Many of us who make our careers in this industry are still perplexed by the distinction between network marketing vs. direct sales. Nonetheless, the vast majority of experienced network marketers define these phrases in this manner.
Most experts would agree that network marketing is a subset of the direct selling concept, in which products or services are offered one-on-one and sold directly to the consumer by the salesperson. The two approaches, however, provide quite different benefits to the seller.
Direct sales businesses are “seller-based,” which means they pay more to the distributor when he or she makes a retail sale. Direct sales organizations typically offer higher-ticket, one-time-sale, long-lasting commodities including air and water filters, kitchenware, art, and home furnishings. The majority of the possible earnings specified for the salesperson’s commission goes to the individual who makes the retail sale in the direct sales business method. That employee typically earns a far bigger percentage of the authorized sale commission than the sales manager who may be supervising his or her activity.
Unless they have been appointed as sales managers, successful direct salespeople are compensated largely on their personal sales rather than establishing a sales organization. Furthermore, because most products sold by direct selling companies are lasting rather than consumable, the opportunity for residual income is usually limited. There are obviously exceptions, such as residual revenue in insurance sales, but when the sale is completed, the salesman moves on to the next individual and possible sale. Direct sales commission checks are usually higher than in network marketing, so if you want quick money, this is the way to go.
However, if you want to create a long-term residual income, you should investigate network marketing. Network marketing distributors continue to sell, although they usually start with their “warm” market of friends and relatives. Because most of the available commissions are diverted toward bonuses paid to various upline management employees in the sponsor tree, network marketing businesses often pay substantially lower retail commissions.
In turn, you can sponsor a downline of distributors who not only sell but also consume things, becoming your customers. If the company’s products are of great quality, reasonably priced, and provide evident benefits, the distributor has a real chance of gaining a “lifetime customer.” Customer retention generates residual income. Residual income is money earned from original sales and reorders, as well as sales and reorders made by those you recruit and those they recruit, and so on. This procedure generates earnings for you long after your day-to-day focus on the “sale” or your sponsorship activities has ceased. For example, royalties earned by a writer or performing artist on his or her work are an example of residual income. So is the return on stock investments. Consumable products like vitamins, personal care, cosmetics, and so on are more compatible with the network marketing business model since reorders generate the residual income that drives the program.
For a variety of reasons, having spent the majority of my professional life in direct sales and network marketing, I have found it easier to attract people to a network marketing opportunity. One example is residual revenue; here are a few more:
- It is frequently less expensive to participate. There is usually no investment other than product samples and a low-cost distributor kit. The company can drop-ship client orders, and consumers can normally reorder from the company directly or through the corporate Web site, with the allocated bonuses going to the individual who made the original sale. As a result, no large quantities of inventory are required. That implies…
- Because the model includes both part-time salespeople and full-time career builders, more people can get involved.
- There is the possibility of exponential expansion. Distributors can leverage their energy and efforts by training a small number of people who can then train and manage their own people, and so on. Sales generate bonuses for the sponsor and upline in this manner.
