Think back about 30 years. It was 1980. Unemployment was high, interest rates were higher, and we escaped to the movies to see E.T., Star Wars and Batman. It was also the last time direct selling experienced a decline in sales.

But the ’80s were also a time when some of today’s most-respected direct selling companies—such as Herbalife, Nu Skin and Primerica—were born. Direct Selling Association President and CEO Neil Offen notes that history may be repeating itself.

“It appears that direct selling may be a leading indicator of economic recovery, supported by the fact that in 2008 we saw a slight increase in the number of direct sellers,” he says. “Reports from some companies and our recently released third-quarter DataTracker indicate this trend is continuing.”

Offen believes that by the third quarter of 2010, the industry’s sales figures will begin a healthy recovery, which he hopes will preface the recovery of the broader economy.

Until that happens, the industry must deal with an economic two-edged sword. With one in 10 Americans unemployed during 2009, direct sellers were faced with both an opportunity and a challenge. People looking for income were more open than ever to business opportunities, but those same people and their friends had tight household budgets. They eyed every purchase carefully, looking for value and asking, Do I really need it right now?

Life Essentials Scott Van Winkle, CFA, who is Managing Director, Equity Research for Canaccord Adams, follows the food and nutrition industries, including several direct selling companies. He theorizes that the product categories that should have performed the best in 2009’s economic environment have products that buyers view as least-discretionary.

Luckily for some companies, their consumers continue to consider their products essential, so distributors have a strong sales story to tell prospects. For those direct sellers, the sour economy took on the taste of sweet lemonade.

“For the devoted supplement consumer or person in need of weight loss, these needs are not optional,” Van Winkle explains. “Ironically, the U.S. weight-loss industry contracted, as the consumer appeared to operate under the assumption that he or she could achieve weight loss on their own, and thus save money. In the case of Medifast [which owns direct selling company Take Shape for Life], its offering has a value perception—$10 per day gives you five meals. More important, Medifast entered this cycle with tremendous momentum. And the quality of its product offering, tools, distributor training and leadership has improved so materially that even the worst recession in generations couldn’t break the momentum.”

---

Luckily for some companies, their consumers continue to consider their products essential.

---

Medifast CEO Michael McDevitt says that Take Shape for Life’s (TSFL) business model helps consumers lose weight at a tremendous value.

“For those looking to lose weight, it’s not discretionary. But they’ll shop around,” he explains. “Most people trying to lose weight do about seven diets a year. They will look for the best diet for them at the best price. We offer one of the best values in the weight-loss industry. Take Shape for Life wasn’t created to be recession-proof. It was created because customers called in to the company saying that they loved our products and wanted to help their friends and family lose weight the way they had. They wanted to be associated with the business. But this happens to be a model that in a recession can do well.”

Do well, indeed. TSFL has grown 40 percent year over year since 2002, and its third-quarter 2009 even exceeded those remarkable results. In the third quarter, parent company Medifast revenues increased 65 percent to $45 million, compared to 2008, and TSFL sales increased 105 percent year over year.

---

“It is the ability to be positive and see the vision for the future that will get people through the negative media and difficult times.” —Angela Loehr Chrysler, President and CEO, Team National

---

Trade Down to Trade Up

Value has been part of the message at Herbalife, too. The message was especially meaningful at Herbalife because it was actually born during a recession. Founder Mark Hughes started the company by selling products out of the trunk of his car.

“Inevitably, from a consumer perspective, when people are worried about their jobs and the economy, they start looking for ways to save money but still buy good nutrition for their families,” notes Des Walsh, Herbalife’s Executive Vice President of Worldwide Operations and Sales. “Our distributors have been successful in getting across to their customers what a great value our products represent. For about $2, they can get a wonderful nutritional meal. As a result, daily consumption of our products has increased substantially.”

He adds that consumers tell the company that they’re prepared to give up their Starbucks latte and muffin before they give up good nutrition for themselves and their families.

“Consumers are willing to trade down in some things, but they’re trading up in nutrition value,” he says. “That really has put us in a sweet spot.”

With its life-essential energy services, Ambit Energy benefitted from this year’s drop in natural gas prices and passed the savings on to its customers. That resulted in greater customer retention and a slight increase in customers per consultant.

“People shop around,” observes Chris Chambless, Ambit’s Chief Marketing Officer. “But that has translated into more customers for us. You can’t eliminate that expense from your budget.”

He explains that the company tracks consultant retention by measuring the number of consultants who have a replicated Web site and have produced either a customer or consultant in the last 90 days. Those figures have climbed every month since the company was founded in 2006. Ambit forecasts almost $400 million in revenues this year, up from $197 million last year. The company was honored as the fastest-growing privately held company in Dallas for 2009 by the Dallas 100 Awards™, co-founded by Southern Methodist University’s Cox School of Business and the SMU Caruth Center for Entrepreneurship.

---

DSA programs often used technology to allow participation without travel.

---

Lemons into Lemonade

So how do companies do well when the economy doesn’t?

The Direct Selling Association set the tone for the year by recognizing that budgets would be tight. Its programs often used technology to allow participation without travel.

“Our educational programming in 2009 focused on providing targeted content with minimal time and travel commitment through offerings such as our new ‘Coffee Break’ series—a monthly topical online presentation designed to run no longer than the time it takes to enjoy a cup of coffee,” Offen says. “These offerings will continue in 2010. We’ve also made participating on committees and councils easier for our executives by offering virtual participation for a number of our meetings.”

He also noted that attendance at this year’s Communications & Internet Marketing Seminar transcended tight travel budgets and set an attendance record, as it focused on what’s working for direct sellers in the realm of social media and new media.

The DSA gained strong results from its Image Enhancement program, with hundreds of articles and news segments published, most of them focusing on the great benefits of direct selling, particularly in a poor economy.

Companies took advantage of the DSA offerings, often sharpening their focus on foundational activities.

Adjustment Process

Like many companies, Ambit recognized in ’08 that 2009’s economy would present challenges, so it decided to focus on the basics, such as training. Once consultants had honed their skills in the areas that let them earn money—recruiting consultants and gathering customers—it ran special promotions that encouraged them to do those very things. In its strongest market, Dallas/Fort Worth (DFW), it also developed and ran a brand-advertising test using television and billboards. The poor economy had impacted advertising rates and availability in the market, so Ambit was able to grab space at an attractive cost. It wanted to see if it could increase the company’s brand recognition and help soften the market for consultants. They got the hoped-for impact, seeing a 40 percent increase in recruiting and customer gathering in the DFW area, compared to their other markets during the test. As a result, Ambit plans to expand its brand-awareness campaign to the Houston market in 2010 and to continue to monitor results. As long as the ads help its field to be more productive, they will continue the campaign.

At Vemma, which has experienced rapid growth in the last couple of years, the tone was realistic.

“This ‘new economy’ has been a shock to everyone in and out of our industry,” says CEO and Founder BK Boreyko. “I wish I had one thing I could point to that allowed us to grow during the meltdown so I could share it with everyone, but there isn’t. Basically, I think the biggest reason [for good results] was the change in our core message. We shot a new DVD, and I cut down on the typical networking ‘hype’ and just talked to people about the problems they’re facing every day. I feel it resonated with people needing to just earn an extra couple of hundred dollars a month and gave them a plan to pull that off.”

Herbalife also focused on one of network marketing’s basics—attendance at meetings. They began the process at the end of 2008 by engaging distributor leadership. They recognized that 2009 would be a difficult year, based on the closing months of ’08, so they put an action plan in place that resulted in tremendous distributor engagement and activity, right from the first quarter.

“If our distributors sit home and watch TV, then all they’ll hear is more and more negative news,” Walsh says. “Inevitably, that has an impact on their confidence. The antidote to that is to get away from the TV, get to meetings, and get around other distributors whose businesses are successful. Then, when they talk to customers and are enthusiastic about our products and business opportunity, amazing things happen. That’s why we did ‘Why Herbalife?’ tours all over the world. We invited special guest speakers, and our CEO Michael Johnson participated in several. People welcomed the opportunity to come to the meetings, hear positive things, and learn about growth and opportunity.”

Walsh notes that the meetings were only one of many things that kept the salesforce’s attention trained on their business. Herbalife continued its branding efforts, social awareness programs and sports sponsorships.

“That may be even more important in challenging times,” he observes. “We’re out there in the community, being active, showing that our commitment to our social responsibilities is undiminished. It gives everyone a sense of confidence and purpose.”

Ignite, which markets Stream Energy in two states, exercised its strong belief in events as a driver of the business. Ignite’s Managing Director Doug Witt says, “In 2009, we stepped up the number and the level of our events in the field. As a result, we haven’t let the economic downturn adversely affect our way of thinking. In the field, our training and recognition events have continued to stimulate activity, which has continued our momentum even as the national economy struggles.”

---

“It is the ability to be positive and see the vision for the future that will get people through the negative media and difficult times.”

—Angela Loehr Chrysler, President and CEO, Team National

---

Stay Solid

Fast-growing Scentsy started a “world tour” around the United States last year and continued it during 2009. But President and CEO Orville Thompson believes that the company’s basic values may be the real key to its continued momentum.

“Simplicity, authenticity and value are the cornerstones of Scentsy,” he says. “We talked about them before the economy turned, and afterward, those things have increased in their value to customers and distributors. We were lucky to have principles before the recession that speak well to people during the recession.” He adds, “One of the things that might have led to success is the fact that we didn’t do things differently.”

Thompson believes that the economy has a neutral effect on the company and is actually a little disappointed that growth figures weren’t even higher than they were. Since it established its direct selling model in July 2004, Scentsy has had an average annual increase of more than 300 percent in both revenue and consultants. It projects nearly $180 million in revenue for 2009, compared to $63.7 million in 2008. Moreover, the company boasts a 12-month consultant retention rate of about 60 percent—about 50 percent higher than the party plan segment of the direct selling industry. And those consultants are engaged, too. About 78 percent of them placed orders during October.

Some of Scentsy’s growth came from international expansion, part of which was accidental. In September, the company intentionally entered the Canadian market—its second international market. The first was Puerto Rico, which it entered unintentionally a year before. During a companywide software upgrade, a switch was accidentally left open that allowed Puerto Rico residents to enroll as consultants. What happened next seemed like the very personification of “if you build it, they will come.” Without any Spanish-language marketing materials or customer support, by the following summer, the Puerto Rico market was growing at a rate six-times higher than the U.S. rate. Just as remarkably, the company found that consultants were beautifully aligned with the Scentsy values. Somehow the Scentsy message made it smoothly through the language barrier. Puerto Rico’s family-oriented, close-knit culture offered a perfect environment for the Scentsy model. The episode is a perfect example of what Thompson refers to as the company’s “magic dust.”

Business was more methodical than magical at most companies, including party plan company Tastefully Simple. But it took a long-term view of the challenging economy as it focused on supporting its consultant base. It launched an enhanced compensation plan and introduced a richer and more rewarding host program that promotes higher party attendance, sales and recruiting. It also enhanced its e-invitation and Web-related business tools.

“This year has posed unique challenges for business growth in all sectors, says the company’s Vice President of Sales Darrin Johnson. “That Tastefully Simple has remained strong and poised for renewed growth in 2010 is a testament to the advantages of the direct sales model in general and Tastefully Simple’s strategy in particular.”

Results at Team National have been steady, according to President and CEO Angela Loehr Chrysler, because the company has stayed positive and has continued to invest in its sales field and itself.

“We have invested in the production of new marketing tools, enhanced our products and invested in new category launches,” she says. “We also invested in the company itself by purchasing a new $3 million, 20,000-square-foot corporate headquarters, because we believe in our growth and future.”

Financial Reflections

Whatever their approach in 2009 and whether their business results were fabulous or flat, the companies that spoke with Direct Selling News said that being their best during bad times would carry them to good ones.

“It’s important to encourage and teach personal growth prior to difficult times,” says Team National’s Chrysler. “It is the ability to be positive and see the vision for the future that will get people through the negative media and difficult times.”

Herbalife’s top managers found that the troubled economy underscored what they already had learned through prior experience.

“This is a business based on distributor confidence,” Walsh observes. “We’re working closely with distributor leadership to ensure that they are confident that, notwithstanding the poor economy or external circumstances, in Herbalife we have the best products and business opportunity—exactly what people are looking for in these challenging times.”

Vemma actually encouraged distributors to modify their approach to the business and to focus on the unique needs that customers have right now.

“I think the new term for ‘sales’ in this new economy is ‘caring.’ People have changed their views, habits and the things they respond to,” notes Vemma’s Boreyko. “I feel you can’t use the same approach that worked for you a couple of years back. You need to let them know that you care about them and their needs first before they ‘buy in’ to what you’re offering. It’s a strange and exciting time we’re living in right now. You need to be transparent and believe in your message. You need to reach people on their level, and their level has been changed forever. Some companies will adapt and respond to the times we now live in, and some, sadly, will just keep doing the same things and hope for a different result.”

Bill Shaw, President of Entertaining at Home and Southern Living At Home, says 2009 was unique not just for direct sellers, but also for their customers. He suggests that they will need to adjust to the shock of an economy like they may have never experienced.

“If you think about it, the average age of our customer is 39,” he says. “That person was 12 years old in 1982. They have no memory of that recession, so they have no memory of the recovery. Why is this time different? This time, the audience is in shock. But they’ll wake up one day and realize that the president and Congress won’t turn this around overnight. This will be a protracted, slow climb-out in the economy. We will go from feeling that inviting friends over will be burdensome to seeing it the way it’s always been. It will be an opportunity to help someone start a business, and that will restart our economy. When that happens, we’ll see resurgence in the direct selling business, especially in the hard-goods side I’m in. We’ve seen it before.”

Taking It to 2010

After a challenging year, what are direct sellers looking forward to in 2010? Direct Selling News asked a sampling of companies, and here’s what they told us:

	Orville Thompson, Scentsy: “This year’s theme was expansion, and we’ll continue that as appropriate. Next year we’ll focus on excellence. We’re looking forward to polishing off some of the rough edges. We’re in that difficult situation of having to scale, and we’ve invested a ton of money in it and in human resources. Sales are continuing to grow, but change management is difficult. We want to nail that down so that we can provide world-class consultant training, support, technology and delivery.”
	Darrin Johnson, Tastefully Simple: “Additional strategies, including expanding awareness of our unique product offerings and recognition of the Tastefully Simple brand, are in development and are expected to drive substantial growth in the future.”
	Des Walsh, Herbalife: “Next year we’re celebrating our 30th anniversary. For us, it’s a wonderful time to be able to look back on the accomplishments of the last 30 years. We couldn’t have asked for a better test of what Herbalife represents than to have our distributors come through this 29th year. It’s not an economy we would have wished for, but it proved beneficial for that message and the resulting strong confidence we’ve seen.”
	Doug Witt, Ignite: “We are expecting an amazing year in 2010. It’s important to put in perspective that we are only a 5-year-old company doing business in only two states. For 2010, we plan to take our game to the next level, not only by building on our existing marketing and training programs, but we also intend to expand our recognition program, as well as expand into new markets.”
	Dan Chard, Nu Skin: “We feel like we’re on a run. There’s nothing to knock us off of some really great things that are happening. We have incredible leaders in our field. They have high energy. We have a good, solid product platform, and we plan for continued innovation. A lot of things are happening for us. We have an amazing group of people out there sharing our story.”
	Michael McDevitt, Take Shape for Life: “It’s going to be another great year for the business. We have a product and a program that provide the consumer with clinically proven weight loss. You have only to turn on the TV or look at the newspaper to see that health care is on the minds of the consumer while obesity is continuing to rise. We have a tremendous solution to the problem.”
	Bill Shaw, Entertaining at Home and Southern Living At Home: “I’m looking forward to a decrease in the resistance to host parties by customers who feel that they are somehow burdening their friends when they invite them to attend a home party. As this resistance goes away, we also expect to see more and more people look at direct selling as a legitimate business opportunity. For people who would have sought traditional part-time jobs in the past, those jobs simply aren’t going to be available during a protracted recovery. I’m looking forward to a renaissance in our industry.”
	Heather Chastain, Celebrating Home: “I can’t wait to see how we can harness all this passion and energy and see how much we can accomplish when we have the freedom to focus just on the business. The Celebrating Home name is on its way to becoming better known than it is now, and we’re getting more involved in ways to do that. We recently participated in Extreme Home Makeover in North Carolina, and we will get more involved in those kinds of things.”
	Chris Chambless, Ambit Energy: “I’m eager to see how big we can get next year. I’m not sure I have a handle on it yet, but I’m expecting double-digit growth again. We’re preparing ourselves to focus on fundamentals again in 2010, reevaluating all our tools and existing support systems to try to improve them where we can.”
	Angela Loehr Chrysler, Team National: “You get what you expect, therefore, I’m expecting terrific things, of course! I believe consumer confidence is beginning to rise and therefore people will start spending money again. The direct selling opportunity is needed today, tomorrow and next year, regardless of the state of the U.S. economy. We need to continue to encourage our sales field to stay focused on their dreams and to never give up.”
	BK Boreyko, Vemma: “I’m the eternal optimist, and I’m gearing upfor growth. Vemma’s focus will not be on launching a bunch of new products. In fact, we just have one scheduled for all of 2010. Our focus will be squarely on growing people and developing leaders. If we can double the leadership in our company, we can effectively double sales.”

Four Became Two, But Stronger

Even though the global economy seemed to be running a fever, entrepreneurial spirit was alive and kicking in direct selling during 2009. Several new enterprises were launched, getting off to a fast start. And industry insiders watched with interest as four established party plan companies began their journeys to consolidate into two.

Entertaining at Home’s Bill and Robin Shaw acquired Southern Living At Home from Time Inc., and Penny and Steve Carlile’s Home & Garden Party acquired Home Interiors & Gifts, which had filed for bankruptcy. Each respective management team approached merging their companies in a different manner, but both are pleased with the results they’re seeing.

The Shaws had purchased Taste of Home Entertaining in July 2008 from Reader’s Digest, rebranding it as Entertaining at Home. Not content to wait for the natural viral growth of EAH, they saw an exciting opportunity when Southern Living At Home became available this year. Because he had served as Southern Living At Home’s General Manager and Vice President for four years, Bill had great insight into the company’s business model, performance and culture. He saw a chance to achieve significant economies of scale by acquiring the company.

The consolidation process started in July, but the companies continued to operate as two separate entities. As part of the agreement, Southern Living At Home will relinquish its brand in July 2010. At that time, the two companies will become one, and a new brand will be launched.

“The clock is ticking on a mandatory new name for the company,” Shaw says. “In creating the new name, we see this as an opportunity to reinvent ourselves. There’s risk associated with giving up the name Southern Living At Home, but there’s also opportunity around branding the new company.”

The task is large but not daunting, according to Shaw. He says he’s never worked so hard for so long.

“The biggest decisions we’ve had to make revolve around our identity going forward,” he says. “What do we take with us and what do we throw overboard on the journey? Who will we become? We have a unique opportunity, not only to learn from the mistakes of others, but to take a critical view of our own past performance, both good and bad. In many ways, it’s about a do-over.”

Although the two companies have different infrastructures, they have similar cultures, product lines and management styles, thanks in large part to Shaw’s foundational influence on both companies. His insights even enhanced the due diligence process and allowed him to more accurately assess the value of the acquisition and the risks associated with the purchase. Shaw’s management team has approached the consolidation process carefully and methodically, but always with one prime consideration.

“But our first consideration all along was securing the future of the consultants who depend on an income from Southern Living At Home,” he says.

He hopes that the expanded company will be able to offer those consultants some technological innovations that will enhance their businesses. While he keeps the specifics confidential, he emphasizes that innovation is critical to drive the business forward.

“Every great advance in direct selling is largely because of an innovation in product or service or related technology,” Shaw explains. “An example would be when we launched Southern Living At Home, as we were the first major company to have Web-based order entry. Since then, software providers have made it available to everyone. So we’re looking for the next application of new technology in our space to gain competitive advantage.”

He acknowledges some surprises along the way, especially among consultant reactions to the merger. He hadn’t expected how well the leadership at Southern Living At Home embraced the acquisition and how much resistance came from Entertaining at Home’s leadership. But as those leaders come together repeatedly, he sees resistance diminish and a new, stronger team emerge.

Field leaders have been the key to success at Celebrating Home, too. While the company attacked the consolidation of the two companies with a vigor that amazed the industry, the evidence that they succeeded is seen in their consultants.

“Everything we hoped they’d do, they have done,” Celebrating Home’s President Heather Chastain says proudly. “Everything we believed they were capable of doing, they’ve done. We’re doing joint meetings all over the company now. It’s been touching and exhilarating to see what people have been capable of.”

Celebrating Home relied on consultants to shoulder the extraordinary tasks of launching the new business while staff continued to focus on daily requirements. Together, they launched new branding, new marketing materials, a new compensation plan and, most difficult, a new IT platform.

“The most challenging thing we tackled was our new IT system and the integration of our new order entry system, hands down,” she says. “No matter how strong our partners were—and we have good ones—we still crammed six months of work into about six weeks. It was a bumpier road than I had hoped it would be. We turned the final corner in September, and we’ve now had two months with zero issues.”

What went best? The name change. Chastain notes that both Home & Garden Party and Home Interiors & Gifts were brands with committed leaders and loyal customers.

“Everyone got around the name Celebrating Home,” she says. “It spoke to them and what they wanted, believed and needed to communicate to their customers and hostesses. It might be the home run of it all.”

Like Shaw’s companies, the predecessors of Celebrating Home shared similar values, which made combining the two companies easier. Chastain points to both companies’ Christian values as the foundation that eased the fusion of two established companies—one 52 years old and the other 12—into a brand-new company.

Bringing together distributors has been another key element. The company held its first national rally as Celebrating Home in August. Included in the agenda were three recognition ceremonies: one that recognized Home Interiors consultants for their achievements while they were at Home Interiors, one that recognized Home & Garden Party consultants for their achievements at that company, and then one that recognized the top achievers at Celebrating Home.

“Leader after leader told me that when she walked out on stage to receive her award, that’s when the page turned,” Chastain observes. “We’re now together. It was extraordinary. We absolutely came out of that event as Celebrating Home, and nobody looked back. We have had our best months of sales since then. October set records left and right.”

Chastain reports that sales in 2009 have more than doubled those from the individual companies in 2008, and recruiting has increased by 20 percent.

“We consider ’09 a real success,” Chastain says. “As a team of home office and field, we worked really hard. Now we’re enjoying the fruits of our labor.”

It’s a spin on the well-known commercial. Sales? Can’t do without ’em. Recruiting? It’s the future of the business. Informed, experienced opinions? Priceless.

Company executives regularly turn to field leaders for insights on a variety of topics, ranging from promotions and incentives to marketing, and, of course, compensation.

“Team National has been using field leadership committees since our inception,” recalls Angela Loehr Chrysler, President and CEO of National Companies. “My father, our founder, was always passionate about that. We value them as business partners and use them in pretty much every aspect of our business. There are very few decisions we make that don’t affect our sales field.”

The moniker “Team National” actually grew from the company’s beliefs and management style that embrace not just corporate employees but distributors as part of the whole team. Almost 200 field leaders—typically couples who form a distributorship—formally participate in advisory councils.

Experienced Advice

MonaVie solicits the opinions of a small, rotating group of its Black Diamond distributors and above during conference calls that take place about every six weeks.

“Some of our best ideas come from leaders in the field,” says MonaVie Founder, Chairman and CEO Dallin Larsen. “I like to say that no major decision regarding the company’s direction is made without consulting with our District Advisory Board.” Larsen purposely keeps the group at around 10 members to ensure that everyone is heard. And he chooses the board’s members carefully. “I want to surround myself with people who have been through the various seasons of network marketing so they can bring differing perspectives and sound advice to the table.”

Top executives are often directly involved with the field-leadership discussions. Particularly for an international company, that can translate into long hours.“It’s a time zone challenge to have conferences with leaders from all over the world, but I’m personally involved as often as I can be,” says Greg Provenzano, President & Co-Founder of telecommunications direct seller ACN, which operates in 20 countries spanning  North America, Europe, Australia and New Zealand. Provenzano includes about 25 top producers in the group called the Circle of Champions, which has biweekly interactive phone calls. “That helps me keep the pulse of the organization and get real-time feedback so we don’t have to wait for market conditions to change before we’re alerted. It’s important to interact as often as we can without taking up too much time for either them or us.”

International company Tahitian Noni has established President’s Councils in each of its international regions—North America, Japan, Southeast Asia and Europe. Each council consists of between four and 12 distributorships. The company plans to create an additional council for South America in 2010.

“Normally, the members of our President’s team are selected from our top leaders and highest titles,” explains Daniel Hillstrom, Managing Director, U.S. Sales. “Depending on the maturity and size of the market, we will select the fastest- growing and -producing distributors. The councils are made up of the most active and growing leaders.” Each council has monthly conference calls, plus informal conversations with individual members.

Take Shape for Life CEO Michael McDevitt says that the company works hard to create a single, unified management system that includes both the field and corporate support organizations. It has a council of field leaders that comes to TSFL’s offices for two days four times a year to focus on field and corporate issues. In addition, every other week, an executive meeting gathers field and corporate leaders together by phone or in person.

“With this system, there’s really just a central flow of leadership, prioritization and culture,” McDevitt notes. “That’s allowed us to really have a level of alignment that is extremely powerful.”

Quantity and Quality Time

At candle-maker Gold Canyon, some 15 top demonstrators participate in a monthly teleconference as well as one-on-one discussions during the month. Company President Curt Waisath makes a point of spending an hour a month with each leader, as well. Chief Marketing Officer Michael Norris says that the relaxed discussions provide the company with a lot of good information from the perspective of top leaders. But the company makes a point of also sampling distributors at lower levels of the organization.

“We don’t believe that only one forum is a good enough way for you to get a true understanding of what’s happening in the field,” he says. “When we’re bouncing around ideas for promotions, we have to expand the discussion to other groups, not only leadership. That gives you a better perspective before a launch.”

Gold Canyon values demonstrator input so much that it even devotes an entire day of its convention to focus groups. While the groups focus primarily on products, other topics are included in the discussion, too. Any distributor attending the convention can sign up to be in one of the groups, which are limited to about 20 people each.

“They provide a lot of guidance about what we should be doing in the future,” Norris says. “We can probe them about ideas we’re having, and they provide feedback.”

Gold Canyon has considered starting a marketing steering committee of demonstrators, but it hasn’t resolved how to keep such a committee’s perspective fresh.

“If you rotate too much, you don’t have continuity,” Norris notes. “If you don’t rotate, you get stale.”

“I want to surround myself with people who have been through the various seasons of network marketing so they can bring differing perspectives and sound advice to the table.” —Dallin Larsen, Founder, MonaVie

Balancing Membership

National Companies has solved the rotation issue by basing council participation on distributor achievement, making it a form of recognition. When a distributor reaches Platinum level—which is based on business building—the distributorship automatically becomes part of the company’s Chairman’s Circle. Double Platinums make up the President’s Advisory Council.

“That has served us well because both committees are ever growing,” Loehr Chrysler says. “Without taking anything away from anyone, we’re always adding fresh blood and participants.”

The exception to that rule is the Executive Committee, which is made up of four couples and one individual, who are all chosen by the company’s top executive.

“The same folks my dad chose are still on the committee today. We haven’t changed or rotated the committee, though we have thought about the idea,” Loehr Chrysler says. “I literally took several weeks to review the idea and to discuss it with various leaders. I came full circle. Because the dynamics of that committee work so well, and because each individual was chosen because of their different locations, backgrounds and ages, each provides a different perspective. They have relationships and work well together. If we rotated membership, it would change the dynamic until we got back to our comfort level.”

Tahitian Noni blends rotation with committee tenure. It rotates memberships each year to ensure that the company is keeping a diverse and broad representation of its field leadership, but it asks some people to serve on its advisory council for multiple years. And its communications channels extend beyond councils.

“As a global and large organization, our local and regional managers all have key influencer groups that they work with on a regular basis to get input from the field,” Hillstrom notes. “We also have a Web site where any distributor can submit questions, suggestions or feedback directly to the president of our company.”

Members of Take Shape for Life’s leadership council serve for a two-year rotation, which begins after a “trial meeting” that introduces distributors to the process. They’ve found that the period lets distributors get their feet wet and understand how the council works so that they can provide meaningful feedback and be involved with the execution of plans during their term. TSFL believes that the relatively short period helps keep ideas fresh while not taking distributors away from their businesses for too long.

A key element of the TSFL communication process is a field-led organization called Team Global, made up of elected distributors who have achieved the second-to-highest rank in its organization. Among its responsibilities is keeping a pulse on the overall business and identifying rising stars. When the group gets together with corporate executives quarterly, they bring concerns that have been raised in their downlines.

“Definitely, it’s an expense to the business,” McDevitt says, “but it’s one that’s shown to have a return on investment that has been significant, both in the ability to have better flow of communication and better speed of the execution in the business. Now we have just so much more trust among the corporation and the field.”

Distilling Advice

MonaVie also makes sure its process enables distributors from around the globe to participate.

 “We try to empower our general managers in international markets,” Larsen says. “Each has their own district advisory board made up of people they trust in their local market. Then I invite the GMs to listen in on my district advisory board of director calls. They provide the advice they’re getting from their boards. North America and each market have district advisory boards that deal with issues germane to those markets.”

Larsen leaves his options open for changing the membership of the councils.

“Every year, I’ll look at it and ask myself, Am I comfortable with the board? Is it serving the greater good of the company and distributors? More often than not, they’re one and the same. You want to make sure you have good, sound people there.” Larsen notes that the council engages in healthy debate, not always agreeing. But, in the end, the buck stops with him. “I can think of some times when we’ve been at an impasse and haven’t had complete agreement, but I’ve made a final decision. I can’t think of a time when the board hasn’t backed me up.”

The effectiveness of each council in influencing
company decision making, and the rapport between the leaders and
executives, boils down to a single factor: trust.

ACN makes eligibility for membership in its Circle of Champions an earned position based on production, but the final choices are at the discretion of the company’s co-founders.

“We as co-founders look at each individual, making sure they’re operating their business with integrity,” Provenzano says. “The members of the Circle of Champions are an extension of the co-founders.”

Relationships Built on Trust

In the end, the effectiveness of each council in influencing company decision making and the rapport between the leaders and executives boils down to a single factor: trust.

“Because we interact so often and have such great rapport with our leaders, if there came a time when we had to make a difficult decision, they would understand our heart as a company, and that goes a long way,” Provenzano says. “This is a  relationship business at every level. If relationships are broken, whether from executives to leaders, or from leaders to the people in the field, or between the people in the field to their prospects, it just doesn’t work.”

Distributor leaders affect decision making in a wide variety of important ways that contribute to the company’s bottom line and also reflect its heart.

Gold Canyon recently revamped its Web site and its online shopping cart, thanks to field feedback. Leaders had reported that customers who tried to shop directly from the Web site were encountering problems.

“We got feedback saying that it was difficult for someone who isn’t a demonstrator to actually shop through the Web site,” Norris explains. “Within six months, we gave them a brand- new Web site and shopping cart. Their feedback has been very positive since then.”

Key Issue: Compensation

The most frequently mentioned business decision that distributors impact is compensation. Their input influences everything from monthly promotions and incentives to the structure of the plan itself. MonaVie recently changed the structure of its compensation plan based on distributor comments, reducing the number of legs that distributorships were required to build and actually making the business easier to build.

Tahitian Noni used distributor advice to make a major addition to its compensation plan, and then its advisory councils worked hand in hand with the company to roll out the program and train distributors on it.

Gold Canyon’s Norris emphasizes that when companies solicit and receive feedback, they’re wise to act on it or to make a point of explaining why they don’t implement a recommendation. Otherwise, they lose distributor trust.

MonaVie’s Larsen agrees, and he emphasizes that the relationship between the company and field leaders is a partnership.

“The degree to which you can build a partnership with leadership will be the degree to which a company can grow,” he says. “It’s about building trust that decisions are not made behind closed doors. Distributors know that they can only do so much. They can show the product and present the opportunity in an exceptional manner. But a certain amount of the future is out of their hands. That’s entrusted to the corporate office and its management. So it’s important that we listen to distributors.”

TSFL’s McDevitt also concurs, suggesting that his company’s current growth is a direct result of the close working relationship between corporate and field leaders. The company’s two-day sessions are punctuated by fun as well as business.

“We’re working hard for eight hours a day, but at the same time, we’ve got such a great culture among our corporate and field together that we have a lot of fun,” he says. “When the day is over, we get out, we go to dinner, we catch up, we hear about each other’s families and friends. We’re still lucky enough that although we are a growing business, we try to operate culturally as a small business, and we’ve been able to do that.”

Distributor advice is so important to company decision making that top executives often devote hours each week to it. National Companies’ Chrysler is so sold on getting field leader counsel that she participates in every advisory panel and makes a point of meeting distributors and soliciting their opinion at every opportunity.

“You can manage your time well enough that you can make a few phone calls.” She adds, “There is never a downside to running something past a committee and getting their input on how to handle something. It’s part of the process and part of getting their buy-in. Distributor advice goes hand in hand with growth. If they feel valued, a part of the team, then they’ll grow their business faster, which grows the bottom line faster. But you have to know that it’s going to take time. As an executive, you must delegate other aspects of what you can do, knowing that you can’t delegate building relationships with the sales field.”

In the Beginning . . .

If distributor input is important to an established company, just imagine how critical it has to be as a new company is getting off the ground.

Direct Selling News spoke with executives from three young companies who all said that distributor counsel was essential to their early success. Moreover, it started even before the company launched.

Although he had some 15 years of experience in direct selling, Ambit Energy Chief Marketing Officer Chris Chambless didn’t hesitate to solicit advice from the company’s early-adopter distributors.

“I definitely had a couple of my friends who joined me whose skills and opinions I respect. I spent a lot of time talking with them as we were developing the compensation plan and business presentation,” Chambless says. “One of the things about starting a business from scratch—the number of people you have to draw from is very small. Brian McClure, who is one of our founding national consultants, joined us very early on. He was a person I relied on to bounce ideas and strategy off of.” He adds, “A business has to reflect the personality of its founders but also its field leaders. If you don’t do that, then you limit your success. You have to be able to allow field leaders to tell the story that they’re part of.”

Even something as foundational as the company’s compensation plan demanded the distributor touch, Chambless believed. When it was being developed in 2006, Ambit’s plan was based on the comp plan he helped develop at a different company. As a field leader from that same company, McClure had experience with the plan.

“We spent a lot of time trying to decide the requirements that were good for the company and also allowed people to achieve pin levels,” he recalls. “Ultimately, that’s been a key factor in our success. Thirty percent of people who join our business achieve that first pin level. That’s off the charts compared to what it was at my previous company. It’s been a differentiator for the number who stick to their business. We keep a lot of people because we made some good decisions early on.”

At less than a year old, wellness company EIRO Research is off to a fast start, thanks in part to the early advice of its field leaders. Even before its “pre-launch,” distributors were active on the ground floor. They were involved in the design of the compensation plan and business presentation, as well as marketing materials.

EIRO CEO Chris Hausman recognized that while his strong business background was a plus, he lacked experience in network marketing. So he brought in key field leaders and other experienced direct selling industry executives.

“Essentially, our feeling is that the best thing we can do to design a compensation plan or set up a promotion is to get out of the way and let key field leaders and experienced people handle it,” he says. “We want experts designing them, specifically to support the field. [CFO] Joe [O’Connor] and I understand that in direct selling, it is critical that the corporate office be aligned behind the field and associates. There are two types of corporate mentalities. One sees the sales team as being there to support the home office. The other is where the corporate office is there to support the sales team. We’re the latter.”

He noted that the philosophy has already proven itself. When EIRO’s management designed a promotion and then introduced it to the field, it fell flat.

“We went back, consulted with our field leadership, redesigned the promotion, and it took off,” Hausman says. “That perfectly illustrates that field leaders know what kind of promotions and activities will drive the right behavior and support the field overall.”

Four-year-old ViSalus had an even more dramatic experience. Its top distributors rotate through what the company calls Mastermind Sessions, which meet for a full day about once a month. As many as 20 distributors who are top producers, loyal to the company’s mission and who bring perspective and good input, are invited to participate. During the dialog at several Mastermind Sessions, distributors and executives kicked around the idea of doing a weight-loss challenge that featured a money-back guarantee. Over time, the concept evolved into the strategy, message and marketing that backs up Body by Vi.

“Our entire company strategy and message shifted because of what started out as an idea that evolved,” says ViSalus Chief Marketing Officer Blake Mallen. “Ever since the launch of the challenge, our growth has been through the roof. We launched the challenge in July, and our business has grown in all categories ever since then.”