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Network Marketing vs. Direct Sales

Which one is best for you?

by Kara Jankowski  |  8873 views  |  3 comments  |        Rate this now! 

Over a year ago, I got involved in a home business. Over the course of six months, this business set me back financially by $4,885. I earned exactly $807 during this time.

Obviously, something was wrong. Ultimately I discovered that I had made the wrong decision about what type of business to join. I wasn’t aware of the features that are common with different business models.

In fact, I didn’t even know there was anything other than network marketing (also known as multi-level marketing, MLM, consumer direct marketing, and referral marketing). I wrongly assumed that network marketing was the only option available to me.

So, I got excited about something and I jumped in. Sadly, that is exactly what most people do. I wasted precious time, and a lot of money.

What’s The Difference?

Most home-business companies are direct-sales companies. However, some direct-sales companies use a network-marketing business model, while others use a direct-sales business model.

Here’s the best way to explain the main difference between the two. In network marketing, when a sale is made, all of the available profit from that sale is shared between you and your upline (the line of people who got into the business before you). The more people in line above you, the more money they make, and the less there is for you. With the direct sales business model, when a sale is made, all of the available profit from that sale goes to one person -- the person who made the sale.

Is that a big difference? You bet. Check this out.

Let’s say you make a sale, and your customer buys products valued at $1,300 dollars. You earn, on average, 7 percent if you're with a network-marketing company. So, for that $1,300 sale, you make about $91.

In a direct sales business, if you make that same $1,300 sale, you keep the entire profit of $1,000 or more. (Not all direct-sales companies offer such high margins; this is just an example.)

I experienced this situation firsthand in my network-marketing company. I brought in about $5,000 in sales in one month, and my paycheck was just about $200.

Do your research carefully! In general, information products or internet-based products offer a much higher profit for the direct-sales marketer.

Company Performance Levels and Sales Quotas

As you probably know, in each company there are various performance levels you can achieve and, at each level, you can earn more money. But do you know what is required to maintain these performance levels?

Requirements vary by company, of course. But every company I’ve researched requires one or more of the following to maintain your performance level and your earning ability:

1.) Monthly personal product purchases. Whether you need them or not, you must buy products each month, typically valued at $100 or more.

About the Author

Kara Jankowski has been an entrepreneur for five years. Her passion is helping others find success at home by sharing her knowledge, experience and support. If you'd like to learn more about Kara, visit her personal web page at www.FollowALeader.com. If you'd like to learn more about Kara's business, please visit www.FollowALeader.net or call her directly at 603-664-3553.

Read more by Kara Jankowski

3 comments so far...

  • Nice Job! Approx. 80% of the NWM industry is fueled by women. Approx. 90% of the Internet marketing is fueled by men!

    There is a huge shift in the making here and your article is very timely!

    My friend Jackie Ulmer, whom I am sure you have heard of, well known 6 figure wahm in the party plan/direct sales industry published not more than two days ago a squidoo on this subject matter!

    You can find it on http://www.momsmakingmoneyonline.blogspot.com

    Flag as inappropriate Posted by Patricia Kagwiria Makhulo on 27th April 2008

  • Hi Maria - thanks for your comments! What you said is so true - you have to like the product you're marketing, or else what's the point?

    I'm in the education industry so of course, I'm thrilled to have such a quality product to offer - especially one that helps kids!

    Good luck with everything and take care,
    Kara

    Flag as inappropriate Posted by Kara Jankowski on 21st April 2008

  • Hi Kara,
    I know what you mean, husband spent 10s of thousands on product like Goji, Vemma, Mangosteen, noni, and amway many years ago, and to come to find out that they really didn't offer anything except a drink that was a berry. When I found Limu, and It worked for him I was amazed. Because of all the others didn't do much except cost money. I like this business, because the product does work, so when sharing it I share the product, not the business. If the product works you will share it. that is just my feeling. Soon I will see all the money he spent over the years back, but shhhh, he doesn't have to know...
    take care

    Flag as inappropriate Posted by Maria on 28th March 2008

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