Direct Sales Versus the MLM Business Model

A brief word about MLM

Regardless of your qualifications, MLM or Multi-Level Marketing companies offer business ownership opportunities to almost anyone who is willing to make a small investment in them. Most MLM companies offer certain benefits such as the ability to build a huge down-line and create a residual income. Additionally, MLM companies typically sell a wide variety of products to families and friends such as health supplements, household products, and vitamins to name a few.

What do we mean by direct sales?

Direct sales is a phrase that oftentimes referred to as multi-level marketing in that it is a channel for the distribution of retail products and services. The text book definition of direct sales is “the direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs” (Advertising and Promotion: An Integrated Marketing Communications Perspective by George and Michael Belch).

In the simplest of terms, direct selling can be defined as the marketing and selling of products directly to the consumer and away from a land-based retail location. In other words, you go to the customer – they don’t come to you. One-on-one demonstrations and other contact arrangements are the primary ways in which direct sales are conducted. Although a large percentage of direct sales companies employ some type of MLM compensation plan there are a few differences that distinguish one from the other.

The differences between each

Direct selling is about as straightforward a sales method as you can possibly imagine. The bottom line is that you have continually got to be selling in order to earn money. With MLM, you earn money by virtue of direct sales but you also earn residual income by virtue of that huge down-line that you have built. Direct selling also involves cold calling or going door-to-door to sell your products whereas MLM involves calling on people you know such as family and friends as well as benefiting from your downline doing the same thing.

Both sales models can be conducted online as well as offline but the principles remain the same in both venues as they do in the paragraph above. Most individuals are not really salespeople at heart. When this is the case, you will benefit more from engaging in MLM versus direct sales. In direct sales, you only have yourself to rely on for an income whereas you have a downline to help add to your earnings when you sell for an MLM company.

Another one of the key differences between direct sales, MLM, and other business ventures is the size of investment and the necessity to stock a product inventory. In the standard business venue, you need a number of things such as:

• a business acumen
• financial stability
• a larger amount of investment capital
• previous business experience
• product inventory

Although the above is not a hard and fast rule, the same does not hold true with direct selling and MLM. When you open your own land-based small business, you are going to have a considerably larger investment than if you were to get involved in either of these selling techniques. Just make sure that you do your homework before you decide on any business venture so that you do not throw your hard-earned money away.

MLM Or Top Tier Direct Network Marketing? Part 4 of 4

Interested in MLM or Top Tier Direct Network Marketing and want to know about compensation plans?

Multilevel marketing varies depending on the company. For the most part, you receive commissions when you sell products. If you sign up a consultant, you receive residuals on everything they do if you’re in a good company.

The amount of the commissions is going to be the kicker. In MLM, you are probably selling skin care, vitamins, energy drinks, household items or maybe a discount furniture store membership. All of these are going to be pretty inexpensive for the end user so what do you think the commissions are going to be like?

Low Investment, Low Commissions

When investing in MLM, if you’re not putting a lot in, you can’t expect a lot in return. There are a few cases where people have made a killing in MLM, but these are a selected few that started near the beginning.

In Top Tier, as mentioned in part 3, it is a much greater start up cost. Fortunately that means you have great commissions. You also don’t have to have nearly as many transactions to make great money. Instead of selling 5 people a line of skin care, you would need a single modest sale to equate the commission of the skin care.

Once you sell to that one person, you receive residuals on everything they do. Their membership fees as well as their sales.

No Extreme Downline

You won’t have the extreme downline with Top Tier because first of all, the start up cost narrows down the target market. MLM is for anyone who may want to “give it a try”. Top Tier is for serious entrepreneurs. Unless someone has a tone of money to throw around, they are usually going to give it their best shot.

My background prior to MLM and Network Marketing was medical sales to the aesthetic market. When describing to my friends the difference, I tell them its like your skin care rep. versus your laser rep. The skin care rep is going to have far more transactions and doing a lot of “busy work”, while the laser rep does far fewer demonstrations and has very specific offices to call on. Not everyone has money for a laser, but most can find a way to buy skin care.

Direct Mail or Social Media: Which Marketing Channel Is Right For Your Small Business?

Imagine this scenario.

One of your salesmen comes into your office to give you his weekly sales update.

“It was a great week” he said. “I had conversations with 138 prospects.”

“Sounds good” you say. “How many of those prospects actually became customers?”

The salesman smiles nervously. “Well… none of them, but if they ever need our services, I’m sure they’ll choose us.”

As unlikely as that scenario sounds, it’s essentially what’s happening with many small businesses when they choose to discontinue their direct mail campaigns in favor of social media marketing.

However, it’s really not the small business owner’s fault.

Some self-proclaimed social media experts have led them to believe that they have to “put all their eggs” in this marketing basket or they’ll be eclipsed by their technologically advanced, media-savvy competitors.

And it’s just not true.

In 2007 many of these same experts predicted the decline of “interrupt marketing” which included broadcast commercials, print ads and direct mail.

They pointed to a growing number of consumers who were either purchasing products on line or seeking useful internet content to aid in their purchasing decisions.

We were told that these new consumers avoided all forms of interrupt marketing in favor of having “conversations” with their favorite companies and brands via social media.

In that same year direct mail accounted for over $58 billion in sales. So you would think that after almost eight years of social media, content marketing and the proliferation of smart phones that direct mail would be almost dead.

If that’s what you think then these facts may surprise you:

• 2013 annual sales in traditional off-line marketing, which includes direct mail, were $93 billion, while online marketing accounted for $62 billion. (Source: Experian)

• Direct mail is still the preferred channel for prospects who receive marketing from local businesses. (Source: Direct Marketing Association)

• The top three actions for people who received a direct mail piece included, 44% visiting the company’s website, 34% searching online and 26% who keep the direct mail piece for future reference. (Source: Direct Marketing Association)

Direct mail is different than social media marketing because most postcards or sales letters contain a specific call to action.

With direct mail you can ask them to buy something or at very least, visit your website, opt in to your newsletter or call to ask about your products and services.

Direct mail marketing also has the advantage of being measurable.

With the right metrics in place you’ll always know how many marketing pieces were sent, how many prospects responded and how many become customers.

Your company may see some return on their social media investment with LinkedIn, Facebook and Twitter, but since social media is more of a communication platform than a sales tool, it takes time.

By “time” I mean that it takes time for social media to work and it also takes time for the staff member you’ve chosen to complete the on-going task to update content and engage with prospects.

When it comes to social media many small businesses also start with a big disadvantage, because most of their prospects simply have no interest in following them on any social media platforms.

Which is why many of their “fans” are actually family, friends and fake followers. (And you wondered why more of your followers weren’t becoming customers ;>)

To engage on social media you also have to provide compelling content for your prospective customers. If you don’t have anyone on your staff with the skills to write content that people actually want to read, your followers will quickly tune you out.

If you have the time, energy and the skills necessary to create content for social media marketing, I would encourage your small business to do so.

However, if you want to do more than just communicate with your prospects in the hope that they’ll buy from you when they’re ready, don’t forget that old-fashioned marketing channel that can still make your cash register ring…

Direct mail marketing.