I would be a wealthy man if I was given even a quarter for every time I heard that question. Today I am inspired to explain some fundamental components of direct marketing and hopefully dispel some of the misconceptions!

Now let me start by saying that direct marketing, MLM, relationship marketing,etc. has been around for over 70 years in various shapes and forms. Currently there are over 1,100 companies that employ some form of direct marketing in their approach. In order to begin a clear understanding, I will define some of the terms used in this industry.

Direct Marketing, is perhaps the oldest of terms associated with the industry and simply refers to the fact that a given product or service is marketed directly from the company to the consumer through a single independent agent who is paid a commission. Over the years the name of the industry has taken on other descriptive names…and in some cases for good reasons to be discussed shortly. Other names associated with the industry are Network Marketing, Multi-Level Marketing, Relationship Marketing, and some other less used terms. The names have changed over the years in order to differentiate a company or its approach from those that have abused or exploited the industry.

Many fine companies have emerged using this approach but there have also been companies that have scammed or taken advantage of its reps and consumers to earn a quick profit. It is companies like these that have given the impression to some that all Direct Marketing companies are scams. When some of these companies were exposed it was clear that their pay system was flawed and took advantage of the average rep. Because the structure of these pay systems resemble a Pyramid, the industry had to endure bearing that name in a negative context for some. The FTC set up some very clear guidelines in the 70′s as to how these structures should be set up which removed some of the worst players. Some companies have continued to survive and operate fairly and with integrity so it is important to understand that the properly laid out binary pay system actually works effectively and legally to compensate a sales organization.

A binary system simply defined means that there are business streams below each rep. Keeping it fair and legal means that every rep regardless of current level in the system, has the exact same potential for earning as the person at the top. This is a sharp contrast to the corporate Pyramid where you have someone at the top earning a large salary and those down the ladder make less and less the further down the rungs you go.

Why would a company want to use this type of sales force and pay structure? Several reasons but the most prominent are:

An Independent Sales Force (no employees!)

Low Advertising Costs (because of word of mouth)

Helps Others (individuals can experience great pay)

While this is not an exhaustive explanation of Direct Marketing, it will, hopefully, provide some new insight and understanding. As with any industry on our planet, there are some bad eggs out there that make it difficult for the legitimate companies. It is always important to know who you are aligning with, the quality of their products and their reputation. A good company will also discourage high pressure and unethical approaches. So next time a relative, friend or colleague recommends something to you, give a look because they may truly be on to something!