When trying to decide on which home business to start working with to generate additional income, many times it comes down to making a decision between a standard MLM program and a program designed with more of a Direct Sales model. It is important to know the differences, because you need to match the program you choose with the goals you have set for your home business.
Many of us who make our living online, still debate what is the difference between network marketing and direct sales. Even so, the vast majority of experienced network marketers would define these terms as follows:
• Direct sales are a method of selling a consumer product or a service, person-to-person and away from a fixed retail location. These consumer products are sold through in-home product demonstrations, “home parties” and one-on-one selling by salespeople. Such products or services are usually marketed to customers by independent salespeople or teams of salespeople. Depending on the sales company structure, the salespeople may be called consultants, distributors, representatives, or a number of other different titles. Direct selling can be a part time job or a full time business, depending on the needs and wants of the salesperson. Direct sales are one of the oldest sales methods still going strong today.
• MLM, sometimes referred to as Network Marketing, is a business model where a person is allowed to not only be a customer, but also have the opportunity to resell the products. In addition to being able to resell the products and earn commission on those sales, a person is able to sign up other reps and earn an override on their sales. Now this is where the “multi-level” comes in to play because it doesn’t stop there. The original associate can also earn commissions on the reps that his reps bring on the team and eventually build a group of reps that he/she overrides. Multilevel marketing, also known as “network marketing,” is a legitimate way of selling goods or services through independent distributors. Generally, independent sales people do not receive a salary. Instead, they are compensated through commissions based on the sale of products, both for their own sales as well as on the sales of those they recruit and support. Legitimate MLM’s base compensation primarily on the amount of products sold – not on the mere act of recruiting.
HOW DO THEY COMPARE
• MLM is a lower barrier to entry and many see that as a plus, it also requires a lot more reps on your team to earn a significant income, sometimes up to 200 just to make $1,000. It will also take you time to build a team this size so the upfront income is minimal.
• Direct Sales companies require more startup expenses, but the ongoing cost can be lower after a period of time.
• A Direct Sales program puts most of the payout on the front-end of the compensation plan when a new customer purchases the program package. By doing so, a large commission is earned immediately.
• Direct Sales and MLM companies typically operate in what is called the home based business industry.
• Direct Sales compensation plans are easy to explain as they mimic what happens in typical retail transactions whereas MLM plans are generally complicated for the average person to grasp if they haven’t been exposed to them.
The home business industry is exploding now during this economic downturn as more and more people look for alternative sources of income. With more people looking and the sheer number of opportunities there are two clear cut types of home business opportunities and it can get very confusing if you are trying to compare companies. You need to be fully educated on each type of company to make sure it’s a good fit for you personally.
If your goals are more geared toward spending 2-5 years building a residual type of income, then a standard MLM program would be the way to go. You must be prepared to be spending 5-15 hours per week retailing products and recruiting new distributors to join your team. It has been proven time and again that this 2-5 year plan, worked consistently week in and week out, can ultimately lead to a nice residual monthly income.
However, if you’d like to see larger profits more quickly, then a Direct Sales program with higher front-end payout might be a better choice for you.
Tags: "compensation plan", "direct sales", "home business", "MLM", "multi level marketing", marketing
