Direct Sales vs. MLM

2008 September 12

Has anyone ever explained to you the differences between Direct Sales and Network Marketing, often referred to as MLM or Multi-Level Marketing?

If you are like most, the answer is NO.

Did you know that tons of people all over the world carry around in their head a negative connotation towards network marketing while they usually know barely anything about it.

When it comes to business, Direct Selling and Network Marketing are like two branches in the same tree.

If you look at any type of business then one of the main goals of that business is to exchange some sort of product or service for a profit.

In turn, that business invests part of the profits towards marketing and advertising so they can acquire more customers and thus keep the flow of new clients and profits coming in the door.

When you analyze Direct Selling, what you have in essence is a group of individuals who are independently marketing and advertising for the company in exchange for those advertising dollars.

This usually comes in the form of some sort of Compensation Program that the company uses to incentivize us to go out and make some sales.

The same is true in Network Marketing or MLM – Multi-Level-Marketing, which ever you choose to call it.

You see I personally have gotten involved in both Direct Selling and MLM for that exact reason. I think that it is a great idea to pay people like us to introduce new, cutting edge products and services to others whom are not only looking for them they are more than willing to buy direct from you.

Wouldn’t it be great if the grocery store or movie theatre did their marketing thru this method?

Refer 3 friends and you get a free Movie..

Or..

After your referrals buy 600.00 in groceries, you get 100.00 of groceries free.

Or..

How about the car dealership? You find 5 people to buy a car here and we’ll give you one for free!

However, we know that most likely these types of businesses will never participate in this type of referral marketing program.

So what are some of the differences between Direct Sales and Network Marketing?

From my personal experiences there are several main differences.

In Direct Selling, there is usually only a 1 time, larger sale and you are done. This sale is usually a bit higher in cost, say 3-4000. And in most cases pays you handsomely. Say 1000 – 1500 per sale.

In Network Marketing, it is usually based on a small sale that is needed to be repeated every month or so. Most are around $100.00 per month or so investment. Hence you are building a base of customers that pay you out repeatedly every month on those repeat, compounding sales.

In Direct Sales you can usually earn full time income with only a few sales a month. If it’s a good program you should be earning full time income with 2 or 3 group sales per month. 2-4500 per month.

In Network Marketing you have to build a substantial base of customers which can be in the hundreds before you are earning full time income.

Then you have to take into consideration all of the people that eventually stop ordering and/or buy from somewhere or someone else.

You see most of the people who get involved in Network Marketing only to make money, realize that it takes more time to build up anything substantial and may give up to soon or end up jumping to another company with the latest and greatest opportunity that matches them better.

You work hard, gain some customers and then want some of your customers to become distributors and create some perpetual forward momentum. In turn you can leverage yourself once you build a large organization of product consumers.

One of the main challenges is learning how to market your products effectively without going broke or crazy in the process.

Let’s say you spend 100.00 on advertising and that 100.00 brings you in 3 new customers and you only make 20.00 on their initial package then you are down 40.00. If they never order again, you are losing money.

If they continue to order you are only adding a few dollars per customer to your monthly commissions. It can be timely before you see any real money.

However, if you are in a direct sales group that has a payout of say 1000.00 and you spend 100.00 on that same ad and get 3 new customers you make 3000.00 minus your 100.00 and you are up 2900.00. Not Bad!

Now again, the goal in Network Marketing is to build up a large base of customers and then teach and train others to become distributors, hence, duplicating yourself.

Once you have a good amount of customers and other distributors it can pay you repeatedly on a monthly basis, really well.

I think that the concept in ingenious and have, along with several friends, been earning residual income in that industry. I am still getting paid on sales that I made several years ago.

You see Network Marketing builds over time and many small purchases.

Direct sales are a way to get paid bigger commissions now.

That’s the main difference!

It’s not that one is necessarily better than the other, they are based in a lot of the same concepts. I think that it is a matter of preference as long as you enjoy what you are doing, who you are becoming in the process and have a workable system in place.

Dr.Charles King, who teaches Network Marketing at Major Universities in the U.S. says “I started researching Direct Selling and in that arena backed into Network Marketing”.

Both MLM and Direct Selling are based on recruiting an independent, outside sales force that gets paid to generate sales. Whether that is small monthly sales or large one time sales, to me it’s still marketing, sales, and team building..

I have also found that some of the best products that I have been able to find have come through the network marketing and direct selling channels. Where people get educated about newer, better technologies and / or ways of doing things.

When people need to be educated about new discoveries or the details of certain products it’s very difficult to get that through in the isles of the store with only a bottle label, hang tag and $7.00/hr employee whom is not trained and educated about all the new technologies that come into the store on a regular basis.

I personally, happily order products from multiple different network marketing companies, have been doing so for years and have down lines of happy customers who absolutely love the products and services and continue to use them everyday.

When it comes to making larger sums of money, I love to focus on Direct Sales and building up my team where we earn 1000’s more with the same amount of time and effort.

To Your Success,

Shawn King

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