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Traditional Sales/MLM–What’s the Diff?

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An apparent contradiction has dogged the MLM industry for years:

  • A network marketing company has almost nothing in common with a traditional sales organization.
  • A network marketing company has almost everything in common with a traditional sales organization.

In reality both of these statements are true! Once you understand this seeming contradiction, you’ll be well on your way to understanding the difference between traditional sales and network marketing.

The issues faced in a traditional sales organization are also faced in MLM companies, but just in a different way. Just like a traditional sales company, MLM companies have to motivate people. Network marketing companies also have to manage people and pay them to sell product. MLM organizations just go about these tasks in very different ways than in a traditional sales environment.

The process of taking a product to market through a traditional sales force relies on:

  • Salespeople who explain and sell the product while addressing their consumers’ needs;
  • Sales managers who work with and train salespeople; and
  • Motivators who generate and maintain enthusiasm.

In this sense, network marketing and a traditional sales force are similar.

How each goes about accomplishing the product-to-market process, however, marks their difference. In traditional sales businesses, such as automobile dealerships and insurance companies, the salespeople are employees who are hired, fired, promoted, or demoted. The marketing department does its job, and the sales force does its job.The salespeople may be on commission, but, again, they’re hired, promoted, and fired just as they would be on any other job.

According to the Direct Selling Association, “In direct selling, products or services are marketed to consumers by independent salespeople person-to-person. Depending on the company, the salespeople may be called distributors, representatives, consultants or various other titles. Products are sold primarily through in-home product demonstrations, parties, and one-on-one selling.” These companies don’t sell by means of traditional storefronts or direct mailings or telemarketing or mass media advertising. Rather, they sell by means of independent representatives, often called distributors. Network marketing companies are a type of direct sales company. These companies, in addition to paying their distributors to sell products, also encourage the distributors to recruit downline distributors by paying commissions on the sales of their downline distributors. In other words, in MLM, a product is distributed by a volunteer army of distributors who choose:

  • Which markets to enter or leave
  • Whether or not to spend their time selling product or building their organizations, whether or not to work part-time or full-time

Unlike personnel in traditional business, independent distributors with an MLM company are not hired employees. Distributors are in charge of their own career choices—whether to make a few hundred dollars extra each month, a few thousand, or tens of thousands by building a large organization. They can also choose to work part-time, and as long as company requirements are met, they can remain with the company.

A traditional retail organization is exclusively sales-oriented. If you sell for such a company, you make your money exclusively from sales and sales commissions. Only the sale matters. On the other hand, an MLM company bases a distributor’s earnings on both personal sales and sales generated by the distributor’s organization—the people they recruit.

Unlike the single income stream of traditional sales companies, network marketers have a dual income stream–income from personal volume sales commissions and commissions on group volume sales from their downline. So, you can see that an MLM company’s commission plan is likely to be more complex than that of a retail establishment or, for that matter, a traditional direct sales company.

Now you finally know the truth of the matter regarding the mysterious MLM contradiction, so expand your mind and embrace truth! In reality, a network marketing company has almost nothing in common with a traditional sales organization. However, a network marketing company has almost everything in common with a traditional sales organization.

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Source:Understanding Multi-Level Commissions and Their Role in a Successful Company, Mark Rawlins.

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