This post covers the different aspects of network marketing – Direct Marketing, Affiliate Marketing and Multi Level Marketing and makes a comparison with Direct Sales.
This term really relates to the distribution system. It is the marketing and selling of products directly to consumers away from a fixed retail location ie bricks and mortar building. The oldest form of this selling was actually peddling! Modern direct sales includes sales made through one-on-one demonstrations, party plans, other personal contact arrangements such as home parties as well as internet sales. A textbook definition is ‘The direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs’.
According to the WFDSA (World Federation of Direct Selling Associations) consumers benefit from direct sales because of the convenience and service it provides, including personal demonstration and explanation of products, home delivery and generous satisfaction guarantees. The cost for an individual to start an independent direct sales business is typically very low, in relation to franchising, with little or no required inventory or other cash commitments to begin.
Direct Sales is distinct from direct marketing because it is about individual sales agents reaching and dealing directly with customers. Direct marketing is about business organisations seeking a relationship with their customers without going through an agent/consultant or a retail outlet. Direct Sales, often but not always, use Multi-Level Marketing.
The largest Direct Sales companies by revenue in 2010, according to Direct Selling News were:
Avon Products, Amway, Natura,Vorwerk, Herbalife and Mary Kay
The Difference Between Network Marketing And Multi-Level-Marketing
Multi-Level Marketing is where a salesperson is paid for selling and for sales made by people he has recruited himself or sponsored rather than single-level marketing where the salesperson is only paid for the sales he makes himself. This marketing strategy is where the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation. Other terms for MLM include pyramid selling, network marketing and referral marketing.
The usual course is that salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing. Some people use the term ‘direct sales’ as an actual name for MLM, although MLM is only one type of direct selling.
MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to the illegal pyramid schemes, price-fixing of products, high initial start-up costs, encouraging if not requiring sales people to purchase and use the company’s products as well as placing the emphasis on the recruitment of lower-tiered salespeople over actual sales. Often these companies have complex and sometimes exaggerated compensation schemes and little integrity when it comes to dealing with their members and people generally!
The Difference Between Network Marketing AndAffiliate Marketing
Affiliate marketing is a marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate’s own marketing efforts. Examples include rewards, sites where users are rewarded with cash or gifts; for the completion of an offer, and the referral of others to the site. The industry has four main players: the merchant (also know as the ‘brand’ or ‘retailer’), the network (that contains offers for the affiliate to choose from and also takes care of the payments), the publisher (also known as ‘the affiliate’) and the customer. The market has grown in complexity to warrant a secondary tier of players, including affiliate management agencies, super-affiliates and specialised third- party vendors
Affiliate marketing overlaps with other internet marketing methods to some degree, as affiliates often use regular advertising methods. Those methods include organised SEO (Search Engine Optimisation), paid search engine marketing (Pay Per click -PPC), e-mail marketing and in some form – display advertising. Affiliates can sometimes use less orthodox techniques like publishing reviews of products of services offered by a partner.
Affiliate marketing – using one website to drive traffic to another – this is a form of network or online marketing which is frequently overlooked by advertisers. While search engines, e-mail and website syndication capture much of the attention of the online retailers, affiliate marketing carries a much lower profile. Affiliates however continue to play a significant role in online retailers’ marketing strategies.