What’s the first thing you’ll probably hear when you mention your direct sales company to someone else? There’s a good chance it’s going to be something along the lines of: “Oh, that’s one of those ‘pyramid schemes,’ right?”
Hopefully we’ll be able to clear this misconception up a little in this post.
There are two major “types” of direct sales companies, and they have somewhat different “models” of their business, both still based on relationships:
Party Plan Companies
Companies that utilize “parties” as their primary sales platform. Consultants will ask their friends to host a party for them where they can show their goods and give the girls who come an opportunity to shop and mingle. The hostess will invite her other friends and they might even invite their other friends. The party may have a theme, like a martini party, wine tasting, a fiesta, a dinner party, or anything else the hostess thinks up. Those girls get quite creative! Examples of party plan companies are Thirty-One Gifts, Pampered Chef, Tupperware, & Cookie Lee, to name a few. 98% of PP consultants are female.
She earns commission on her personal sales at these parties. The hostess gets special incentives (like exclusive products, free items, etc.) for hosting and inviting her friends. The customers get to shop, interact with each other, and have a good time doing it. Often the consultant will give door prizes as well. If one of the customers has a good time and wants to host a party of her own to get those special rewards, all the better. Even better if she likes the experience enough to sign up as a consultant herself!
As the consultant builds a team, she will earn a small percentage of the sales of the girl on her team as well. She may get 5% on her personal recruits’ sales. She’ll get smaller percentages as the downline gets deeper.
Multi-Level Marketing Companies
These companies are, in a lot of ways, similar to Party Plan Companies. There is still a direct-to-customer sales model where the marketing is done by a “consultant,” “distributor,” “sales rep,” or “independent agent.” The difference is that MLM consultants tend to be more focused on promoting product through briefer interactions and less through “parties.” When given the opportunity, the MLM consultant will tell you about their product & its advantages, give you a card with website information and ask you to check it out when you have time later. They may get your information and follow-up with you as well. So, generally, sales are made on a one-on-one basis. MLM tends to be a male-dominated group. Examples of this group include Amway, Rodan + Fields, Herbalife, & Mary Kay.
MLM reps get a commission on their sales. Often in MLM, there is a focus on turning the customer into a sales representative. Both the original rep and the new rep get benefits from this arrangement (the new rep getting discounted prices on product and the opportunity to earn income, the original rep getting a percentage of sales from the new rep’s personal use and anyone that signs under them). This is where the “Multi-Level” part of the name comes from. Generally, a higher percentage of an MLM company’s customer base become sales reps themselves. They don’t tend to remain simply customers. Much of the earnings incentives for MLM reps are based on developing deep “teams.”
The majority of my experience with direct sales comes from Thirty-One Gifts. Holley has been a consultant with that company for 8 years and I’ve been helping her with her business for about 2 and a half years. She has recently become a consultant for Rodan + Fields as well as she has been using the product for a year and wanted to share it with others. We’re still trying to figure out how to operate in both of these worlds which is easier said than done.
What direct sales company(-ies) do you have experience with? What do you think are the main differences between the PP and MLM models?
Bonus question: Are these posts too long? I’ve been aiming for 500 words but overshooting it every time.