Party plans vs. MLM

[sdElise]

Stella and Dot...fashion-forward jewelry!
See my linky.

[archergal]

Hi Allison

I am with BeautiControl and we are a DS party plan company.
We do "Spa Escapes", "Work Escapes" along with schools and other places of business. We also do health fairs, etc.

[JoyfulHome]

Hi Alison,

Forgive the long response; this is an area of much frustration to me due to the common misconceptions associated with our industry. Please be patient with me while I try to explain...

(1) Not really, because MLM ("multi-level marketing") isn't an official classification of business type. As others have mentioned, MLM actually refers to the method of compensation plan. To the layman, though, both"MLM" and "network marketing" have become terms with negative connotations due to some sadly widespread unscrupulous business practices among many "independent business owners" associated with certain companies.

The umbrella classification you're looking for is actually "Direct Sales" or "Direct Selling". Companies that fall under thedirect sales umbrella are then divided into sub-categories according to their principal selling methods: either party plan (sales presentations are made to groups of people, often in private homes)or one-to-one (sales presentations are made to individuals).Most companies usually offer some flexibility for either method but lean heavily in one direction or the other.

Now, seperate from selling method classifications are compensation styles. Direct sales companies will use either a "single level" or "multi-level" compensation plan.Single-level compensation plans pay only on a contractor's personal sales, but may offer some sort of one-time recruiting bonus for bringing in new contractors. Multi-level compensation plans are designed to pay both commission on personal sales as well as override bonuses on the sales of those they recruit.

In the real world, when you see people referring to their companies as "network marketing" or "MLM," it often means that there is a heavy emphasis placed on building a large organization of recruits as opposed to building a large database of customers. In party plan, on the other hand, you'll usually find that people are very focused on their own sales with recruiting being a secondary priority. The reason for this is that companies using the party plan methodology tend to create compensation plans that require contractors to maintain good personal sales levels (sales to customers, NOT to their own recruits!) in order to be eligible for overrides on their team's sales.

Phew. That sure was long-winded! I hope it has been of some help. As others have mentioned, our professional association, the DSA ("Direct Selling Association") defines things quite clearly and would be a great resource for you.


(2) I'm with Heritage Makers. We teach our customers to preserve their family memories by writing down their stories and preserving them in the format of heirloom-quality books. It's simple and fun to do, and leaves a legacy for future generations. Customers just need access toa computer with a high-speed internet connection and they log on toa secure website to create their very own customized books. Once they've completed thedesigns, Heritage Makers publishes their stories into beautiful heirloom-quality hardcover books. We call the process Storybooking(TM).


Blessings,
ChristyEdited by: JoyfulHome

[LoreneB]

Joyful Home,


Great explanation! The terms are thrown around a lot and it can get confusing to those who are new to the industry. I have found that most people either prefer a certain comp plan and a certain method for getting the product to the customer. Personally, I love Partr Plan Direct Sales! I can tell from you post that you also have a passion for building your business through relationships!


Thanks for a great post! The DSWA is another a great educational resource for people looking for explanations about our industry.

[nuwave06]

Hi Alison,

If you check theWAHM.com sub-forums below, you will find several listings for current party plan companies by industry:


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Hope you find this info helpful!

[AlisonMSmith]

Thank you, folks!

We have an Usborne area (I'm a homeshooler, I think loving Usborne is a duty!) and even have one rep who's joined. Added Stella & Dot and BeautiControl. Thanks for letting me know about them. Heritage Makers is now up as well.

Thanks nuwave6. Amazing how many companies there are. I think I'm going to go with what I've got and then just open new boards on a per request basis. What do you think?

Originally Posted by JoyfulHome

(1) Not really, because MLM ("multi-level marketing") isn't an official classification of business type. As others have mentioned, MLM actually refers to the method of compensation plan. To the layman, though, both "MLM" and "network marketing" have become terms with negative connotations due to some sadly widespread unscrupulous business practices among many "independent business owners" associated with certain companies.

I agree, Christy, that MLM has a tarnished reputation in general. I hope you don't think any disrespect was intended. What I'm talking about is the fact that most (all?) party companies pay their associates based NOT just on sales, but also on sales of those who they signed up to be associates.

There are as many different variations of comp plans as there are companies (some that I think are good and some downright crazy), but as far as I know all major "party plan" companies use some variation of this model.

My point being that to say that, for example, Amway is an MLM and Mary Kaye is NOT, isn't accurate.

To be clear, I asked the question not to prove some kind of point, but simply to accurately classify the companies on my site. Does that make sense?

The umbrella classification you're looking for is actually "Direct Sales" or "Direct Selling". Companies that fall under the direct sales umbrella are then divided into sub-categories according to their principal selling methods: either party plan (sales presentations are made to groups of people, often in private homes) or one-to-one (sales presentations are made to individuals).

This would work, but it's not the classification I'm looking for. Why? Because ALL companies do "direct sales" in some way, except perhaps wholesalers. Even service companies. So that's not a particularly helpful division for the purposes of my site.

Single-level compensation plans pay only on a contractor's personal sales, but may offer some sort of one-time recruiting bonus for bringing in new contractors. Multi-level compensation plans are designed to pay both commission on personal sales as well as override bonuses on the sales of those they recruit.

That's helpful. So are there any party plans that only compensate for personal sales and/or only give a bonus for sign-ups, after which time the associates are independent of one another? I hadn't heard of any like that, so that info would be useful.

In the real world, when you see people referring to their companies as "network marketing" or "MLM," it often means that there is a heavy emphasis placed on building a large organization of recruits as opposed to building a large database of customers.

Yes, I'm aware of the emphasis, which is generally one of my big complaints against many of the MLMs around. Still, the classification is accurate. It's a difference of degree, not of kind, if you know what I mean.

Christy, I really appreciate your input. I've also added Heritage Makers. I think I saw a booth for the company at a convention I spoke at last year. Beautiful stuff. [img]smileys/smiley1.gif[/img]

AlisonEdited by: BookWhiz.biz

[Yuliya Mironova]

Hi Alison, your PM inbox is full ...[img]smileys/smiley2.gif[/img]

[JoyfulHome]

Originally Posted by BookWhiz.biz

I hope you don't think any disrespect was intended.

Not at all! I saw your question as a request for clarification, not as a slam of any type.

Originally Posted by BookWhiz.biz

This would work, but it's not the classification I'm looking for. Why? Because ALL companies do "direct sales" in some way, except perhaps wholesalers. Even service companies. So that's not a particularly helpful division for the purposes of my site.

Not to belabor the point, but direct sales is not something that "all" companies do. Just for clarification, here is the official definition as found on the DSA website:

<BLOCKQUOTE style="MARGIN-RIGHT: 0px" dir=ltr>
"Direct selling is defined as the sale of a consumer product or service, person-to-person, away from a fixed retail location. But there's more to the story than the simple sale of products. Find out more here."</BLOCKQUOTE>

Originally Posted by BookWhiz.biz

So are there any party plans that only compensate for personal sales and/or only give a bonus for sign-ups, after which time the associates are independent of one another?

In a word... yes. Not many, but there are a few. The DSA Member Directoryshows three companies when you run a search selecting "Sales Strategy: Party Plan" and "Compensation Plan: Single Level". However, it's important to point out that not all direct sales companies are members of the DSA. So there are probably many more than the three shown.

Originally Posted by BookWhiz.biz

I've also added Heritage Makers. I think I saw a booth for the company at a convention I spoke at last year. Beautiful stuff.

Thank you. I love how muchjoy it brings!

Blessings,
Christy

[JoyfulHome]

Originally Posted by ShineIn2009

Great explanation!

Thank you, Lorene.

Originally Posted by ShineIn2009

I can tell from you post that you also have a passion for building your business through relationships!

No doubt about it! It's the difference, as they say, between "a customer for a night time or a customer for a lifetime."


Blessings,
Christy

[LoreneB]

Christy,

I had never heard that line before. I love it! Thanks for sharing.

This was a great post, Alison. I hope it helped you in setting up your forum.