Multi-level marketing (MLM) and single-level marketing (SLM) sound similar in name. But what is the difference between SLM and MLM? They are both types of direct sales. So let’s talk about what all these things mean.
As a reminder, I have an MBA, I am a Certified Public Accountant (CPA), and have almost 15 years working in finance and accounting. These are my opinions based on researched facts and my understanding of those facts. However, this is not legal, financial, or tax advice. If you need legal, financial, or tax advice, you should reach out to a professional for a 1:1 chat! All opinions are my own.
What are Direct Sales?
You’re familiar with traditional sales. You go to the store and buy something. In this model, something is manufactured, sent to a wholesaler, then a retailer and then you purchase it. There can even be steps in between. In direct sales, a product is manufactured and sold to the consumer by independent consultants, skipping all the middle steps including retail stores. This can be done in a variety of ways including online, in-person, or on social media.
What is SLM – Single-Level Marketing?
Single-level marketing is a direct sales model where a salesperson is engaged to sell products directly to a consumer and makes a commission from the sales they do. Typically commissions increase as your monthly sales increase. There is no recruiting others to work under you. In a direct sales single-level marketing model, the salespeople are independent consultants paid by 1099. This means that they are not employees of the company that developed the product. They are an independent distribution channel that is compensated by commissions.
Examples of single-level marketing
Direct Retail by Kendra Scott is a fairly new single-level marketing program that was launched in 2022. They offer commissions on sales. Commission percentages increase as the monthly sales volume increases. You can read my write-up on this, which includes the commission schedules here: Is Kendra Scott a MLM?
What is MLM – Multi-Level Marketing?
Multi-level marketing is also part of the direct sales model, but there is an additional layer. Commissions are based on sales. However, the additional layer is team building, also known as building a downline. If you are able to get additional people to join you will earn commissions off their individual purchases as well as their sales to other customers or by recruiting new consultants.
Examples of multi-level marketing
There are many examples of multi-level marketing companies. They include Tupperware, Pampered Chef, Amway, Color Street, Monat, Herbalife, and many more! The easiest way to identify an MLM is if someone tries to sell you something and then tries to get you to join their team for selling the same products they do.
What is Network Marketing?
Network marketing is another name for a multi-level marketing company. These companies encourage you to expand your “network” of associated consultants to build a large downline to earn additional commissions and bonuses. You will also use your network to sell products. So if you’re online network is just your friends and family, essentially you’ll be trying to get your friends and family to buy the product and join your team.
What is the difference between SLM and MLM?
Single-level marketing (SLM) and multi-level marketing (MLM) are both direct sales models. However, multi-level marketing focuses on building teams to sell products and single-level marketing focuses on earning commissions straight from product sales. Those in MLMs may call themselves “direct sales” and not specifically identify themselves as a participant in an MLM. However, if they recruit you to join their “business” this is a sign it is an MLM.
In a single-level sales model, there would be no incentive to oversaturate the market with sales consultants. The more people in the market, the fewer commissions for available for each salesperson. However, in MLMs, because they are making money off the sales consultants they recruit, there is a large incentive to invite others to join your business.
Are Direct Sales and MLM the Same?
Multi-Level Marketing (MLM) is a type of direct sales. The other type of direct sales is single-level marketing. Direct sales mean that products are sold directly to consumers skipping retail stores. This is typically done online or through social media. Historically it was done door-to-door or in-person parties (Tupperware party anyone?).
What Are Other Names of Multi-Level Marketing?
There are many different names that people call multi-level marketing. I would expect to see multi-level marketing used less and less as the anti-MLM community grows. Other names for multi-level marketing include network marketing, social selling, and pyramid selling. Essentially, if someone is trying to recruit you to sell for the company they also sell for, it is a multi-level marketing company.
Multi-level marketing = Network Marketing = Social Selling = Pyramid Selling
Why would a Company Choose MLM over SLM?
Why would a company choose to implement a multi-level marketing model over a single-level marketing model? In single-level marketing, commissions are earned through selling products to customers. However, in multi-level marketing, there are incentives for people to recruit people to join them. In addition, once those people are consultants, there are incentives and minimums to retain ranks. This encourages them to buy products. Also, since there are more people joining as salespeople, and buying their starter kits, they are making more revenue. Essentially, in MLMs, the company makes money off selling products to both consultants and customers. This means the more people recruited to sell, the more money the Company makes (not necessarily those independent consultants associated with the company). This is one of the fundamental reasons why MLMs are so controversial.
Should You Join a Direct Sales Company?
I would not recommend joining an MLM. The majority of people who join MLMs do not make money and often lose money. You can read more about that here: Are MLMs Pyramid Schemes?
A single-level direct sales model could be a good option if you have a large engaged audience. But if you’ve got that audience, you could consider affiliate marketing as well, so you’re not locked into one company.
If you liked this article, you could check out all my MLM-related articles here: MLM Reviews & Info
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