Affiliate Program Reviews

If you are starting with on-line business, or even if you are in it for quite some time, you will come across some terminology like MLM, 1-tier, n-tier, pyramid systems, … In this post I will explain the differences and pros and cons of each system.

1-tier

Definition

A 1-tier system is a system where you are an affiliate or member and you only earn commisions on your direct referrals.

Pro

• Simple and Clear

Contra

• You only earn money on your own clients

Examples

• Affiliate Junktion

MLM, Multi Level Marketing

Synonyms

Affiliate marketing, network marketing, n-tier, multi-tier

Definition

A system whereby affiliates (associates,members) earn money on sales to their own clients, but also on sales made by other affiliates that they have recruted in their network.
Depending on the number of layers where you get paid you sometimes hear the term 2-tier (you are paid on your own clients, and the clients of your direct referrals), 3-tier (own clients, direct referrals clients and their clients), … this typically goes down 5, 7, 10 or and infinite number of levels. In most cases the % commission you get on lower levels will drop sharply (otherwise the system is impossible to maintain)

Pro

• You get paid for efforts of other people. (Of course, the more effort you put in yourself to find other people to join the more you get paid)
• A famous saying in MLM : “I’d rather have 1% of 100 persons’ efforts than 100% of my own effort“

Contra

• Many people confuse it with illegal pyramid systems which makes it sometimes difficult to convince other people to join.

Examples

• GDI
• Tupperware
• VirtualWorldDirect
• Herbalife
• Many listbuilder systems (see other post)

Illegal Pyramid Schemes

Definition

Any system where the main focus (and source of income) is on recruiting new members (victims), or where newcomers have to buy a huge stock of products, is considered as an illegal pyramid system.
So if you stumble upon a system that apparently has no products to sell but pays you for new ‘members’ who usually have to pay an entrance fee (how else could they pay you if they don’t sell anything ?) should be approached with great care.

Pro

• If you are in it as one of the first members you have a chance of not losing money

Contra

• It’s illegal
• and if the first reason is not enough to stay away from it … most of the time you are not it in from the start and thus you will loose your money

Examples

• Many chainletters
• Although strictly speaking the Guardian System I’m talking about in another post is legal, it is very near the edge of a chainletter.

Personal opinion

As you might have guessed my personal favorite is clearly the MLM system. If I can sell the products myself … fine, but if other people sell the products and I can get a fraction of their profits I’m even more happy. I have even been in real-life MLM a couple of years ago and today I’m still being paid commissions on my (and other persons’ clients). (For the moment I’m no longer an active seller because I live in South-Africa now where this company is not active).

My attraction to MLM systems might also come from my background as a mathematician which means that I do know the power of multiplication very well. For those of you who hate(d) math I’ll just give a small example.

Suppose you find a system that only pays you $1 for each sale made in your network. If you only find 2 direct referrals and they do the same and so on this would give you :

Level 1 : 2 persons selling 1 product a day => 2$
Level 2 : 4 ” ” 1 ” ” => 4$
Level 3 : 8 ” ” 1 ” ” => 8$
Level 4 : 16 ” ” 1 ” ” => 16$
Level 5 : 32 ” ” 1 ” ” => 32$

For 3 persons the numbers would be : 3$, 9$, 27$, 81$, 243$
For 5 persons the numbers would be : 5$, 25$, 125$, 625$, 3125$As you can see this is a very powerfull system. (You can click on this Calculator to fill in your own numbers and see what it gives. The calculator is on the right hand side at the top)

I hope this post was useful to you.
If you have any comments, please let me know.

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