Direct selling, multi-level marketing, brand ambassadors — you may have heard these terms, but what do they mean? We break down each one, and talk with an entrepreneur who’s using two of them.
Most people with a social media account have seen them: the posts, direct messages and home videos from people pushing leggings, diet pills, vacation deals and everything in between.
But who is your college roommate, former colleague or sister’s dog walker working for? And is what they’re doing making money for them and the companies they represent?
Odds are your friend or family member is working for either a direct selling or multi-level marketing operation — neither of which is a new phenomenon. Makeup retailer Avon has famously deployed women to sell products directly to neighbors and networks for decades. What was once a door-to-door operation has simply evolved as technology has advanced — and a slew of new retailers have gotten in on the action, too.
But negative press surrounding some of the mainstays — health and home goods purveyor Amway is a prime example — and questions about the glut of online ventures launching and invading Facebook feeds in recent years has sown confusion. Is the woman selling nail kits in essentially the same line of work as the person selling vacations? Do they want me to just buy something, or join something as well? Are these people “brand ambassadors?”
The first thing you need to know is that direct selling, multi-level marketing and brand ambassadorships are three separate sales and marketing models used by companies of all sizes to reach wider audiences. There are some shared traits between them — most notably that none of the sellers are salaried workers. But the differences are many, and are important for both companies and customers to understand.
Below, we break it all down. Read on to better understand the differences between these sales strategies, gain some insights into how they work, and — for women entrepreneurs who want to do it right — the skinny from a female founder who’s growing successfully using direct selling.
3 Marketing Methods Explained
• Direct selling companies bring on individuals as partners to promote and sell their products, and are the most common approach. According to the Direct Selling Association (DSA), a membership organization for companies using that model, approximately 20.5 million Americans worked as direct sellers for various ventures in 2016, and just about three quarters of them were women.
These sellers make an initial investment in a company in exchange for access to resources, inventory or both. Some major players in this arena — like leggings company LuLaRoe and nail kit seller Jamberry — have come under fire for the amount of money some of their sellers have lost after ending up stuck with boxes full of products they couldn’t move.
• Multi-level marketing companies, meanwhile, offer individuals commissions for both their direct sales and sales made by people they recruited into the company. This incentivizes participants to both promote products and bring on other sellers. Hence, they are often referred to as “pyramid” companies because growth requires adding more people who work below them.
“Multi-level marketing” has acquired a negative connotation — which isn’t unearned. According to Truth in Advertising, a watchdog organization that looks out for false marketing claims, 97 percent of the 140 companies registered as multi-level marketing firms in 2017 misled people about the profits participants earned.
• Brand ambassadors are a newer concept and a separate animal altogether. These individuals — also often women — have pre-established social media followings, and use those platforms to share reviews of a company’s products and personalized e-commerce links. Those links allow the businesses to track purchases made as a result of an ambassador’s post, and pay the ambassador a related commission.
Could one of these models be a good fit for growing your venture? We spoke with one woman business owner who has implemented both direct selling and brand ambassador programs. Hear how she sought to employ them ethically — and sparked growth in the process.
How One Woman Does It
Serial entrepreneur Janet Kraus, the founder and CEO of Boston-based fashion brand Peach, is using two of these sales approaches to grow her business and empower other women at the same time, she says.
Peach, launched in 2014, manufactures and sells clothing that’s appropriate for the office, but made from comfortable fabrics. From the start, it has sold items to consumers both through an online store and via direct selling. Kraus included the latter approach in hopes of encouraging women to explore entrepreneurship. She wants women near and far “to thrive personally and professionally,” and thinks that direct selling is a good first step toward business ownership.
Peach’s sellers, whom it calls “stylists,” can “buy in” by paying $199. The company then gets them up and running by providing them with an individualized website, marketing tools, business training and social media pages. Stylists can also purchase additional sample items for making in-person sales. “However, they can only buy one sample per style, as we do not want them buying and carrying inventory” that they may not be able to sell, Kraus says.
“Our stylists only place, take or accept orders online. We ship all the product from our home office and then pay commissions,” she adds. The result is a “business opportunity that is much lower risk for women.”
Today, around 700 women throughout the United States work as Peach stylists, and 70 percent of them pull in between 20 percent to 35 percent commissions each month. In 2017, Kraus added a brand ambassador program for women with significant online followings looking to make extra money. The 175 women presently serving as ambassadors earn 15 percent commissions on their sales.
Kraus declined to disclose annual revenue figures, but says that her multi-pronged approach has resulted in growth for Peach that has led her to hire an additional 23 full- and part-time employees, independent of stylists and ambassadors.
She says her long-term goal is “world domination,” for women near and far — and feels confident that strategies like hers will pave the way.
Posted: September 27, 2018