Is there a difference between network marketing and direct sales?



Network marketing vs. direct sales



network marketing vs direct sales



Have you heard both of these terms used interchangeably? I have. They are similar, but they are not the same. Think of direct sales as a category and everything else is underneath of that.



Direct sales just means selling a product directly to the public without the use of a retail store. Direct sales has also been called, relationship marketing or one on one selling.



A company or manufacturer may not want to expense of a retail distribution system and storefront. Their expenses also include mass advertising. Mass advertising includes television commercials, radio ads, print and other media ads. This type of advertising can reach well into the millions of dollars.



Why would a company or manufacturer want to sell things through a retail outlet when they can hire “citizen salespeople” and just pay them a commission on their sales? Why spend millions of dollars on ads when you can have someone sell your products directly to their friends, relatives, neighbors and co-workers?



That’s what direct sales, as a category, is and why a company or manufacturer would want to use this type of business model. Simply put, it’s a lot more profitable for the company.



Under this category, you have companies that call themselves direct sales companies and network marketing companies, which are also known as MLM companies.



Both types of companies sell directly to the public. What’s the real difference?



The difference between network marketing and direct sales usually boils down to the compensation plan that the company uses.



direct sales companies



Direct sales companies



A direct sales company will pay the distributor a higher commission on each product sold than a network marketing company. Typically, commissions range from 25%-50% of the sales price of the product. Some direct sales companies will allow you to recruit other distributors into your business. They will pay you a very small “override” or commission on their sales.



Network marketing companies



A network marketing company will pay out a smaller amount on the products that a distributor personally sells. The added benefit of a network marketing company is that they allow you to recruit other people into your sales organization. The company will pay the recruiting distributor a small “override” or commission from the sales of other distributors in your “downline.”



As you can see



Direct sales company are placing the emphasis on selling the products. The network marketing company is emphasizing recruiting of other distributor in to the company.



The products they sell



The types of products that are sold by direct sales companies can be, but are not always, higher priced. This allows distributors to make decent money by just selling the products.



Network marketing companies tend to sell products that are consumable, meaning the products are used up in 30-60 days and the customer needs to reorder the products.



The fact that network marketing products are consumable, means a distributor can earn a commission on future sells. This is the famed residual income.



the products they sell



Is one better than the other?



It depends on what your goals are. If you want quick and steady income and don’t mind selling, then direct sales is the way to go. Again, the emphasis is placed on selling the products.



If you are looking to create a long term, residual income then network marketing is for you. You won’t get paid the upfront money that you get from sales in direct selling, but if you are able to recruit enough people into your organization, you can make a lot of money.



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