We all need money. The money we earn is always used to buy things we need in our daily lives and even impress people around us. It is funny how money has taken control of almost everything in the world. The same way food is important to the body, so is money to human life. In the quest for money, most of us have heard or engaged in various types of businesses. One of the famous businesses is direct sells and multi-level marketing. These might be new terms to most of us. So, how do we differentiate the two?
Direct sales vs. MLM
Understanding the difference between direct sales and MLM might be hard, but we will try to break them down for you to understand.
What is a direct sale?
This is a business model where individual distributors sell a company’s product to the customer in a direct way. The products are sold in a non-retail environment. The sales can occur any other place such as home or work but not in around the store.
What is MLM?
Just like direct selling, multi-level marketing is also a business model where an independent agent or representative sells products of a company or its services to customers directly. However, in MLM, the independent representatives also make money from recruiting other representatives to work for the company.
Differences between Direct sales and MLM
Income is money earned from sales of products and services. In direct sales, income is earned from the profits of the products sold. Once the direct sales representative is done selling the product, they move to the next customer to try and sell the remaining product. In direct sales, the sales representatives earn a higher percentage of the profit than the management. In MLM however, the marketers earn a small percentage of the profits made from the sales. They then make extra income from the sales of the people they recruited.
Direct sales always sell products that are at higher prices, most of these products are one-time purchase materials. They can be cookware, furniture or even electronics. On the other hand, MLM entails selling of regularly restocked products such as Vitamins and Supplements as well as cosmetics. The representatives in this case approach customers who are close to them such as friends and relatives. One of the marked difference from direct sells is the reordering of the consumable products which in turn creates a residual income.
In direct sales, training and meetings are done on a relatively small scale. Motivations are majorly based on sales made. In multi-level marketing, training is done on very many occasions. Motivations are done through seminars and subscriptions to books and CDS. These events are always done with so much hype to encourage people to get more recruits.
In direct selling, the salespeople earn money from the sale of their products. The distribution growth is always reserved for the sales managers who prescribe sales territories and time of sale. On the other hand, distributors in multi-level companies are recruits down the chain. This is what leads to one on top of the chain earning more residual income that the recruits below them. In MLM, no one is limited, and that is why an individual can create his distribution team and even train them.
As noticed, we can say that all MLM companies are Direct sales companies. MLM companies are like a branch of direct sales companies. However, there are also the other larger groups of direct sales companies that are not MLM companies at all. Mlm companies can be termed as Direct sells companies that have sponsored networks of agents who share commission regarding who recruited whom.
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