Network marketing vs. direct sales
Understanding the distinction can assist you in determining which opportunity is the greatest fit for you.
Many of us who make our career in this industry are still perplexed by the distinction between network marketing and direct sales. Nonetheless, the great majority of experienced network marketers define these phrases in this manner.
Most experts would agree that network marketing is a subset of the direct selling idea, in which items or services are supplied one-on-one and sold directly to the customer by the salesperson. The two techniques, however, provide quite different rewards to the seller.
Direct sales businesses are "seller-based," which means they pay more to the distributor when he or she makes a retail sale. Direct sales organizations often offer higher-ticket, one-time-sale, long-lasting commodities including air and water filters, kitchenware, art, and home furnishings. The majority of the possible earnings specified for the salesperson's commission goes to the individual who makes the retail sale in the direct sales business method. That employee often receives a far bigger proportion of the authorized sale commission than the sales manager who may be monitoring his or her activity.
Unless they have been hired as sales managers, effective direct salespeople are compensated largely on their own sales rather than establishing a sales organization. Furthermore, because most products sold by direct selling businesses are lasting rather than consumable, the opportunity for residual revenue is generally restricted. There are obviously exceptions, such as residual revenue in insurance sales, but when the transaction is completed, the salesman moves on to the next individual and possible sale. Direct sales commission checks are generally higher than in network marketing, so if you want rapid money, this is the way to go.
However, if you want to create a long-term residual income, you should investigate network marketing. Network marketing distributors continue to sell, although they generally start with their "warm" market of friends and relatives. Because most of the available commissions are diverted toward incentives given to various upline management employees in the sponsor tree, network marketing businesses often pay substantially lower retail commissions.
In turn, you may sponsor a downline of distributors who not only sell but also consume things, so becoming your customers. If the company's products are of great quality, reasonably priced, and provide evident benefits, the distributor has a genuine chance of gaining a "lifetime customer." Customer retention generates residual income. Residual income is money earned from original sales and reorders, as well as sales and reorders made by people you recruit and those they recruit, and so on.
This procedure generates revenue for you long after your day-to-day focus on the "sale" or your sponsorship activities has ceased. For example, royalties earned by a writer or performing artist on his or her work are an example of residual income. So is the return on stock investments. Consumable items like vitamins, personal care, cosmetics, and so on are more suited with the network marketing business model since reorders generate the residual revenue that drives the program.
For a variety of reasons, having spent the most of my professional life in direct sales and network marketing, I have found it simpler to attract individuals to a network marketing opportunity. One example is residual revenue; here are a few more:
It is frequently less expensive to participate. There is generally no investment other than product samples and a low-cost distributor kit. The firm can drop-ship client purchases, and consumers can normally repurchase from the company directly or through the corporate Web site, with the allocated incentives going to the individual who made the original sale. As a result, no large quantities of inventory are required. That implies... more individuals can get involved, because the model includes both part-time salespeople and full-time career builders.
There is the possibility of exponential expansion. Distributors may leverage their energy and efforts by training a small number of individuals who can then teach and manage their own people, and so on. Sales generate compensation for the sponsor and upline in this manner.
Direct sales or network marketing can give an accelerated earning potential if you like people, are a strong communicator, and a dedicated worker. It is ultimately up to you to determine which option best meets your requirements and goals.
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