Today, I want to take some time to educate you about the difference between network marketing and direct sales.
For some strange reason many people in our industry interchange these two words as if they mean the same thing. They do not. My goal today is to fix that. By the end of this post, you will clearly know the difference between network marketing and direct sales, so you can decide which business model is better for you.
Direct Selling Overview
Once again, direct selling and network marketing are very different. Direct selling is when someone sells something directly to a consumer and makes a retail profit for doing so.
Companies such as Avon and Tupperware are commonly known as direct selling companies (because of the focus on retailing), even though they have a MLM Component. Other examples of direct selling include selling items at flea markets, selling jewelry at a home party, making your own candles and selling them at local events, etc.
Simply put, when you sell something directly to someone it’s direct selling. If you remember nothing else about direct selling remember that direct selling is focused on personal selling.
The major benefit of direct selling is that your income is normally tied to your own performance. If you know how to find prospects and make sales, you can make a lot of money quickly. The sky is the limit. The people who typically do best in direct selling are the folks with a strong sales background and solid product knowledge.
The major disadvantage of direct selling is that you do not have any leverage. You have to keep selling items yourself to keep making money. If you want to take time off, or can no longer work, your income stops. Direct selling is linear income! I consider it a temporary income.
Network Marketing Overview
On the other hand, network marketing is a team sport. Network marketing is about a lot of people each doing a little bit, not one person doing a lot. Network marketing is about building a team of people who consume the products, make a few sales to customers each month, and sponsor a few people.
The major advantage of network marketing is the leverage. You earn a small commission from each person on your team, whether you personally referred them or not.
As your team’s sales volume increases, so does your income. You can multiply your organization (and income) and eventually have a business that pays you whether you work, or not.
The major disadvantage of network marketing is that most of your income is tied to other people’s performance. Even if you are good at recruiting and sales, to make the big bucks you need to find others who duplicate what you do.
If you can’t find people who will go to work and produce, your income is severely limited. If you’ve spent any time in this great industry, you will quickly discover that most people cannot produce. That’s one of the reasons attrition is so high in our industry.
One thing I do love about the network marketing industry is that you only need to find 2-5 “leader type” people who really get it, and put in the work, to build a big business. From the efforts of that small group of leaders, you can have a team with tens of thousands of people in it. Keep in mind you will need to sift and sort through a lot of prospects and distributors to find these quality “leader type” people.
It’s also important to note, for legal purposes, that even the MLM Business model should have a strong emphasis on direct selling, in addition to recruiting. Network marketing is not about recruiting, it’s about creating volume. You don’t get paid to sign up distributors. You only get paid when products are purchased by customers and distributors.
As I see it, every distributor should have two to five retail customers, minimum. This legitimizes their business and gives them an immediate retail profit.
Neither Business Model is Perfect
As you can see, neither business model is perfect. They both have advantages and disadvantages. What works for one person might not work for someone else.
Ultimately, you have to decide which business model is best for you and your family, based upon your goals, talents and needs.
I would say that if you just want to “sell” something, pick a business model such as the insurance or real estate industry where you can earn several hundred or several thousand dollars per sale. It’s hard to make a lot of money in network marketing if you just sell the product yourself.
I personally chose network marketing over direct selling, because I wanted a leveraged income. Although I am good at recruiting and sales, I realize that if I’m limited just to what I do, there is a cap on my income. Plus, I love residual income. With most “direct sales” companies there is no residual income component. Instead, your income is linear.
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In conclusion, this post shared the difference between network marketing and direct sales. While these two business models have some similarities, they are clearly different from each other.
If you enjoy selling and want quick money, I would focus on direct selling. However, if you want leverage through others and you want to build a long-term residual income, I would really consider network marketing.
What do you think? What business model do you prefer and why? Leave a comment below to share your thoughts. I look forward to hearing from you. Have a great day.