What exactly is direct selling?
Direct selling is a marketing approach that concerns about selling the product to customers via a representative or a distributor from the concerned direct selling organization directly. Usually, the commission earned for independent sales is the only revenue of a distributor. The marketing and selling of products are managed through a dedicated MLM software system.
A distributor prefer various methods to make sales like,
- Make sales over door-door with a proper demonstration in front of customers (face-face sales)
- Home parties are yet another space to occupy as a direct selling opportunity where distributors make the sales in the party. This mode of selling is called Party plan MLM. Hosts of such parties also get a share of commission for the sales made by the distributor in those home party events.
- Online space to introduce product selling to customers via a personal website is a new trend
With the above methods, revenue can be increased to reach a better value.
These representatives or sales consultants are solely responsible for product sales and they can be tagged as “self-employed” status. The tax which the consultant obliged to pay is done by their own efforts, and the organization is not responsible for those matters.
What is network marketing?
Moving onto the next side, network marketing is more a referral system where distributors earn a commission for not just their independent sales but also for the sales made by their team. It’s a combined effort and the revenue earned might be more or less depending upon the activeness of your group.
Sales from downline members will also be taken into consideration while calculating the commissions of the distributors. Building a network alongside sales is what network marketing stresses out for if it’s just about referring more people and getting paid will fall under “pyramid schemes”.
Earning commissions might be calculated based on achieving a certain volume of sales or referrals or ranks. It depends on the organization and the criterion is chosen by them.
Direct selling and network marketing – The contrast!
Not everyone is aware of the difference between direct selling and network marketing, not even network marketers in the industry. Awareness has to bring in and let’s see the difference between the two.
The major differences between the two includes,
- Instead of independent sales network marketing focuses on group sales of distributors of the network
- It’s an opportunity to earn an additional set of commission by building a proper set of distributor line-up through training and useful insights
- Various compensation plans are available to choose from and it’s effective
- Sales can be extended to other parts of the world through reference
- Meeting new people can be considered as a new opportunity and converting a customer into a distributor brings in more set of commissions
- Branding can be established with your network connection and it can be built using social media platforms easily
Well, there are other sorts of drawbacks too that can pull you out of network marketing and get back to direct selling business.
- Not everyone is happy with the organization’s policies and regulations.
- Losing independent working mode won’t be encouraging for ex-direct sellers
- A proper schedule or continuous hours of marketing schedule might not be preferred at times
- In network marketing, during the month-end, it’s always a marathon to close the target sales meanwhile direct selling is more a relaxing side
- Not every effort is transferred into desired revenue or commission gain like your sales will be shared with the upline members and you won’t get the deserving commission
12 major differences – A closer look between direct selling & network marketing
Direct selling
Network marketing
Independent sales are the only revenue earned in this marketing model
Revenue earned depends upon the distributor contribution of the network
Commissions are not shared among other distributors
Commissions are shared with upline member line-up
Independent from other distributors
Depends on other distributors
Self-motivation and no team exist to control
Sponsor needs to give motivation to the team and lead them for best performance and result
No referring model system is followed
Member referring is a part of a distributor network expansion
Revenue-based on sales only
Revenue is generated based on sales and member recruitment
Not many compensation plans to choose
Many compensation plans are available for the organization
Only individual targets to achieve
All members have to achieve the target for achieving deserved income
Not best for long-term income goals
Best for long-term income goals
Global expansion is not easy
Global network expansion is possible
No sponsor bonus or commissions are received for distributors
Sponsor bonus and other sorts of commissions are available for recruiting new members
Initial joining to the organization doesn’t cost high
Initial joining packages might be expensive depending upon the organization
Apart from that, there are many similarities between these two marketing approaches like,
- Both models need individual skills and require proper training
- Even though in network marketing group sales are considered, individual distributors have to achieve the target like direct selling model
- Distributors no matter in direct selling or network marketing has to convince customers by proper demonstration with samples for achieving the sales
- There is no fixed salary to individuals unless the salespersons are appointed in the organization with an employed status and certainly everyone in the industry is self-employed
- Age isn’t a barrier to join in the product selling organization
- No specific experience is needed but must have good presentation skills to reach more customers and thereby earn more income
At present every direct selling company has opted MLM or network marketing as a business model or progressively chooses the path. More and more people are attracted to the plan and the network keeps growing on and on.
However, these two sides are connected to each other. Many have chosen network marketing as a secondary source of income alongside primary jobs. Well, never get confused with that of pyramid selling.
It’s important to understand the difference between direct selling and network marketing model. For more details, it’s best to understand all the other necessary terms involved with the industry like direct marketing, pyramid selling, etc.
One must be aware of the legal side before kick starts his own product selling business.
We personally recommend you to research more about the product selling business, and understand in-depth by bringing together all the elements necessary to market a product and reach the customers.