Posts Tagged ‘network building’

Direct sales opportunities

October 10th, 2009

Direct sales opportunities are growing for individuals everyday. But because the industry is still in infancy, we often confuse the jargon. The entire spectrum of the direct-to-consumer industry is set to sweep revolutionary socio-economic change in the coming decade and we are standing at the brink of the revolution . So it does make sense to start getting clarity!

That said, I don’t take upon myself to lay down the rules or proffer definitions. For a simplistic understanding, here are fundamental explanations:

MLM: Multi-level marketing necessitates the movement of a physical product and pays out at various levels based on the total sales of a group of people. For example, if an individual has sold 1000 units of product and has recruited 2 people, each with 1000 units of stock, and they each do the same, there are 7000 units of stock moving through the group. Commissions would be issued to the 4 newest entrants based on the commission %age slab for 1000 units each. Then, for the 2 mid-tier members, commissions will accrue on a %age slab for 3000 group units. And finally, the group originator is remunerated at the 7000 unit %age slab. These tend to get pretty hefty and generally are high returns once the group achieves a critical mass. What I have described here is a ‘binary model’ but there are various strategies (matrices) designed by various companies to make their compensation models attractive.

Network Marketing: I like Jim Dornan’s philosophy which pretty much sums up the definition of network marketing. He says, “we don’t use people to build the business; we use the business to build people”. Network Marketing uses the MLM model and builds atop it leadership, empowerment and duplication. It takes MLM into the B-quadrant at a personal level and as a B-quadrant business owner a network marketers focus is not as much on product sale as it is on empowering others to align with team structure, leadership principles and network building. Contrast to MLM this method earns money slowly but does surely (and hugely); as is characteristic of any business system that is reliant on people’s initiative to learn and grow. Network marketing typically does not operate on a binary model.

Network Building: A relatively new term, network builders operate on the GPT concept of ‘getting paid today ’. This ensures quick returns through product sales and network building up to one or two tiers allows for subscription based continuing income. Like network marketing, network building calls for vision sharing, leadership development and empowerment. But as monies accrue through individual product sales, rather than group product sales, returns are controllable by individual effort. And royalties are controllable by empowerment effort.

As all these involve movement of product directly to consumers… bypassing the traditional distribution supply chain… they all fall under the umbrella of ‘Direct Sales’ and employ Direct Marketing tools such as literature, presentations, roadshows, mailers etc. Corporations have historically employed the direct sales model to sell vacuum cleaners, safety equipment, insurance, computers… the works. Now the individual consumer is getting empowered to do the same and profit from it. That’s exciting!

A common mistake is to confuse the compensation model with the business system. A system is a step-by-step methodology of operation and training and has nothing to do with the network development system set up by the manufacturer or service provider. A ‘business system ‘ is like a franchise you would take to develop your business in a paint-by-numbers fashion by following what works. McDonalds has a system to market its burgers… you too would do well to have an external system to market your opportunity within the gamut of the direct sales industry.

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