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Traditional Multilevel Marketing VS. Top Tier Direct Sales Model

Author : Jodi Ouellette


If you are researching the home business industry right now, you have probably been introduced to countless options, and may be overwhelmed by not knowing which direction to take. It was almost ten years ago, when I started my home business, I was not informed of my options, and I didn’t have a clue about what I am sharing with you. 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. Let me educate you about both of these plans.

Traditional Multilevel Marketing has a plan which is structured around building an organization or a down-line, through sponsoring 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 . Commissions can vary in this type of plan, with an average pay out being anywhere from 5-10 percent of your total volume.

There are of course positives and negatives with any business model, so let’s explore this. 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.

This takes us to the down side. First, due to the lower initial investment, businesses of this type can tend to appeal more to the part time or hobby type business builder, equating to less overall duplication from the bulk of your organization . Second, the majority of recruiters fail to give people proper expectations when starting their new business, and tend to share the awesome success stories, but may not let you know typically it can take up to three to five years to build a sustainable income. Which leads us to the 85% attrition rate in multilevel marketing, due to improper expectations, because if people are not generating income fast enough, they give up, and stop their auto-shipment. An unfortunate added down side is the instability in long term success. 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. Keep in mind, there are many successful companies that are thriving, but it’s important to be educated to make sure you choose the right one.

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. Basically, you earn profits from direct sales, and larger one time commissions from the sponsoring 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. An important point to remember, this is direct sales, not building commissions in depth through duplicated sponsoring.

What are the up sides and down sides to the top tier direct sales model? First, this is also known as a GPT or get paid today program, so you don’t have to wait until you build a massive team to earn the larger commissions. Since the commissions are larger, you can build a career level income faster with this type of model. 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. Lastly, with the higher investment, there is more of a business ownership environment created, which lowers the overall attrition rate. Here are the negatives: the higher ticket items can cause a longer sales cycle, basically it can take a person longer to make a decision. 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. Finally, because of the increased investment, this plan will exclude anyone who cannot afford the investment, regardless of how qualified they are and how much potential they have.

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. This is truly the anwer to what people want, and also what people don't want, because most people when they start a business want to see results and cash quick, and they also want to eventually be able to take a vacation, or may need a sabatical, or even retire and not worry about losing their income or lifestyle. That’s what I call creating the winning hand.


Author's Resource Box

Applied knowledge is power. Learn more about home business model options by watching a video training here with Jodi Ouellette. Jodi has been a leader in the home business industry for almost ten years, she is a business transformation authority, marketing systems coach, personal development and leadership trainer, and public speaker.

Article Source:
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Tags:   direct sales model, multilevel, top tier direct sales, multilevel marketing, home business

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Submitted : 2010-11-11    Word Count : 1161    Times Viewed: 228