don’t do enough research before they join and they just join the first one they find. I’m not against mlms or network marketing. I think that its like any other business. You have to build it from the ground up. There are just different attributes to it. Have you ever joined an mlm?

    • A few, but that was before I understood what they really are Jonathan and I am honestly not a fan at all of either of those businesses.

  16. Thanks for the enlightening me on this subject. Frankly I’m also ignorant about this until now. I personally believe that being true to what our values are about what is a real business is vital to long term joy in the journey as an entrepreneur.

    The first part of the equation to me is always to do business honestly with products that we believe in and to sell it in a way that is aligned with our values. If recruiting others into a system supersede selling a product I believe in, I would also steer away.

  17. Thank You for the review. It is unbelievable to me that these companies can even still exist. You would think that after such poor ratings with the BBB and on consumer report sites that they would be put out right? And it really gives a bad name to those of us who are out here working hard and doing things the right way. That makes it even tougher for us to make a living! You Agree?

    • The BBB isn’t a trusted resource and even if it was, it would never be able to keep up with all the MLMs and network marketing companies springing up Howard, it’s just one of those where you need to be vigilant and understand the system of MLM and NM so you know how to avoid them.

  18. Very well written article and it was interesting for me to read it. I just wanted to share my experience with MLM.

    My mother in law is involved in MLM. She works for Amway. But it seems to me that this company is among the ethical ones as my mother in law is really fond of their products and she actually joined them not because of making money but because she wanted to get their products for a better price 🙂 She has been working for them about 10 years now and sells their products just to some close relatives, but mostly buys for herself 🙂

    So there are exceptions also within MLM and not all of those companies are bad. If a person does believe the product is good, there is nothing bad in him/her trying to sell it to others. Then I don’t refer to it as a scam even if it is MLM.

    • In the rare cases that an Network marketing program produces a good product that you take and like, it’s fine, but I can almost bet you that there are cheaper and better alternatives out there Arta. If Amway’s products are working for your mother in law and the people she sells it to like it as well, then I don’t see a problem with this.

  19. This is the best post that I’ve read describing MLM and Network Marketing.

    I’ve been in the affiliate marketing game for some time now and wanted to learn a little more about what MLM is, I am very glad I ran across your site, because it has a lot of valuable information for me. I will be coming back for it.

  20. When you mentioned the pyramid scheme it made me wonder how much of that is real versus just talk out there. I have heard about pyramid schemes many times and have only heard bad things. Are they always “bad” or does that name just give things a bad rep. Every company out there is really a pyramid scheme in theory but obviously only some really benefit the top at the expense of the bottom feeders. What are your thoughts about pyramid schemes in general and how much of that negative stereotype is reality?

    • Hi Brad, you ask an excellent question and I answer that part about good and bad pyramids in this post, which I did also link above. Anyway, the point is, pyramid *schemes* are the bad thing. Most businesses, and things in our culture are based of a pyramid model, but a scheme is a completely different thing and again, please read that post I linked to understand the difference.

  21. I always wondered what the difference was. I was personally involved in a MLM and I didn’t see any real profits and I hated walking up to strangers trying to provoke them to join the company. They always tell you to invite your friends and family to join but most of the time that’s like talking to air. Reading this review makes things even clearer for me because I just thought people would use different terms to explain it was a pyramid. Thanks again for clearing things up

    • Yeah I also admit there is an uncomfortable feeling I would get about selling these things. If one cannot comfortably and with a clean conscious promote something, you shouldn’t promote it…

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