Is Marketing Direct Sales Different From Multi-Level Marketing?

Some years ago, I partnered with my first multi-level marketing company or MLM, not knowing exactly what a MLM company was. I thought I was just selling makeup and getting others to join me. Once I got into the industry, my eyes opened up to the conglomerate of marketing direct sales companies and all the various types of direct sales companies. There is multi-level marketing, network marketing, affiliate marketing, internet marketing and whatever other phrase that is hot for the new year. In either case, I was confused. I am always coming across people who don’t understand the difference between the different types of companies so I figured I will break it down simply for you all. In today’s blog I will focus on multi-level marketing.

Marketing Direct Sales: Direct Sales is an industry in which companies sell their products or services directly to consumers through a distributorship.

Basically, think of the term “direct sales” as the broad category for multi-level marketing and affiliate marketing. Marketing direct sales also goes beyond these two types of companies. There are also single-level companies that typically include industries such as real-estate and financial services. Single-level in which distributors are just compensated for the work that they do.

Marketing Direct Sales: Multi-Level Marketing

Multi-Level Marketing (MLM) is an industry in which individuals or an individual entity, called distributors, sell a company’s products or services through a down-line of distributors.

In MLMs, individuals are able to purchase the right to sell a specific company’s products or services and are able to earn a commission on the items she or he sells. What makes multi-level marketing so attractive is that not only do you earn a commission on the products/services you sell, but you also earn a commission on sales when people join the business under you.

In product based companies, like Mary Kay, Amway, Organo Gold, etc., distributors are able to buy products at wholesale and sell them at retail, which is usually a 50% markup on the wholesale price.

In service based companies, like Legal Shield, ACN, etc. distributors are required to utilize the service to maintain their distributorship.

Additionally, as distributors bring more people into the company and sell more products they are able to achieve certain rankings.

MLMs are based around rankings that incentivize people to produce more. As you move up the ranks, you are able to earn higher commissions and earn additional bonuses.

Marketing Direct Sales: The Downside of Multi-Level Marketing

The multi-Level marketing industry is often associated with a lot of negativity. Typically, when you hear the words network marketing or MLM, you will hear the following: SCAM! Before there were concrete regulations in place, there were people marketing direct sales illegally. There were many fly-by-night companies that came on the scene that were doing illegal activities such as Ponzi schemes. The issue here is that the majority of commissions were made off of bringing people into the business instead of selling products or services.

However, the Fed shut down many of these companies years ago. However, be mindful there are still a few illegal companies lingering out there.

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The Importance of Knowing the General Stock Market Direction

Knowing the general stock market direction is critically important to investors and traders everywhere. The bottom line is this: Most stocks (80%+) follow the general direction of the stock market. In a bull market cycle, most stocks will hold their own or rise. In a correction or bear market cycle, NEARLY ALL STOCKS will fall. And stocks tend to fall much faster than they rise!

It does not matter how good a stock’s earnings and fundamentals are or how well the stock has been accumulated over the last several months. Make no mistake, when the market turns bearish, the correction can be brutal. It can do a lot of damage to an otherwise good portfolio.

A great case in point would be Apple (AAPL: Nasdaq). In the brutal bear market of ’08-’09, AAPL fell close to 60% in value, even though the fundamentals never changed. I am sure you can think of a few stocks that did the same!

In bull markets all the cream rises to the top AND KEEPS RISING! In bear markets EVERYTHING pretty much comes down.

Now as a full time stock market trader, I make no distinction between “long-term” bull and bear cycles or what the talking heads on TV love to call “Secular Bull” or “Secular Bear” markets. Stocks are either in uptrends or downtrends, PERIOD.

In his bestselling book “How to Make Money in Stocks”, William O’Neil teaches investors exactly how to determine the stock market’s direction and how to make decisions based on this direction. Additionally, O’Neil does all the analysis work for you in the Investor’s Business Daily (IBD) newspaper article (also appears on IBD website entitled “The Big Picture” which appears every day on the first page. He essentially tells you!

In summary, if you want to improve your investment or trading results, know the stock market’s general direction. If you are buying stocks in a market correction you have a much higher probability of losing money and vice versa. The single best place to find the general market direction in the IBD article “The Big Picture.”

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