The Difference Between Direct Sales and Multilevel Marketing
One question that I get asked a lot is “What is the difference between direct sales and multilevel marketing, and where does Avon fall into that?”
This is a very valid question as the different terminology can be confusing – especially for people who are new to this industry or just thinking about it.
So, I want to take some time today to clear up this topic for you.
First off, let us revisit what direct sales is.
Essentially, direct sales is face-to-face selling.
A salesforce of independent contractors (called consultants, representatives, ambassadors, etc.) market and sell products/services for a company.
They do this outside of a fixed retail location through face-to-face meetings (although the order can also typically be paced over the phone and via a website).
Essentially, they provide potential customers with knowledge and demonstrations of the products/services.
They are then rewarded via a compensation plan.
Avon would be considered Direct Sales because we receive a commission from our sales of Avon products.
This is actually where multilevel marketing comes into play. It can also be called Network Marketing.
You see, multilevel marketing isn’t really marketing.
It is really the term used to describe a technique that is used by direct selling companies to compensate their salesforce (Representatives).
On the one hand, you have companies that use the single-level marketing plan.
This is where a Representative is paid based on the sales that person makes.
On the other hand, you have multi-level marketing.
This is where a Representative is paid based on his sales as well as for the sales of people that he/she sponsored into the company.
Avon would also be considered Multilevel Marketing because we have the Avon Leadership Program, where we can sponsor new Representatives, build a team, and earn commissions from that team.
Building a Team
You see, in direct sales, the company usually allows you to build an organization (often referred to as a downline or team).
So, you are an Avon Representative, and you love it.
You tell all of your friends and family about how great the products are and how the additional income is really helping your family.
Some of your friends are intrigued. They, like you, need to make some extra money. They also feel that the products are something that they could benefit from.
So, they decide to join your team as a Representative.
In many direct sales companies, including Avon, they utilize multi-level marketing to reward you for building your team by allowing you to earn commission based on not only what you personally sell, but what your friends sell.
Look at it as a referral bonus that keeps paying off month after month.
This, my friend, is called residual income. And once people understand it, they would walk through a brick wall to get it.
That is multi-level marketing.
But is MLM a Pyramid?
Now let me talk about an important point that often comes up when people look at the organizational structure of multilevel marketing.
When you draw it out, it can resemble a pyramid.
People who don’t truly understand it often look at that and automatically assume that multi-level marketing is a pyramid scheme.
But that is not an accurate or fair assumption.
In fact, there are two simple ways that you can discern whether or not a business is, indeed a pyramid scheme:
1 – Are the Representatives paid based on the sales that they make?
If the answer is yes, then it is not a pyramid scheme.
In pyramid schemes, the money is made mostly based on recruiting people.
In legitimate businesses, the focus is on the products/services that are offered, though they also often offer leadership bonuses.
In fact, with Avon, we make nothing from sponsoring a new Representative to our team.
They have to sell something, and then we get paid commission on that sale.
2 – Is there a limit to how far down into their downline a consultant can receive compensation from?
If the answer is yes, it is not a pyramid scheme.
In pyramid schemes, someone can earn money from a person that is infinite levels below them.
In legitimate businesses, there is a cap.
Avon pays down to 3 levels below you.
Direct Sales and Multilevel Marketing are very Similar.
Ultimately, direct sales is a way that sales are made and multi-level marketing is a way commissions are determined and paid.
I hope that you are now a bit more knowledgeable about the difference between direct sales and multi-level marketing.
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By Lynn Huber
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