MLM vs. Social Selling: What’s the Difference?

If you’ve ever thought about selling products, you’ve probably come across different terms like social selling, network marketing, and multi-level marketing. But what do these terms really mean? Are they all the same? And are they all bad? 

In this post, we’ll break down these terms and see if the businesses behind them are built to last. You’ll learn how to spot companies that can actually help you succeed and those that might not. So, let’s dive in and find out!

What is Social Selling?

Social selling, also known as social retail, involves using social media to showcase products to a wide audience. It’s a blend of marketing methods like word-of-mouth promotion, product endorsements, product placement, trust-based marketing (reviews and recommendations), and more.

Imagine a retailer aiming to boost sales by leveraging social media. They deploy all these tactics through platforms like Instagram, Facebook, and Twitter to engage with users and drive business. This strategy acknowledges the power of social media in enhancing product visibility and generating positive buzz.

To understand it better, consider this: Back in the early 2000s, Pepsi invested heavily in a Super Bowl commercial featuring Britney Spears enjoying their cola. They knew this exposure would boost sales. However, today, merely featuring a celebrity in an ad isn’t enough. 

Companies like Pepsi want to show not only celebrities but also your friends, their friends, and the influencers you follow all enjoying a Pepsi on social media. How they achieve this is a part of their social retail strategy.

What is MLM (Multi-Level Marketing)?

Multi-Level Marketing (MLM), also known as network marketing, involves individuals selling products directly to the public, often through word of mouth and direct sales. 

The core concept of MLM is to recruit a large number of distributors to promote the product, leading to a rapid expansion of the sales force. 

Promoters earn commissions on their own product sales and also receive compensation for the sales made by the people they recruit. 

This compensation plan is designed so that commissions are distributed across multiple levels, and the amount of commission depends on the overall sales volume.

Read more: What Is an MLM?

Examples of Social Retailing

Social retailing comes in various forms, and here are some examples to help you understand:

Paid Social Retailing:

  • Influencer Collaboration: A retailer notices that a particular social media influencer has a strong following among their target audience. They pay the influencer to talk about or showcase their products.
  • Unboxing Videos: A YouTuber with a large subscriber base creates videos where they unpack and review new products. The retailer compensates them or provides products in exchange for creating a video about their product.
  • Facebook Shoutouts: A Facebook user with a significant following agrees to mention the retailer on their feed, live video, or stories in exchange for payment.
  • Facebook Marketplace Partnership: A well-known Facebook influencer lists a retail product for sale on Facebook Marketplace and gets a percentage from each sale. People might trust the influencer’s recommendation more than buying directly from the retailer.
  • Engagement Rewards: Retailers encourage followers to like, subscribe, or share their content by offering gifts, contest entries, or future discounts.
  • Review Management: Retailers pay users to write positive reviews on platforms like Google and Facebook, or may offer compensation to users who remove negative reviews.

Free Social Retailing:

  • Genuine Customer Posts: Satisfied customers share their positive experiences with a product on social media without any prompting.
  • Turning Negatives into Positives: When a customer leaves a negative review, the retailer addresses the issues publicly and resolves the situation to show their commitment to customer satisfaction.
  • Unsolicited Mentions: A customer creates a video or post featuring a product they like, even if the retailer didn’t request it.
  • Spontaneous Viral Content: Products become part of a viral meme or trend without any payment involved.
  • Organic Recommendations: When someone asks for suggestions on social media, your product gets recommended naturally by users.

These examples showcase the diverse ways social retailing can happen, from paid collaborations with influencers to genuine customer endorsements that happen without any monetary incentives.

Key Differences Between MLM and Social Retail

Many people often wonder if social retail is the same as multi-level marketing (MLM). Some people think of social retail as shady and equate it with MLM, which has a controversial reputation. However, it’s important to understand that these two concepts are different and shouldn’t be confused.

Think of social retail as a big umbrella term that covers various ways stores sell products using social media. Not all social retailing involves the tactics of MLM, and not all social retailing is controversial. It’s similar to saying all marketing is bad just because a few people have used questionable methods.

Here’s a breakdown of the main differences:

Growth Opportunity

MLM provides a chance for fast growth through an e-commerce network marketing approach. Entrepreneurs can grow their customer base by bringing in independent distributors, who then recruit their own distributors. This creates a chain reaction for quick business expansion.

On the other hand, social selling uses online platforms like social media, e-commerce marketplaces, and mobile apps to connect with larger audiences. These platforms have large user bases and effective tools for engaging with customers, showcasing products, and increasing sales.

Marketing Strategies

MLM relies on existing social networks and relationships. Entrepreneurs can leverage their personal and professional connections to establish a strong business foundation. This network effect accelerates business growth and widens its reach.

On the flip side, social selling uses influencers to endorse products and generate interest. Influencers with significant followings can promote products, creating excitement and boosting visibility and sales. This word-of-mouth marketing strategy is especially effective for reaching target audiences.

Social Selling vs. MLM: Which One Works Best?

When it comes to making money through business models like multi-level marketing (MLM) or social selling, it’s important to understand the differences and find what suits you. Let’s break down these concepts in a more reader-friendly way.

Multi-Level Marketing (MLM)

MLM has been around for a while. In this setup, a company sells products or services through a network of independent distributors. These distributors not only earn from their sales but also bring in new distributors. As these networks grow, distributors earn extra income from the sales of their recruits. This model is often called MLM because of the organized layers of distributors. Some companies emphasize recruiting, while others have more straightforward structures.

People sometimes doubt MLM due to its resemblance to pyramid schemes. But a key distinction is that pyramid schemes lack real products or services. Legitimate MLM companies offer actual products and opportunities for earnings. Brands like Rodan + Fields show that MLM can lead to big success with genuine products.

Social Selling

Social selling is a newer trend where regular folks use social networks to sell products primarily to friends. It’s not just about pushing products; it’s about building relationships. However, don’t confuse this with broader B2B social selling.

Remember, not all social selling is MLM, and not all MLM is social selling. Some influencers sell products independently, and not all MLM distributors use social media extensively. Many modern direct sales companies, like MONAT or LUMINESS, use the term “social selling” to describe their approach.

If social media vanished, MLM companies could still function because their strength lies in connections. Direct sales is inherently social, which is why “social selling” is an apt term.

Final Thoughts

Ultimately, the choice between social selling and MLM depends on your preferences. Both involve networking and relationship-building, but they operate in distinct ways. MLM has a proven history, while social selling is a contemporary approach that leverages the power of social media. Whichever path you choose, understanding the nuances can help you make the most of your efforts.

FAQs

What is a Social Retailer? 

A social retailer is basically a store that uses smart social retailing methods to boost sales and increase brand visibility. With so many people on social media these days, it’s a smart move for stores to become social retailers as part of their marketing strategy. Just remember, it’s important to be ethical and avoid questionable tactics because today’s consumers are less forgiving than ever.

Who uses Social Retailing? 

Guess what? Almost everyone is already dabbling in social retailing, whether they realize it or not. Even having a Facebook page is a form of social retailing. But let’s say you’re not into social media at all – you’re still in the social retailing game, just not playing it very well.

Here’s an example: Ever heard of Wendy’s, the burger chain? They’ve become internet famous by using their Twitter account to cleverly poke fun at their competitors. By winning battles of wit, they’re not only making people laugh but also getting them to think about their brand more. It’s like scoring bonus points for being cool.

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