Are you tired of commuting to work every day? If so, you can always utilize the opportunity of selling products to consumers. The Darren and Mike Dream Team, online business coaches know that the secret to succeeding in a sales business is identifying a niche. Then, online business owners can choose the right business model.
The direct sales and multi-level marketing (MLM) models allow individuals to sell their preferred products to consumers while making a profit. Read on to learn more about these models, both their advantages and disadvantages!
What are Direct Sales?
Direct sales is a business model whereby an individual sells products to consumers outside of the traditional business setting. It requires an individual to look for the consumers and take the products to them for sales or marketing. Individuals who choose this model earn a commission on all the items sold. The commission is a way of motivating a person to sell to more consumers.
The Darren and Mike Dream Team explains that this model is best for people who want to have flexible working hours. The business owner chooses where and when to buy and sell the products. Initially, these individuals sell to family and friends and expand their niche as the business grows. They get most of their clients through referrals.
Pros of Direct Sales
Direct sales is one of the most reliable business models for small organizations. It allows individuals to focus on a specific audience, which increases their chances of selling many products. In turn, the business develops strong customer relationships. These interactions facilitate growth through referrals.
According to Darren and Mike, Enagic distributors, building these customer relationships helps business owners understand customer preferences. Then they can create products that satisfy their needs more easily, leading to more sales.
The business model enables an organization to coordinate its activities, such as marketing strategies. The direct interaction between customers and sales representatives provides useful feedback in coordinating production activities. It also helps the team identify the best-fit marketing campaigns, thus fostering business growth.
Direct sales allow a business to control its prices and distribution strategies. The business interacts directly with clients and, therefore, can change the prices to suit the customer’s budget. The business ensures that all the sales representatives have sufficient knowledge about their products, which then attracts more customers and gives the company a better reputation.
Cons of Direct Sales
The direct sales model presents small businesses with the chance of experiencing technological hurdles. When running a business, individuals should keep a database containing consumer demographic data and consumption profiles. Gathering and analyzing this data requires the expertise of knowledgeable individuals. If the business doesn’t have experienced staff, running a smooth business can be challenging.
The model also faces the disadvantage of saturated communication channels. For instance, many businesses market their products through short messages and social media. As consumers receive a large amount of information via these channels, they are likely to ignore it. So, it becomes ineffective for a small business to send promotional messages through these mediums.
According to Darren and Mike, a business using this model might make a poor first impression, especially when working with inexperienced sales representatives. A poor impression can lead to the loss of customers and damage the company’s reputation, such as with Kangen Water.
What is Multi-Level Marketing?
Some people confuse MLMs with direct sales because both use similar strategies when selling products to consumers. However, the two have a key difference. In MLMs, sellers can make extra money by recruiting other members. The referral process is known as a downline because people make money from their recruits and individuals added to the team by the recruits.
Pros of Multi-Level Marketing
MLMs are ideal business models for people seeking growth. Through the networking strategy of referrals, an individual can have as many recruits as possible, selling more products and earning more commission through the new team members. The growth also enables them to invest in more products or other ventures. In the case of a company, the strategy allows it to gain access to many consumers.
The model also reduces the amount companies need to pay the distributors or salespersons. As MLMs only pay commissions, they don’t have to pay fixed salaries, which might reduce profits. Therefore, this kind of company has lower sales expenses. This model also allows the distributors to make an extra income because commissions depend on how much an individual sells to customers.
Cons of Multi-Level Marketing
According to the Darren and Mike dream team, distributors in the lower level or the newest team members make less income than those on the top levels. In this case, the new recruits have to work harder to make a substantial amount of money. These individuals share their commission with the people in the top tiers and therefore, might engage in fraudulent activities to make more money. In turn, this has a negative impact on the company.
The model might also result in unqualified individuals working as sales representatives. The employees’ goal is to recruit as many people as possible and so they might not care about a person’s qualifications. In turn, this leads to the company being poorly represented, affecting the company’s representation, and potentially resulting in the loss of clients.
In this model, the distributors also aim to sell many products to their customers. Therefore, they might be untrustworthy to make sales due to using unscrupulous methods. They also lack training, and this makes their sales skills poor.
MLMs also face the risk of failure associated with pyramid schemes. These schemes cause a huge economic loss, and when it occurs, they can result in a company’s downfall. Hence, the company needs to be careful not to commit fraud. According to Darren and Mike, the model requires a lot of strategizing to facilitate success.
Bottom Line
The right business model for you depends on what you wish to achieve. So, it’s best to analyze your goals before choosing a business model to ensure that it facilitates success. The team suggests direct sales and MLMs as some of the best strategies for businesses.