Multi-Level Marketing, Party Plan, Direct Sales – What’s The Difference?
by Michael L. Sheffield
Find the Right Fit
I am looking at a part time opportunity in sales, but I am confused by the many different types of business opportunities that seem to be available. What is the difference between Direct Sales, Party Plan selling and Multi-Level Marketing? How do I determine which approach is the best for me personally?
Direct selling has its roots firmly planted in the seedbed of American colonial capitalism. The “Yankee Peddler” was a marketing phenomenon of the colonial period – a drummer who went from community to community selling household goods and farm implements. He was the 17th century version of the Fuller Brush, Tupperware, or Amway salesperson. Companies and products, which have traditionally been sold through “conventional” distribution channels (people going to the product), are now recognizing the potential of Direct Sales, Party Plan sales and Multi-Level Marketing to achieve spectacular sales momentum. There are subtle but important differences between these three methods of person to person selling.
Direct Sales income is earned through addition soliciting one customer at a time and then combining the personal sales commissions earned from each personal sales effort to create the weekly or monthly paycheck.
Party Plans sales commissions are earned from leveraging your efforts through group selling by combining multiple retail commissions earned from a single sales presentation.
MLM sales commissions are earned from personal sales commissions combined with the geometric growth generated by sponsoring others who make sales and sponsor others creating an ongoing multiplication effect.
What Suites You?
A direct salesperson typically is an independent contractor working on a commission basis on sales of a company’s products or services. A sales order is written and the company normally ships the product directly to the end customer. Usually there is no need for the salesperson to stock products other than demonstration items. In the typical direct sales company, the income opportunity is tied to receiving a percentage of the retail cost of the product sold. This is called a commission. Most direct sales products require a reasonably sophisticated level of training on proper sales presentation techniques. While most direct sales products are non consumable, there are exceptions such as insurance and pharmaceutical sales. I define consumable as a product typically reordered or a service renewed at least four time a year or more. Most experienced direct sales people tend to be direct selling professionals, many of which are on a career path and work on a full time work basis. However, many people try direct selling on a part time basis. Unless a person aspires to sales management positions, the direct sales income is based on the combined commissions earned on all personal sales made during the pay period. If you are a sales manager, there may be potential profit called commission overrides on the sales efforts of those you train and manage.
There are probably few women over thirty years old that have not attended a home party offered by a sales rep from Tupperware, Home Interiors, Discovery Toys, or other successful Party Plan companies. The concept of group sales through the Party Plan concept is quite simple. In comparing traditional Direct Sales to Party Plan, two significant differences occur. First, the distribution channel is simplified because the product normally moves directly from the manufacturer or distribution company to the Party Plan hostess to be distributed to her party attendee customers. The hostess is a volunteer ambassador for the products that can earn gifts, cash or credit toward the purchase of her own product selections. This cycle is begun and completed by the Independent Representative who will ultimately be the catalyst for the retail sales of the product at the party.
Most products offered through Party Plan sales are high in quality, low in cost, highly demonstrable and stimulate impulse buying. The independent representative making the group sales presentation relies on word-of-mouth “advertising” by satisfied purchasers to create a brand name loyalty and an ever expanding demand for the company’s products. Enticing the party attendees to return to future parties is critical to the growth of a good party plan system. This can be accomplished by introducing new products, offering future discounts to past customers, or most assuredly by making sure that the attendee has fun and looks forward to a repeat performance. The sales representative can use this group sales party environment to recruit other candidates to act as hostesses for their next party. In addition, they can sponsor new independent sales representatives, usually the hostess herself, on whose future sales they will realize a small return. This recruiting effort is more aggressive than a typical Direct Sales model, but much less aggressive than a typical MLM recruiting model. However, most income generated is based on the direct sales effort to the group attending the party.
In the past Party Plan companies were structured like a direct sales model with single level commission compensation offered to the sales representative. Today, Party Plan companies are combining the Multi Level Marketing compensation model with the time tested and proven Party Plan concept.
Multi Level Marketing:
Today, Multi Level Marketing Companies account for billions of dollars in sales, and are estimated to influence one out of every three homes in America with a marketing related contact. In fact, the Direct Selling Association reported that MLM sales in the US represent over 30 billion dollars and has already exceeded 100 billion dollars worldwide. Today, virtually any consumer product is open to Multi Level Marketing style distribution. Any company or entrepreneur ignoring the power of MLM will certainly miss the future.
At a time in history when large numbers of highly professional and entrepreneurial persons are motivated to get out of the corporate arena and into their own businesses, the MLM Industry is growing at an unprecedented rate.
Through MLM, also called Network Marketing, the direct selling process can be duplicated by a sales person who sponsors and trains others. An ever-increasing income stream can be generated through bonuses on sales made by several levels of downline distributors. This creates geometric growth and momentum fueling the spectacular sales volume of which this business is capable. The dollars which would otherwise have gone toward expensive packaging and advertising campaigns are paid directly to the MLM representatives as commissions and bonuses rewarding their sales efforts for retailing the product and sponsoring others who retail product and sponsor others, etc.
Consider Every Opportunity
In conclusion, it should be pointed out that it is not uncommon for independent representatives to initially get involved in direct selling, party plan selling or MLM opportunities on a part-time basis. It is entirely feasible for someone to continue to work at their full time job while building a second income. When their part time income becomes large enough to provide the basic financial necessities is the point at which most independent representatives will consider devoting full time to their direct selling/party plan/mlm pursuits.
Whether you are considering Direct Sales, Party Plan Sales, or Multi Level Marketing, never before has their been an opportunity so right for the time and a market so ready to embrace the opportunity. Timing is everything. If you are considering a part time or full time sales opportunity with low risk and high potential rewards, the time is NOW!