Thursday, November 21, 2013

MLM vs Direct Sales - What's the Difference?

This post is a little about my successes and "failures" in from-home businesses; what works and what doesn't, and why that might be.

I've been in and out of various from-home businesses since I left the Navy in 2001.
  • First I worked with Pampered Chef and filled my kitchen with some great tools that I still use today. When we moved to Maryland, I decided I didn't want to start that over. 
  • I jumped around for a bit earning pocket change doing mystery shops (generally not worth the money for the time spent. Seriously, Folks!) so I tried starting something of my own in 2007.

I still work on that business writing family histories and personal memoirs and memorial books here and there. It has been successful. It hasn't made me "rich", but it feeds my soul, and gives me such a lift to help families and individuals record their stories for future generations. One day, I'll give it a heavy push to build it more, but I'm content to let it run on the idea that, "if it's meant to happen, it will."
  • Next I tried selling jewelry with Silpada. Silpada is a great company, but I don't wear jewelry. 

When I hit the end of the Silpada line, I came home and told the White Knight, "If I ever talk about joining another direct sales company, slap me!"

Then we moved from Maryland to Virginia and within four months I was looking at signing up with not just one company, but two: Young Living Essential Oils, and The Traveling Vineyard wines. (Soooo... what happened to slap me if I ever talk about another direct sales company??) 

These two companies had several things going for them, but what I've learned since joining these two is that there is a difference in from-home businesses, and how successful you are at such a business is going to depend on matching your personal style with the business in question.

When many people hear the words, "MLM," "Multi-Level Marketing," or "Network Marketing," they think of it synonymously with "Direct Sales," or with "Pyramid Scheme," and both are mistakes. Here, in simple terms, is the make up of each:

Direct Sales: 
Direct sales are when the sales effort takes place directly in the person's home. These are the companies that have you invite "40 of your best friends" or "all of your friends" over, you provide some food or recipe ingredients (usually) and the consultant comes in and shows you the company's products, perhaps plays a game or two, does an educational presentation, etc. At the end of the evening, the guests order whatever appealed to them, and the hostess is rewarded with free goodies or credits or whatever, based on the total amount the show earned before taxes, shipping and handling are added.

Network Marketing:
By contrast, Network Marketing is not about selling individual items, customer care and follow-up. Network Marketing is more a means of sharing your knowledge about the company as a whole, and getting a person to see the benefits to multiple products for their own use. While some MLM type companies and distributors follow a home-party model, most find that single-item selling is not as beneficial within the MLM network system.

Now for a short look at key differences in the day-to-day workings that a distributor might see:

Direct Sales:

  • Home parties are the primary means of garnering new business leads, sales and income
  • Hostesses of the home party receive "host/ess rewards" for opening their homes
  • Guests at the party are introduced to new products, games, etc. in order to garner interest in hosting a party of their own, ordering products or signing up as a new consultant
  • Most direct sales companies require a minimum monthly (or quarterly) amount in sales to remain an active consultant
  • Special promotions are offered to retail (i.e.: party) customers on a monthly basis
  • Many direct sales companies allow you to rise in the ranks based primarily on personal sales, and not as much on the efforts of the overall team
Network Marketing: (At least in the Young Living world, and as I understand it with the other few MLM companies I've had some limited experience with)
  • One-on-one or one-on-two meetings, occasional information sessions, and referrals are the primary means of garnering new business and sales. 
  • "New Business" means people are signing up in your "downline", and ready to use the products themselves
  • Most Network Marketers don't do very many direct, individual-product sales. Purchasing the items at retail cost is not worthwhile to most customers and so if they want to use the products, many folks will simply join up, if only to get the discount for themselves.
  • Special promotions are generally not offered to people who are not signed up as wholesale customers already, but instead to existing (or newly-signing) wholesale customers and distributors
Finally - some things to consider when looking at working from home with one of these two types of companies: 

Any time you join a company, whether as a Network Marketer, a Direct Sales Rep, or even owning a franchise somewhere, you're likely putting out a cash investment of some sort. You don't want to waste that money by joining a company that is not the right fit for your personality and interest. Here are some tips I've learned along the way (and sometimes the hard way.)
  • Money (or the promise of it) is not enough - if you are joining the team just because you look at what someone else has done successfully and you would like to earn that kind of money too, don't give up the dream, but look elsewhere first. Even if you're fairly successful at selling the trinket of the day, unless you have some reason for joining the company in addition to the promise of financial gain, you'll struggle to keep the business going and growing over time.
  • Link up with a product you LOVE - It is very hard to talk about jewelry and how great it is if you don't wear it every day; harder still to sell wines if you're a tee-totaler. If you don't already love the product enough for its own sake - so much that you would use the product even if you weren't earning money from it, move on. It's not the right fit for you. 
  • How outgoing are you? - Any sales opportunity, whether in a shop or from home, is going to take you a bit out of your comfort zone, but if you don't feel like you can talk about your products and ask for people to host shows for you without being a burden to them, go slowly into the direct sales water. It is natural for people to be somewhat uncomfortable asking for friends and strangers to step up and "earn free products" or "host a show", so how willing are you to step out of that comfort zone and push past to do what is needed and succeed.
I am not an expert, certainly, and these are just things I've experienced along the way. So if you want to jump in and you end up thriving in the company you pick, that is fantastic! The purpose of working from home, for many people, moms in particular, is to have time to be with their families and to have more control over life while earning an income. Don't be shy! The customers and hostesses and companies are out there! Then come back here and give us some success stories of what's worked for you!

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