User Comments

1. 

   2/04/09

   BobMo

   Multi-level marketing (MLM), also known as Network Marketing,
   
   is a business-distribution model that allows a parent company to market its products directly to consumers by means of relationship referrals and direct selling.
   Independent, unsalaried salespeople of multi-level marketing, referred to as distributors (or associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents, etc.), represent the parent company and are awarded a commission based upon the volume of product sold through each of their independent businesses (organizations).
   
   Independent distributors develop their organizations by either building an active customer base, who buy direct from the parent company, or by recruiting a downline of independent distributors who also build a customer base, thereby expanding the overall organization. Additionally, distributors can also earn a profit by retailing products they purchased from the parent company at wholesale price.
   Distributors earn a commission based on the sales efforts of their organization, which includes their independent sale efforts as well as the leveraged sales efforts of their downline. This arrangement is similar to franchise arrangements where royalties are paid from the sales of individual franchise operations to the franchisor as well as to an area or region manager. Commissions are paid to multi-level marketing distributors according to the company’s compensation plan. There can be multiple levels of people receiving royalties from one person’s sales.
   
   Compensation plans
   
   Companies have devised a variety of MLM compensation plans over the decades.
   
   • Stairstep Breakaway plans This type of plan is characterized as having representatives who are responsible for both personal and group sales volumes. Volume is created by recruiting and by retailing product. Various discounts or rebates may be paid to group leaders and a group leader can be any representative with one or more downline recruits. Once predefined personal and/or group volumes are achieved, a representative moves up a step. This continues until the representative..."breaks away" from their upline. From that point on, the new group is no longer considered part of his...upline’s group - hence they are a "breakaway". Stairstep Breakaway plans are not level based.
   
   • Unilevel plans This type of plan is often considered the simplest of compensation plans. Uni-Level plans pay commissions primarily based on the number of levels a recipient is from the original representative who is purchasing the product. Commissions are not based on title or rank achieved. By qualifying with a minimum sales requirement, representatives earn unlimited commissions on a limited number of levels of downline recruited representatives.
   
   • Matrix plans This type of plan is similar to a Uni-Level plan, except there is a also limited number of representatives who can be placed on the first level. Recruits beyond the maximum number of first level positions allowed are automatically placed in other downline (lower level) positions. Matrix plans often have a maximum width and depth. When all positions in a representative’s downline matrix are filled (maximum width and depth is reached for all participants in a matrix), a new matrix may be started. Like Uni-Level plans, representatives in a matrix earn unlimited commissions on limited levels of volume with minimal sales quotas.
   
   • Binary plans: A binary plan is a multilevel marketing compensation plan which allows distributors to have only two front-line distributors. If a distributor sponsors more than two distributors, the excess are placed at levels below the sponsoring distributor’s front-line. This "spillover" is one of the most attractive features to new distributors since they need only sponsor two distributors to participate in the compensation plan. The primary limitation is that distributors must "balance" their two downline legs to receive commissions. Balancing legs typically requires that the number of sales from one downline leg constitute no more than a specified percentage of the distributor’s total sales.
   
   • Hybrid plans are compensation plans that are constructed using elements of more than one type of compensation plan

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2. 

   2/04/09

   BobMo

   Affiliate marketing
   
   is an Internet-based marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate’s marketing efforts.
   
   Affiliate marketing is also the name of the industry where a number of different types of companies and individuals are performing this form of Internet marketing, including affiliate networks, affiliate management companies, and in-house affiliate managers, specialized third party vendors, and various types of affiliates/publishers who promote the products and services of their partners.
   
   Affiliate marketing overlaps with other Internet marketing methods to some degree, because affiliates often use regular advertising methods. Those methods include organic search engine optimization, paid search engine marketing, e-mail marketing, and in some sense display advertising. On the other hand, affiliates sometimes use less orthodox techniques, such as publishing reviews of products or services offered by a partner.
   
   Affiliate marketing—using one website to drive traffic to another—is a form of online marketing, which is frequently overlooked by advertisers. While search engines, e-mail, and website syndication capture much of the attention of online retailers, affiliate marketing carries a much lower profile. Still, affiliates continue to play a significant role in e-retailers’ marketing strategies.
   
   Compensation methods
   
   Predominant compensation methods
   Eighty percent of affiliate programs today use revenue sharing or cost per sale (CPS) as a compensation method, nineteen percent use cost per action (CPA), and the remaining programs use other methods such as cost per click (CPC) or cost per mille (CPM).
   
   Diminished compensation methods
   
   Less than one percent of traditional affiliate marketing programs today use cost per click and cost per mille. However, these compensation methods are used heavily in display advertising and paid search.
   
   Cost per mille requires only that the publisher make the advertising available on his website and display it to his visitors in order to receive a commission. Pay per click requires one additional step in the conversion process to generate revenue for the publisher: A visitor must not only be made aware of the advertisement, but must also click on the advertisement to visit the advertiser’s website.
   
   Cost per click was more common in the early days of affiliate marketing, but has diminished in use over time due to click fraud issues very similar to the click fraud issues modern search engines are facing today. Contextual advertising programs such as Google AdSense are not considered in the statistic pertaining to diminished use of cost per click, as it is uncertain if contextual advertising can be considered affiliate marketing.
   
   Performance marketing
   
   In the case of cost per mille/click, the publisher is not concerned about a visitor being a member of the audience that the advertiser tries to attract and is able to convert, because at this point the publisher has already earned his commission. This leaves the greater, and, in case of cost per mille, the full risk and loss (if the visitor can not be converted) to the advertiser.
   
   Cost per action/sale methods require that referred visitors do more than visit the advertiser’s website before the affiliate receives commission. The advertiser must convert that visitor first. It is in the best interest for the affiliate to send the most closely-targeted traffic to the advertiser as possible to increase the chance of a conversion. The risk and loss is shared between the affiliate and the advertiser.
   Affiliate marketing is also called "performance marketing", in reference to how sales employees are typically being compensated. Such employees are typically paid a commission for each sale they close, and sometimes are paid performance incentives for exceeding targeted baselines. Affiliates are not employed by the advertiser whose products or services they promote, but the compensation models applied to affiliate marketing are very similar to the ones used for people in the advertisers’ internal sales department.
   
   The phrase, "Affiliates are an extended sales force for your business", which is often used to explain affiliate marketing, is not completely accurate. The primary difference between the two is that affiliate marketers provide little if any influence on a possible prospect in the conversion process once that prospect is directed to the advertiser’s website. The sales team of the advertiser, however, does have the control and influence up to the point where the prospect signs the contract or completes the purchase.
   
   Multi-tier programs
   
   Some advertisers offer multi-tier programs that distribute commission into a hierarchical referral network of sign-ups and sub-partners. In practical terms, publisher "A" signs up to the program with an advertiser and gets rewarded for the agreed activity conducted by a referred visitor. If publisher "A" attracts publishers "B" and "C" to sign up for the same program using his sign-up code, all future activities performed by publishers "B" and "C" will result in additional commission (at a lower rate) for publisher "A".
   
   This system rewards a chain of hierarchical publishers who may or may not know of each others’ existence, yet generate income for the higher level sign-up. This sort of structure has been implemented successfully by a company called Quixtar, a division of Alticor, the parent company of Amway.Quixtar has implemented a network marketing structure to implement its marketing program for major corporations such as Barnes & Noble, Office Depot, Sony Music, and hundreds more.
   Two-tier programs exist in the minority of affiliate programs; most are simply one-tier. Referral programs beyond two-tier involve multi-level marketing (MLM) or network marketing.
   
   Even though Quixtar’s compensation plan involves network marketing that may not be considered to be affiliate marketing, the leading partners in the company are considered to be and call themselves affiliates. Therefore, one may argue that Quixtar is the affiliate marketer for its partner corporation

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3. 

   3/08/09

   BobMo

   ???

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