|
Network marketing industry: How is network marketing different from other methods of distribution?
Traditional sales, direct sales, and network marketing
Let's begin by clearing up a couple of misconceptions that have dogged the network marketing industry for years:
-
A network marketing industry has almost nothing in common with a traditional sales organization - True.
-
A network marketing industry has almost everything in common with a traditional sales organization - Also true.
Once you understand this apparent contradiction, you'll be well on your way to understanding network marketing commission plans. Everything that applies in a traditional sales organization also applies in network marketing industry. It just applies in a very different manner. Companies still have to motivate people. They still have to manage people. They still have to pay people to sell product. They just go about it in very different ways than in a traditional sales environment.
Every successful commission plan has two basic elements to manage:
· Pay those who sell the product a fair commission so they will wish to continue selling for the company.
· Pay those who manage the sales process so they will wish to continue motivating and supporting the sales force.
The process of taking a product to market through a traditional sales force relies on salespeople, who explain and sell the product while addressing their consumers' needs; sales managers, who work with and train salespeople; and motivators, the people who generate and maintain enthusiasm.
In this sense, network marketing and a traditional sales force are similar. How each goes about accomplishing the product-to-market process, however, marks their dissimilarity. In a traditional sales organization, the work is done by employees who are hired, fired, promoted, or demoted. The marketing department does its job, and the salespeople do their jobs.
In network marketing industry, a product is distributed by a volunteer army of distributors who choose which markets to enter or leave, whether to spend their time selling product or building their organizations, and whether to work part-time or full-time.
Clear understanding of commission plans requires an understanding of the relationship between the four cornerstones of a network marketing industry:
-
The product or service the company sells
-
The services the company provides to its distributors and consumers
-
The company's communications strategy
-
The company's commission plan
Although our focus is commission plans, an understanding of how commissions affect the other three cornerstones is essential to grasping the complex and multi-faceted nature of why and how a commission plan works. Therefore, in order to instill a sense of how commission plans operate within all areas of a network marketing business, we will discuss how commission plans support or hinder each of the other cornerstones.
It's important for you to have a clear understanding of the way we use the terms "direct sales company "and" network marketing company, "often called an "MLM" or "multi-level marketing" company.
According to the Direct Selling Association, "In direct selling industry, products or services are marketed to consumers by independent salespeople person-to-person. Depending on the company, the salespeople may be called distributors, representatives, consultants or various other titles. Products are sold primarily through in-home product demonstrations, parties, and one-on-one selling."
These companies don't sell by means of traditional storefronts or direct mailings or telemarketing or mass media advertising. Rather, they sell by means of independent representatives, often called distributors. We use the term "distributor" throughout, but remember that we refer to these independent representatives, not to a jobber such as a book distributor. Direct sales distributors are usually required to use the term "independent representative" on their business cards to make their status clear.
|