Can You Make Money with Direct Marketing Businesses?

Direct marketing (DM) is a concept pioneered in the 1950s as a way to market products directly to consumers.  The original company to use the concept was Tupperware, which used housewives to sell their products to other housewives.  Today, direct selling or direct marketing is used to sell kitchenware, scrapbooking supplies, house wares, decorating supplies, makeup, and many other products.  These businesses typically find sales people by portraying the jobs as business opportunities.  While many people have and can do well with these kinds of businesses, there are a few things to consider before starting.

First, remember that DM companies do not typically hire salespeople.  By buying a starter kit you are essentially owning a franchise of the business.  Like any business owner, there is no guarantee that you will make a profit.  There is no guarantee that you will even make your initial investment back.  Any company that promises you that you cannot lose money should be viewed suspiciously.  There are, however, plenty of legitimate DM companies to work for.  When you make a decision about whether or not to invest, consider your target market, the market saturation of the product, the time involved, and your personal liability.

Your target market consists of the people you will sell the product to.  In many ways, they are more important than the product itself.  To get an idea of this, start by writing out a list of everyone you know who would buy the product you are considering selling.  Don’t just list people you know or who would like the product.  Consider who would buy the product at the price that is being asked, who would buy it because they liked it and how long would it be before they bought another one?  If the business model involves selling at parties, consider how many of the people on the list would be willing to host such an event, and how many people would attend one.  Many newcomers to DM businesses make the mistake of overestimating their client base.  Although many people may express interest in a product, only a few will but it.  Furthermore, the belief that “my clients will bring in new clients” gets many new salespeople in trouble.  While word-of-mouth advertising is great, many experienced sales professionals know it is very difficult to get people to even talk about a product, much less convince someone to call a stranger and invite him or her into their home for a marketing presentation.  DM companies that require their representatives to make a certain amount of sales or host a certain number of parties in a limited amount of time after starting a business can be risky if you do not have a big enough initial client base.

One thing that new salespeople often overlook when calculating their client base is market saturation.  Chances are the DM business you are considering was recommended to you by a friend or relative who also happens to sell the product.  How many friends and relatives do you and that person have in common?  Have those people already bought the product?  If so, how inclined are they to buy more?  Even if they will buy more, will they buy it from you or the person they originally bought the product from?  In some communities, certain products will become popular for short periods of time, and there are seemingly more people trying to sell than are actually buying.  Many DM salespeople realize too late that most of their potential clients have already been sold the products that they are trying to sell.  Make sure that your client list consists mostly of people who have never bought from (or better yet, even heard of) the company.

Finally, consider the time involved and your personal liability for any business you start.  Most DM companies promise that you can set your own hours and determine your own schedule.  While this is mostly true, you will have to spend time organizing presentations, entering orders, and most importantly, generating new clients.  Marketing the business after you have exhausted your initial client base may require hours of socializing, often at times that may not be convenient to your schedule.  Most new business owners say that generating clients takes up the majority of their “working” time, and DM companies are no exception. 

There are lots of people who do well with DM, but many will tell you that it is like any other business.  Many use these types of businesses to supplement their income as opposed to living solely on its profits.  In fact, the average DM business owner makes less than $5,000 a year.  Remember that DM is an appealing business because of the part-time schedule, so that figure does not represent the result of full-time work.  Still, it is important to keep your expectations reasonable and view any money you give to such a company as an investment in a business.