Multi-Level Marketing Vs. Direct Sales: What’s the Difference?

mlm vs direct sales

Everywhere you turn, it seems like someone is talking about a new business opportunity that’s perfect for you. But how do they know?

Whether you’re tired of the 9-5 office grind, commuting, or feeling like you have no control over your time – getting into sales might be an excellent way to shake things up and start living the life you want.

But what type of sales business should you be looking at?

Both direct sales and multi-level marketing (MLM) take similar approaches to selling products directly to consumers, and both offer the convenience of working from wherever you want.

The best fit for you depends on how you want to approach sales.

In a direct sales business, the focus is on product sales rather than recruitment. Direct sales typically pay higher commissions. In MLM, also referred to as network marketing, you earn commissions on what you sell and by recruiting people. You earn a commission on your team’s sales, too.

Either option may work for you, depending on your skills and interests. If you have strong leadership skills and enjoy coaching others to succeed, an MLM business could work well for you.

On the other hand, if you’re great at sales, but don’t want to recruit, grow, and lead a team, direct sales might be the better path.

Keep reading to find out more about the differences between MLMs and direct marketing.

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What Is Direct Sales?

Direct sales is a distribution method that relies on independent salespeople to sell products and services directly to consumers outside of a traditional retail setting.

When you work in direct sales, you make money through commissions on the products you sell. You’re also self-employed, so you’re responsible for purchasing your marketing materials and product samples, setting your schedule, and paying your income taxes. 

Direct sales representatives sell products and services, initially, to friends, family members, and coworkers. Over time, successful representatives develop a larger pool of customers through referrals, and networking opportunities.

Examples of direct sales businesses include companies such as: Pampered Chef, Cutco, and Kirby Vacuums. 

What Is MLM?

Multi-level marketing

Multi-level marketing is a variation of the direct sales model. However, in addition to referrals and network marketing prospecting efforts – you recruit and train other sales representatives.

When you recruit someone, you receive a commission on their sales, as well as any additional representatives recruited by the new team member. 

Depending on the structure of an organization’s marketing plan, it may be possible for you to earn commissions on multiple levels of recruits.

People often confuse MLMs and pyramid schemes, but they’re not the same. MLMs are legitimate businesses that sell actual products.

Examples of MLM businesses include: doTERRA, Organo, Dream Trips International, and Club Seacret.

Pyramid schemes often don’t have an actual product to sell, and rely exclusively on the recruitment of salespeople. The main source of revenue in a pyramid scheme comes from new representatives buying into the company.

The Difference Between MLM and Direct Sales Is Leadership

The differences between direct sales and MLMs are very nuanced because they both rely on selling directly to consumers, but the main difference lies in the compensation plan. 

Direct sales are weighted more toward providing a commission on the products you sell, so you tend to earn more on sales. 

With MLMs, you’re likely to earn a smaller commission on the products you sell, but earn more by recruiting other salespeople to your network marketing team and getting a commission on their sales. 

So MLMs are more focused on leadership in how you recruit, train, and manage your sales team. 

With direct sales, you only have to worry about yourself and your sales. 

Pros and Cons of Direct Sales Vs. MLMs

Direct sales and MLM opportunities share many of the same benefits, including: 

  • Working from home
  • Flexibility in choosing your own hours and schedule 
  • Easy entry 

No special education or training is required, and it’s usually pretty affordable to get started in either business. But what about the cons? 

The biggest challenge most reps face is moving beyond their personal network to generate real income. 

Since both direct sales and MLMs initially start with selling to your friends and family, this repeated contact can strain your closest relationships – and leave you struggling to make enough sales. 

Growing your network, with a daily focus on income-producing activities, is the path to long-term success.

With direct sales, you’ll make a larger commission on your sales, but the product may be harder to sell. It takes more work to sell big-ticket items like vacuums or one-time purchases like kitchen gear.

With MLMs, you’re typically selling consumable goods which cost less but need to be replaced more often. This can lead to more sales over time, but means you also need to reach out to your contacts more frequently. 

If you have the drive to recruit a team, an MLM can be a great model for you, but it doesn’t work for everyone. Successful leaders make it easy for new reps to succeed with network marketing duplication. They coach people to follow a proven business model, down to the details like content templates and sales scripts.

It’s important to note that more and more companies are relying on the direct sales model because of Federal Trade Commission (FTC) regulations. The regulations require MLMs to focus more on selling products and less on recruitment in their compensation models.

Direct Selling the Smart Way with Network Marketing Automation

If you’re looking to get into sales and work for yourself from home, either one of these options may work well for you. But no matter which option you choose, it’s important to research the company first, and it helps if you use and truly enjoy its products.

Then, find ways to get the most out of your network marketing business – without getting burned out before you start gaining traction. The right technology can change the game in direct sales and coaching a successful team. 

Whether you’re in direct sales or an MLM business, the RapidFunnel App allows you to keep all your contacts organized in one place. Our Authentic Sharing Technology (AST) powers up your business with automation to maintain and develop authentic, person-to-person relationships – without sacrificing all of your time. 

To discover more, schedule a demo with us today. 

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