Referral Marketing Vs Network Marketing – What’s the Difference?

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For each sale that you make in network marketing, you receive a commission. For each sale that one of the salespeople makes within your network, you also make a commission. If you were recruited by someone else, each of your sales will make them a commission. These commissions are sometimes referred to as “residuals.” That’s why network marketing is often also called “residual marketing.” Each person has their own network that overlaps with other people’s networks, and the potential for earning is virtually endless depending on the amount of work you want to put into building your network, and the success of those you recruit to work around you.

Multi level marketing (MLM) is another term that is used to refer to this unique form of marketing through networks and leveraging the power of the Internet through the use of things such as social networks. The only difference is that each network in MLM is called a “level.” The concept is identical and the marketing methods are the same. So if MLM, network marketing, and residual marketing are the same thing, what is referral marketing?

Referral marketing is based on the same basic concepts as network marketing– using individuals and their personal relationships or contacts to sell goods and services. Referral marketing– the Germans call it Empfehlungsmarketing– however, is a form of “word of mouth” marketing. It can work in several different ways. In its simplest form, a business can pay cash for a referral of another client. For example, you might have a monthly gym membership, and your gym gives you money or a discount for every new signup who mentions your name. It could also be in the form of a coupon. Your auto mechanic might give you a $10 coupon off your next oil change for every oil change you refer to them.

Referrals are powerful because of the trust associated with them. If your friend trusts your judgment and you refer him to a product, service, or business, they are far more likely to act upon that referral. This is why small businesses can really benefit from referral marketing. This type of marketing is also very cost effective compared to traditional methods such as billboards, print, or broadcast advertising. It can be as simple as paying people a small fee to talk about your business in their every day transactions, online, or via their social networks. People will respond to the advice of their friend far more quickly and with greater enthusiasm than they will respond to a cold call or unsolicited advertisement, email, or wall posting on Facebook.

And because referrals come from friends and close acquaintances, the business relationships that result are stronger and have a potential for greater financial gain and long term success. It is a system that works well, is simple to implement, and cost effective for small businesses, making it a fantastic marketing option.

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