Multilevel marketing, network marketing, referral marketing, pyramid scheme. For better or worse, these words have been used to describe a sales phenomenon which more and more companies are opting to use for the bulk of their merchandising distribution. This is known as direct marketing. Direct marketing is nothing new, mostly gaining traction in the early 80’s and 90’s as a viable business model, and has led to the explosive growth of billion dollar companies like Avon and Amway. From a corporate and consumer standpoint, there are many benefits to direct marketing.
The Nuts and Bolts
The basic structure of most network marketing companies consists of consumers ordering or purchasing products directly from a manufacturer. The consumers generally need to make a minimum order over a certain period of time to remain a “member” or “distributor” of the company. Most consumers only become a member to purchase products for personal use. Direct marketing companies will also offer incentives to their members to become distributors of their products, meaning the distributor will sign up new members or distributors, or sell product directly. The direct marketing company will also offer incentives to for its distributors to sign up new members. Most incentives are cash based and usually pertain to the number of new members signed up or product sold by a distributor, or a combination of both.
Many people wonder, “Why go through all this trouble to get something I can just pick up at my local grocery store?” True, it does sound like a lot of work to get something a consumer could probably find with an easy internet search or help from an associate in a colorful vest. The answer lies in products and profitability. Consumers benefit because most items they are getting no longer have to go through a drawn out supply chain that add mounting costs to the final price. Consumers are also in direct contact with the manufacturer, knowing exactly where the product comes from that they are sharing with or using on their loved ones. They can be more assured of the quality in both sourcing and production of product because they are part of the company that is making the product. It forces the company to be honest with its consumers because they are the company’s marketers, salespeople, and promoters all rolled into one.
This begs the question, why would a company want to put up with the hassle of using a direct marketing platform? The benefits for a company are enormous. Most of the overhead operating costs disappear when a company goes the route of direct marketing. They no longer have to employ salespeople, they can significantly cut their marketing costs, and they don’t have to work with endless middlemen to get their product into a store or particular market. Wherever there are people who are willing to use their product, the company will have a presence. The direct marketing company can then focus on what really matters to everyone involved, the quality production of a useful product. Those dollars that would normally go to salespeople or marketing could now go to research and development, allowing the company to focus on making the best and highest quality product possible.
In the end, it’s a win for both producers and consumers. The consumer knows he or she is getting a quality product at a lower than retail price from a company in which they are personally invested; and the producer can focus its resources on making the best possible product at an affordable cost without the distraction of traditional distribution methods.
To Join Or Not To Join
The benefits of joining a direct marketing company can be very rewarding. Before joining any company though, a consumer should do their homework. Does the company work with their lifestyle? Are the products safe and sourced correctly? If the consumer decided to become a distributor, what type of pay structures are available and what resources does the company offer to help them grow their business? Not all direct marketing companies are created equal, and even companies who produce similar products can vary greatly in their product quality and compensation plans. Current distributors are a great resource for information regarding the company they represent. Most companies will also have introductory meetings to help prospective members understand their structure, products and practices. Overall, direct marketing is a great way for a person to get quality products they already need at a lower cost than retail while also giving them an opportunity to grow their own home business.