The difference between social selling and multi-level marketing

The Qyral Team · February 3, 2022

If you’ve ever considered working as a distributor for a product, you’ve heard a lot of different terms for the type of work you’d be doing. Social selling, network marketing, direct sales, and multi-level marketing are the most common. But what do all these terms mean? Are they all the same thing? And are they all bad? In this post, we’ll look at what these terms mean, and if their business models are sustainable. Learn how to spot a company that can offer you a chance of real success, and the ones that are destined to fail.

What is multi-level marketing?

Let’s start with the business model that’s got the worst reputation. Multi-level marketing, or MLM, is a controversial business model that has come under fire in recent years. But what is an MLM, and how does it work?

MLM companies all follow a similar pattern. They create a range of products and recruit distributors to sell those products on their behalf. In return, distributors get a cut of the sale price. That’s no different to how any commission-based sales position works. When you buy a new vehicle, your sales representative will also get a commission from it. So what’s so bad about that?

The fact is, there’s nothing wrong with commission-based sales as a business model. As long as there’s an end user for the product that the distributors are selling. However MLM companies often prioritize recruiting new distributors and creating downlines that earn the recruiter even more money.

For distributors, the math is simple. You can spend all your time making 50 sales a week and earning a one-time commission from each sale. Or you could spend your time recruiting five other distributors each week, and earn commissions from each sale that they make. By adding more and more people to your downline, it’s easier to meet your income goals.

For MLM companies, this can become problematic.

Are MLMs pyramid schemes?

According to the FTC, the definition of a pyramid scheme is something that promises “large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public.” If all the distributors for a company are more interested in recruiting other distributors than selling the end products themselves, some distributor chains will start to function like a pyramid scheme, even if the main company doesn’t.

This becomes even more likely if the products the company produces don’t have many end users. Lots of MLM brands have been criticized for low quality merchandise, or trying to sell at extremely inflated costs. If the brand doesn’t have many consumers, how does it sell its products? Often, by getting the distributors to recruit other distributors, and selling the products to them.

MLMs rarely have enough legitimate end consumers to sustain their distributors’ businesses. Instead, they rely on the distributors purchasing their products themselves for personal use, as inventory, or to sell on to the distributors they recruit. Commission from these sales flows through the upline, and to make their money back, distributors have to recruit more people into their downline.

But why do downline distributors buy the products? It could be because they need to meet a minimum sales quota, either through finding customers or buying products themselves. Or they could be told they need to keep an inventory of products on hand at all times. Then the only way that distributors have to make their money back is to recruit people into their downline and repeat the cycle.

The problem with multi-level marketing is that without enough end customers to sustain the business, the consultants at the bottom will always lose. MLMs can make people at the top of the chain a lot of money, but the moment the recruitment chain loses momentum, everything falls apart.

The statistics behind MLMs show that this is a business model that works very, very well for just a few people, but the majority don’t make much at all. Lots lose money instead.

A 2017 study by the Consumer Awareness Institute found that less than 1% of MLM participants made a profit from their business. Another study looked at the disclosure statements released by major MLM companies and found some depressing trends. In all the companies studied, over 50% of the total payouts each year went to less than 1% of their consultants. In six out of the seven companies included in the study, the bottom 99% of distributors made less than $10 a week, on average, before taxes, expenses, and their own product purchases.

About 8% of Americans have been involved in multi-level marketing at some point. Half of them have quit within the first year. Only 5% make it to year ten in the business. Imagine being offered a job with a company where half the workforce quit each year. The truth is, the MLM business model is fundamentally flawed, because it has no end consumer. And without customers to buy the products, consultants at the bottom of the downline can’t hope to make money.

What is direct selling?

Another term you might hear is direct sales or direct selling. This is what multi-level marketing used to be. Direct selling is just people making sales outside of a traditional retail environment. Salespeople cut out the middleman and sell straight from the manufacturer to the end consumer. Think door-to-door sales, or hosting a sales party on Facebook.

Direct selling has been around for hundreds of years. As long as men have had products to sell and carts to sell them from, people have been going door-to-door to make sales. But it was in the late 1900s that modern direct sales began. One of the first, and still the most iconic, direct sales companies was the California Perfume Company. Founded in 1886, the company rebranded as Avon in 1939.

“Avon ladies” (and some men!) became the face of direct sales. The company broke new ground as a way for women to develop their careers and gain financial independence at a time when they had very few opportunities available. Avon kept the same business model until 2005, when it embraced the multi-level marketing model.

There’s nothing wrong with direct selling as a business model. It’s just one person selling something to another person. However some companies claim to be direct sales businesses that really aren’t. If you’re considering starting with a direct sales company, check if their business model relies on selling products to consumers, or if the majority of your income is expected to come from recruiting other salespeople. That’s the difference between direct sales and MLMs.

What is network marketing?

Network marketing is like a hybrid of multi-level marketing and direct sales. Distributors still make individual sales to end consumers, but can also recruit other distributors to create a sales network. This can also be called social selling or social retail.

The main difference between network marketing/social selling and MLM is what the distributors focus on most. In network marketing, the main focus is on selling products to end customers. You can create a network of other distributors to increase commissions, but that isn't the primary goal. With multi-level marketing, often distributors never learn how to sell to customers, because their focus is primarily on recruiting other distributors.

Why selling to customers first matters

We know that the FTC defines a pyramid scheme as something that relies just on recruitment to make money, with no end customers. The reason this is illegal is because the people at the bottom will always lose their investment. Pyramid schemes also aren’t sustainable, so they’re not a good idea for anyone who wants to learn skills that can bring in long-term income and growth.

While not pyramid schemes, many MLM distributors suffer a similar fate. The reason is often because they never focus on selling to customers. Instead, they only focus on recruiting. And once you stop being able to recruit new people, you start losing money. Most MLM distributors fail to recruit anybody at all. These distributors could be successful by making direct sales, but nobody taught them how to do it.

At Qyral, we do things differently. We believe in the concept of social selling. The model has been around for decades because it works! Just because it lost its way in the last few years doesn’t mean it can’t work again. But to make it work, companies have to support their distributors and invest in their training.

Create products that real customers actually want
Price the products to be competitive in the marketplace
Teach distributors how to become effective salespeople
Train distributors to recruit others into their network and show them how to be successful

We’re in this business because we’re inspired by the real social good that direct sales and network marketing achieved back in the 1930s and beyond. We want to help others find real, sustainable success and lift others with them as they rise. We’d rather have fewer Qyral consultants making 6- and 7-figure incomes from their businesses, than have 10,000+ consultants all struggling to make money.

How Qyral helps you succeed

Our business has been designed from the bottom-up to help our consultants get ahead. That starts with our products. The Qyral range of skincare products are at the cutting edge of technology and innovation. We use the latest ingredients, the most rigorous science, and amazing tech to produce skincare products you can’t buy off the shelf. And because they’re customized to each user, they work better than anything you’ll find off the shelf too.

Even more important, from a consultant’s perspective, you can’t stockpile these products. Because they’re customized, you couldn’t keep an inventory even if you wanted to. That means it’s literally impossible to run your Qyral business like an MLM.

It also means we’re always innovating to stay ahead in a competitive and dynamic market. New skincare products are released all the time, so if we want to keep our end customers, we need to keep providing them with products they can’t find anywhere else.

We also provide next-level support for all our consultants from the moment they join the Qyral family by implementing an amazing training program. We took advice from some of the most successful network marketers in the business. People who’ve created more 6- and 7-figure social sellers than anyone else. We picked their brains to learn what makes a successful consultant, and discovered the answer was systems.

As a customer, you come into contact with systems all the time. In McDonald’s when they ask if you want fries with that, or in Starbucks when they ask your name for your drink, they’re following a system. Systems are sequential, duplicable patterns that anybody can learn and replicate. And if a system is designed well, it can help anyone to become successful.

Unlike other companies, we don’t promise it’ll be easy. Nobody learns their whole job in a day, week, or even a month! And nobody makes their fortune by working just 1-2 hours in their free time. We want to be realistic about what it takes to become a successful network marketer. That means following the training, learning the systems, and putting in the work. But if you’ve got the hunger and the commitment, we’ve got the systems that will make the most of your efforts and give you the tools to build a sustainable, successful business.

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