Segmenting Direct Selling’s SalesForce in the U.S.

This is a special section of the August, 2017 Cover Story article.

Data Released on Pilot Basis in 2016

Seeking a clearer picture of the direct selling salesforce, U.S. DSA and WFDSA embarked on new research to characterize the motivations of people involved in direct selling. U.S. DSA President Joseph Mariano says the channel became increasingly aware of the need to quantify and qualify who was involved in direct selling.

Delineation on a company-by-company basis could be important to investors, regulators, and members of the public trying to better understand a particular company. “Our lack
of consistency and sometimes inability to describe those people fully on a company-by-company basis was causing some challenges in the marketplace for those companies,” Mariano says.

Global and U.S. research teams wrestled for several years to appropriately categorize direct sellers, eventually segmenting the salesforce as: full-time business builders, part-time business builders, and discount customers.

“It’s imperfect—a project in process in some ways. That’s why the U.S. DSA agreed to release data (for 2016) on a pilot basis, seeing that it did begin to answer questions and accurately depict who was involved in direct selling,” Mariano says.

U.S. DSA segmented data for 2016 showed a record 20.5 million people involved in direct selling in the U.S., up 1.5 percent from the previous year. Of those, 5.3 million were building independent businesses as direct sellers, actively managing a customer base and possibly sponsoring others to do the same. And 800,000 of them were full time with 4.5 million part time. The remaining 15.2 million people received discounts on products and services that they personally enjoy and use.

The U.S. DSA’s Board of Directors adopted a policy statement in June 2017 to encourage all companies to develop some form of segmentation for a variety of reasons, including helping to meet code requirements demonstrating sales of real product to real people and clarifying earnings and earnings representation.

While the categories are accurate, they are not exact. For instance, it is common for a preferred customer to become more assertive over time and graduate into a part-time business builder. Mariano says, “Reality is, while we put out this template, it is just one way of approaching the issue. Each individual company might have its own system or approach or peculiarities. Nonetheless, we think direct selling companies could look at these categories and take a lesson from it.”

“Companies should begin to think about this process, so that when and if questions arise about earnings or whether or not sales are happening to real consumers, they are armed with this kind of data, rather than being caught behind the eight ball. To the extent that folks are able to do that, it will be helpful to the industry, as well as the association and to individual companies in the future,” Mariano says.