Network marketing and direct sales. Advantages of the commissions plans in network marketing companies. Differences from the companies of direct sales. 

Network marketing and direct sales companies: 

Network marketing companies are a type of direct sales company. These companies, in addition to paying their distributors to sell products, also encourage the distributors to recruit downline distributors by paying commissions on the sales of their downline distributors. 

Party plan companies are another type of direct sales company. These companies focus on in-home product demonstrations and employ several other business practices that distinguish them from traditional network marketing companies. The reason we discuss these companies is that more and more of them are paying multi-level commissions.

To keep all of this straight, the two types of companies that pay multi-level commissions are traditional network marketing companies and party plan companies. Many people call either of one of these a "multi-level" company, which is technically correct. The only reason we refer to them exclusively by the terms "network marketing" or "party plan" companies as well as multi-level commission plans is to increase clarity.

So what's the difference between a network marketing company and a traditional business that employs salespeople to sell directly to consumers? A traditional retail organization is exclusively sales-oriented; if you sell for such a company, you make your money exclusively from sales and sales commissions. Only the sale matters.

Another consideration is that in traditional businesses such as automobile dealerships and insurance companies, the salespeople are employees. They may be on commission, but they're hired, promoted, and fired just as they would be in any other job.

A network marketing company bases a distributor's earnings on both personal sales and sales generated by the distributor's organization-the people they recruit. Unlike the single income stream of traditional sales companies, network marketers have a dual income stream: income from personal volume sales commissions and commissions on group volume sales from their downline.

Unlike the traditional business, an independent distributor with a network marketing company is not a hired employee. The distributor is in charge of his or her own career choices-whether to make a few hundred dollars extra each month, a few thousand, or tens of thousands by building a large organization. He or she can also choose to work part-time, and as long as the company requirements are met, the distributor can remain with the company.

So you can see that a network marketing company's commission plan is likely to be more complex than .that of a retail establishment or, for that matter, a traditional direct sales company.