There are 2 very different types of opportunities under the umbrella of Network Marketing: (a) Direct-selling; and (b) Multi-level Marketing (MLM).
Are they different? YES!
This kind of opportunities are often referred to as “seller-based” opportunities. You earn more income by making a sale at retail (difference between members’ price and selling price). This type of businesses often carry high-end, long-lasting products i.e. air purifiers, water filters, durable automotive products, club memberships etc.
You earn more per each sale. So if you’re good (if not great) at selling, you earn more money faster. That’s why successful people in this type of businesses are often great salespeople. They’re rewarded based on their sales performance. Their main focus is on making sales… a lot of sales.
Most direct-selling businesses cost more to get involved with, because you’ve got to invest more in initial inventory, and because the products cost more. In the long-run, there is very little residual income (passive income) because the main activity is continuously making sales.
Passive income means income that you can continuously earn even after you cease working on the businesses or activities that provide you the income source. Interest earned on a stock investment, rental collection from your properties portfolio, the royalties a writer or performing artist makes on their creation… these are all examples of passive income.
Multi-level Marketing (MLM) Businesses
MLM businesses focus on building a network organization of lots of people who are taught to use/sell a little bit each. MLM companies usually offer reasonably priced (not over-priced) products that people consume within a month or two and then re-order. There’s a high repeat-sale rate.
You’ll earn less money up-front if you sell the products. But if the product is really great, and people love it or depend on it (like great nutritional supplement or super skin care item) they’ll buy it again and again, sometimes for years and years.
It’s easier to attract people to this kind of opportunity for a number of reasons:-
- It costs lesser to get involved. A couple of units of initial inventory will usually cover all you need to get started. And this means…
- More people are able to get involved. Then the organization grows bigger faster, with more people using the products every month. This will give you more…
- Passive income. Every month. For a long, long time.
Direct-selling businesses require salespeople to make it work. The reality is that most people don’t like the idea of going out to make sales. The approach that most MLM distributors use often is recommendation or sharing of products or services they think are great, that they have personally used.
In a direct-selling business, you need to be continuously making sales or training your downlines to make sales to enjoy the rewards continously. In MLM, you often need to create awareness, share with others your own experience with the products and to teach your downlines to do the same. In the long-run, your income is mainly earned from the continuous consumption of the products from everyone in your organization, even if nobody is selling anything to anyone.
To find out more about Network Marketing, please read my other blog posts in this category, at http://blog.cheanu.com/category/network-marketing/
Learn how to automate your income by using the power of internet, at http://blog.cheanu.com/internet-marketing/how-to-automate-your-income/
Another great post about the difference direct selling business and multi level marketing business. To me, direct selling is not creating us a passive income. But a multi level marketing (mlm) business is creating us a passive income.
Haron is right.
I lost lots of time and money following my sponsor’s advice, he was successful and still is, but I could just not duplicate his system, thank heavens for online MLM and the ability to generate leads online.
interesting point of view Cheanu
This is a great post about the difference direct selling business and multi level marketing business. The approach that most MLM distributors use often is recommendation or sharing of products or services they think are great, that they have personally used.
This is a Official blog, I agree your Business and Product, Thanks for good opinion.