subject: Traditional Multilevel Marketing VS. Top Tier Direct Sales Model [print this page] Traditional Multilevel Marketing VSTraditional Multilevel Marketing VS. Top Tier Direct Sales Model
When you begin the process of starting your own home business, the decision about what company to work with can be a daunting task. It took me over 6 months to make my decision, but in that time all I had really learned about was a little about the companies and products, and I was totally clueless about the type of business models and compensation plans available. If you haven't made a decision on the type of business you want to work with, congratulations, because what you are about to learn, will educate you and allow you to make better decisions. Although there are several types of home businesses today, most of the opportunities you will come across will fall under one of the two most popular categories. They are the traditional multilevel marketing model and the top tier direct sales model. Allow me to share with you what I know about each of the models.
Traditional Multilevel Marketing is a business model based on developing a team or a down-line, through recruiting people. You can earn commissions and develop residual income based on the volume your team produces each week or month, and it is usually based on auto-shipments of products to your existing team members and new recruits. There are various compensation plans with this industry, however the most widely used is the binary program, based on building two teams with your primary goal of multiplying in depth in each of the two organizations. With this type of plan, you increase your income potential by massive duplication, and by working to equalize the volume in both of your teams so they are as close as possible on a consistent basis . Depending on the compensation plan with the company, the commission is usually in the range of 5-10 percent of your volume.
Naturally, all business models have an up side and a down side, so let's begin with the up side. What attracts most people to traditional multilevel marketing is the residual income, due to the auto-shipments, and the opportunity to generate a substantial income. Another plus is the start up cost or investment is usually pretty low, so it is a low risk venture, making it a little easier to recruit. The start up cost depending on the company can range somewhere between $50 - $300 give or take, with a monthly auto-shipment ranging anywhere from $30-$150, again give or take. There is a wide variety of companies participating in this business model, but the most common categories include health and wellness, nutrition, beauty based, or services ranging with everything from legal services to education and personal development.
Now let's address the negatives. Number one, since the start up cost is lower, you can have a tendency to attract more of the hobby style business owner, which means there may be less duplication from the majority of your team. Unfortunately, although I believe it is not intentional, most companies sell you on the dream and paint a beautiful picture of success, but fail to tell you on average it can take 3-5 years to build a career type income. There is a high attrition rate in traditional multilevel marketing because if a person doesn't have proper expectations, and the money isn't coming as quickly as they hoped, they quit and cancel their auto-shipment, thus decreasing your volume. Another negative, especially in today's market, is the lack of long term security. We live in a time where companies come and go, and by the time you build a career income, the company could go out of business. Please don't let that scare you, because there are countless companies growing and succeeding, which makes it even more important that you do your research in selecting a solid business.
Now, let's talk about the Top Tier Direct Sales Model. This type of plan involves you being the direct seller or retail salesman for higher ticket items, and you can generate commissions by recruiting direct sellers. When you sell product you earn a profit margin between the wholesale cost and the retail price, or you can earn a one time commission from the recruitment process. The compensation plan is usually based on a one time purchase of products ranging anywhere between $1,000 - $10,000 or more depending on the company and products. In this type of structure keep in mind, you are not earning residual income through team building in depth.
We need to understand the positive and negative sides of the Top Tier Direct Sales Model. The biggest positive is that this is also called a "get paid today" model; higher commissions are produced more quickly without having to build a huge team. Due to the higher profits, you have the opportunity to create job replacing income in a shorter period of time. Also, due to the higher cost of entry, you will sort out more of the hobbyists and attract more serious business builders to your organization. Another positive, again related to the increased cost of entry, it provides for more of a business owner environment, lowering the attrition rate. Now for the down sides - higher priced products leads to a lengthened sales process, when you are talking bigger figures, people think more before deciding. Due to the fact that there is no long term residual income, with this model, if you want to continue to make the same amount of money, you need to do the same amount of work, which means you have to continue selling or your income will stop. Lastly, the higher entry cost can sort out candidates that may really be a good fit for your business, may really want to do it, they just simply cannot afford the price.
As you can see, there are great points with both Tradition Multilevel Marketing and the Top Tier Direct Sales Model, so you may be wondering, well what is the best option? My answer may surprise you, but I feel the answer is both, and this is because you can actually find a company that incorporates both of these models so you can produce significant profits quickly, like the GPT model, while also building long term passive residuals . Having a combination business model, is like having your cake and eating it too. When you have the ability to not only make real money quickly, but also develop a substantial residual income stream, you can not only replace your job or your income faster, but you can also take vacations or step away from your business for a period, or even retire, without the loss or a decrease in your income. That's what I call creating the winning hand.
