The 3 Types of Direct Sales

By Belinda Ellsworth

Part of Direct Selling For Dummies Cheat Sheet

Direct sales or direct selling refers to the sale of products or services away from a fixed retail location. These products are marketed and sold directly through independent sales representatives, also known as consultants, presenters, distributors, and a variety of other names.

With a starter kit purchase for a small fee, direct sales offers the average person a way to earn income with an established business model and a marketable product line. It works almost like a mini‐franchise but without the initial investment. It is a low‐risk opportunity to earn more money than you could realistically by starting from scratch alone.

There are three types of direct sales models:

  • Party Plan: This model focuses on efficiently selling to groups of people who have been gathered together by a host whom they know personally, either in person or virtually (online). These types of gatherings are typically referred to as parties. These parties are hosted at a customer’s home, and this customer is known as the host. The host traditionally is rewarded with a series of discounted and free products as well as host-exclusive specials. The host invites her friends over as guests to attend the party. The party usually consists of light refreshments, socializing, and a presentation done by the representative.

    The purpose of a home party is to create a fun, relaxing, home shopping experience with friends. This model lends the power of the host’s personal recommendation to the products and facilitates social proof, which means the weight of influence carried by a group of people. Party Plan parties are quite effective in generating sales, attracting recruits, and teaching others how to sell. One clear strength of the Party Plan model is the easy-to-understand emphasis on selling products to customers.

  • Network Marketing: Network Marketing refers to a company structure designed to move consumable products through a network of independent representatives, via both personal use and sales to end consumers. When a Network Marketing company is building its sales force, it is focused on building a network of consumers. The company doesn’t distinguish between those who join as independent representatives to earn money and those who join merely for a discount on their personal products.

    One strength of the Network Marketing model is that companies can grow very large and sell huge amounts of products through a vast network of people who have, in many senses of the word, joined as members. Many members set themselves up for a subscription to receive their products each month — an arrangement often called autoship. These continuous re-orders through a network of people affiliated with the company by choice can lead to consistent sales growth, as long as people in the network continue to see the benefit of the product.

  • Hybrid: As you might guess, hybrid blends the practices of Network Marketing and Party Plan. In Hybrid companies, as with those in the Party Plan model, independent representatives have hosts gather their friends and family to experience a product demonstration, in person or online. But with Hybrid, the emphasis is as much on the business opportunity as it is on sales of the product. The compensation plans tend to borrow traditional elements from both Party Plan and Network Marketing. As in Network Marketing, these products lend themselves well to auto‐ship, the subscription order model where independent representatives and customers get monthly replenishment orders shipped to their homes automatically.

    In Hybrid companies, auto‐ship usually offers a price break for the customer (sometimes referred to as a preferred customer rate). Some programs offer vanishing auto‐ship or free auto‐ship for customers who refer other customers through referral programs. These referral programs can also include free auto‐ship for independent representatives who have a certain number of customers on auto-ship, meaning that the representative’s own monthly consumption of product is covered. These referral programs, which combine the customer‐focused Party Plan outlook with the Network Marketing‐style auto‐ship approach, have been very successful and have led to significant growth for the companies and leaders involved.