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Even though most direct sellers classify themselves as either party plan companies or network marketers, the truth is that the lines aren’t so clear cut.
Take a lingering look at many companies in the industry and you’ll find that many use predominantly one style or another, but they aren’t at all rigid about it. They’ve often adopted an element or two from the other style, and they don’t see it as so unusual. It just works for them. It’s all part of the big, blended direct selling family.
When asked about their practices, companies in this story proactively called themselves “hybrids.” But every company noted that their sales and recruiting styles were developed because they made sense for them. In fact, those practices have resulted in solid finances and growth that any company would covet.
Princess House President and CEO Connie Tang is a veteran in the industry, having held several executive positions before taking the helm at Princess House last year. She notes that party plan companies developed as an opportunity for women to earn a little “fun money.” The focus was on selling products at a home party, not on recruiting. While consultants did build teams, they often focused more on sales. But today’s party plan company, including Princess House—especially since Tang arrived—has evolved to look a little more like a network marketing company than it did a generation or two ago. The simple reason: economics.
“Part of what has continued to push that evolution is the need to be competitive from a business development and comp plan perspective,” Tang says. “This diversification came to fruition because of the need for companies to have long-term prosperity, so it’s been like investing in our own portfolio.”
Today’s party plan company has evolved to look a little more like a network marketing company than it did a generation or two ago. The simple reason: economics.
She notes that when party plan consultants broaden their practices beyond finding hostesses and holding parties—and they grow by building teams and coaching new recruits—they accomplish a couple of important things. First, they increase their immediate earnings opportunity beyond what they can produce by their individual efforts. Second, and just as importantly, they protect their business from unpredictable factors such as economic downturns. It’s good for the consultant and good for the company. Tang shifted the focus at Princess House to place more emphasis on recruiting, holding network marketing-style hotel opportunity meetings and training consultants to talk a bit more about the company’s earnings opportunity during parties, even as they sold its high-quality, durable products.
“We had to find ways to reach more consumers,” Tang says. “When we focus more on sponsoring, then we have more ambassadors out there building the business.”
That seemingly simple shift in focus produced impressive results. Princess House said Happy New Year in 2013 to 40 percent more consultants than it had a year before.
For Tastefully Simple too, recruiting gets started at parties where guests nibble from the company’s wide selection of convenient, easy-to-prepare foods designed to help people spend less time in the kitchen and more time enjoying the rest of their lives. Tastefully Simple has two types of gatherings. Relax and Savor is a traditional party where consultants share products and information and then take orders at the end of the party; and Mix and Mingle is a less-used and less-formal come-and-go gathering where guests and consultants float from product area to product area, socializing, snacking and sometimes selling each other on delicious products. In both, the focus is on product sales and social interaction.
“We’re clearly a party plan company,” says Travis Bautz, the company’s Vice President of Marketing. “We’ve done a fair amount of research on the whole party dynamic to try to understand where people draw value from it. For us, they’re social reasons, learning reasons and product reasons,” he explains. “The trick is how to deliver a great experience when people have increased pressure on their time.”
Even for a proud party plan company committed to group selling, one-on-one interactions are still part of the process.
Passive Sales, Positive Profits
Tastefully Simple relieves some of that pressure by offering something more associated with network marketing companies: an auto-ship program called Simply Stocked. With about 40 standard products included, the program is highly customer-centric. Users can choose whether their favorite products are shipped to them every two, three or four months, and they can change their order at any time. While most sales are made at parties, the Simply Stocked program adds an element of predictability to consultant commissions, making life even simpler for customers.
Bautz admits, though, that even for a proud party plan company committed to group selling, one-on-one interactions are still part of the process.
“That’s especially true on the business opportunity side,” he notes. “For us, those conversations often start as a party interaction and finish as one-on-one. At parties, there are small conversations—we call those ‘sprinkles,’ references to the business opportunity that lead to an opportunity to talk one-on-one with the guest later.”
As much as Tastefully Simple and Princess House are clearly party plan proponents, a few companies in the industry are harder to classify.
“We were hybrid when hybrid wasn’t cool,” says Arbonne Senior Vice President and Chief Sales Officer Heather Chastain. “It’s an example of how Arbonne has always been a little ahead of the times. We recognized 15 or 20 years ago that it isn’t just one or the other. We’ve always had hostesses as an element of our plan, but we eschew party language. We refer to them as group presentations. But our history is that we’ve always used a combination of methods.”
Chastain notes that the flexible sales approach was developed to adapt to the needs of customers. Whether consultants talk to their customers one-on-one or in a group presentation, they’re making a business decision based on customer preferences. But whether the discussion is between two people or 20, Chastain notes that it’s still about people, products and opportunity. It’s just a question of emphasis.
“When you have those three things, it’s usually a matter of where you start,” she says. “A one-on-one conversation typically starts with opportunity. A party starts with products. But ultimately, from start to finish, you’re still hitting all the elements.”
Having options for how consultants run their businesses helps them be successful, and Chastain notes that most successful consultants run a pretty evenly balanced business. Arbonne’s data shows that about 60 percent of their business comes from individual discussions.
“When you’re offering multiple ways of doing business, you’re giving consultants great ways to overcome common objections,” she notes. “You don’t have to ask people to hold parties if they don’t want to. Make it work for you.”
Arbonne’s hybrid system works for them; 2012 net sales were $377 million, up from $353 million in 2011.
Self-proclaimed hybrid Vemma is a network marketer that builds its fast-growing business through get-togethers it calls home events, even though they’re often not held in homes. The language was carefully chosen to be inclusive and appealing to the broad demographics of its distributors, or Brand Partners, especially the youthful cadre that builds businesses on Vemma’s energy drinks. Their version of a “party” has revolutionized the term.
“The word meeting sounds boring to a lot of people, and a party, well, it’s much more than that to us,” says Mark Patterson, Vemma Executive Vice President, Marketing and Brand Development. “One of the biggest changes for us is the frequency of them. I just came from a big event where I heard kids saying, if you really want to ignite your business, have at least two home events a day. Many shoot for five. Lots of people hearing that would think they were crazy, but these kids are just actively seeking three to five people. They don’t plan the events. They just use social media to say things like, ‘I’ll be here, here and here today. If you’re interested in doing more or being healthier, meet me there.’ ”
The “kids” Patterson is talking about are Vemma’s Young People Revolution (YPR), an exploding group of millennials whose leaders coined the term The Five M’s—More Meetings Make More Money. While their fellow Brand Partners from an earlier generation hold more traditional tasting parties, the YPRs move fast. Their events may be as short as 15 minutes. In addition to making heavy use of social media, they use Vemma’s business app to send texts—the preferred communication method for their generation—to their contacts. The text may include a video of an experienced leader making a simple business presentation. With the business side of the “home meeting” already in place, they can appear with their cooler of Verve products, tell their story, maybe show their new car and close the deal.
“Our recruiting effectiveness has skyrocketed by doing these kinds of things,” Patterson says. “Our new focus is on helping to foster and train new people coming in to be leaders themselves. The rapid personal development and the excitement among this group are amazing. The other benefit of frequent, small home events is that the more you do it, the better you become at it, and that makes you more effective.”
Even though many events are held on the go, Brand Partners actually do hold events in homes, as well as in larger public places, often collaborating with other distributors to maximize impact.
“We encourage people and teach them that we’re all on one team,” Patterson says. “When we’re united, we can do many more things. I’ve seen one of our stronger Brand Partners holding a big meeting and people from a variety of teams coming together. The combination of stories is powerful, and the meetings are very inspirational.”
They’re also inspiring explosive growth. Vemma recently announced that sales reached a record-breaking $20 million a month in July. After taking seven years to reach the $10 million monthly sales mark in July 2012, Vemma has now doubled that just 12 months later. In addition, Vemma monthly customer and Brand Partner enrollments reached the 30,000 mark for the first time this July.
Industry stalwart Nu Skin has always walked the party plan/network marketing line, driven by its lineup of demonstrable products. Scott Schwerdt, Nu Skin’s President of its Americas Region, says that regardless of a company’s marketing methodology, it’s still all about customer acquisition.
“For as long as I can remember—and I’ve been with the company for 25 years—our distributors have always used home parties to demonstrate products,” Schwerdt says. “That method is particularly applicable for products that provide immediate results. That’s been our hallmark from when we were founded in 1984 until today.”
Schwerdt says that the company doesn’t call itself a hybrid, though. Nu Skin is a social business model that uses network marketing as a method of compensation for customer acquisition. Host-driven home parties are simply part of the company’s business method.
“On their own, our distributors will take the initiative to provide gifts to hosts or to do trade shows,” he says. “They’ll use any initiative they can in order to get their business in front of customers.”
Nu Skin’s most profitable draw is its auto-ship program. An astonishing 72 percent of all shipments are on the auto-ship program. While that number indicates strong customer loyalty, it also provides both the company and its distributors a predictable income. And that creates what all direct sellers want: retention. The thriving auto-ship program was a happy side effect of web technology.
Nu Skin has provided replicated websites to its distributors for almost 10 years, but over the last year has migrated toward mobile devices and apps. It already offers several Internet-related tools and continues to expand its mobile platform, providing distributors with an increasing number of methods to know exactly what their customers are doing so they can respond appropriately. The mobile platform works hand-in-glove with other products that open doors. Take the Biophotonic Scanner, an innovative tool Nu Skin developed to measure blood antioxidant levels without actually taking blood—an irresistible way to pique interest in Pharmanex supplements. In its first generation in 2003, “You almost had to move into someone’s house to do a scan,” Schwerdt jokes. Now in its third iteration, it’s smaller and operates using an iPad and a Bluetooth connection, making it the perfect conversation starter for spontaneous one-on-one interactions.
“You can do a scan any place in 30 seconds now,” he says. “It’s an instant-on device they can pack in their purse or briefcase. We have distributors who are scanning on planes, even hotel lobbies.”
The combination of technology, group sales and a strong auto-ship program creates loyal customers as well as distributors who stick around. Everybody wins. That creates a strong revenue stream. In July, publicly traded Nu Skin announced that it is increasing its full-year 2013 revenue guidance by $320 million to between $2.83 billion and $2.86 billion. Revenue in 2012 was $2.17 billion.
Train for Success
Blended styles that result in fast growth arise from effective training. These companies make sure that their distributors know how to party and that they also know how to recruit. But Princess House ran into a challenge that every company would love to have. For years, the company had stellar skills at retaining distributors, giving it an experienced salesforce. When it started placing more emphasis on recruiting, its success in attracting so many new consultants changed the face of its salesforce. Consultants with relatively little experience needed to learn skills from the ground up—how to hold a party that results in sales, how to work with hostesses and also how to recruit. Princess House consultants typically recruit during individual conversations after a party, but less experienced consultants had to learn how to plant the opportunity seeds while they ran a party—a skill that can be tough to master. The company responded by revamping its training completely.
“We just launched to our leadership group a completely new consultant success system that fine-tunes coaching on party behaviors,” Tang explains. “We promote that talk about the opportunity happens throughout the course of the party. That allows people time to process and develop questions. It’s a very different goal than ‘I have to close the sale.’ Planting those ‘whys’ in the conversation throughout the evening is one of those difficult, intangible skills to acquire, but that conversion is very important. That’s what we’re trying to teach.”
The skill is the same one Tastefully Simple teaches so its consultants can effectively drop “sprinkles” throughout a party.
“We train to that,” emphasizes Tastefully Simple’s Bautz. “We have a structure we recommend for the party with lots of examples of language and ways they can use ‘sprinkles’ and other techniques. The most value is to new consultants.”
Then when consultants follow up to talk opportunity individually, Tastefully Simple provides them with numerous tools—both print and online—to increase their comfort and to support the conversation.
No matter which camp a company identifies with, if they adopt a technique from the other method, it’s a practical decision that they adapt to fit their own culture. And why not? Direct selling is an industry that freely shares information and where member companies learn from each other.
Vemma’s Patterson says it well: “I don’t think people are opposed to adopting good ideas, no matter where they are. I think we’re in a society now where we’re very used to change, and this industry as a whole doesn’t mind adapting.”
Two-year-old Chloe + Isabel (C+I) defies description, at least in traditional direct selling terms. Neither party plan nor network marketer, it has an omni-channel approach, according to its Founder and CEO Chantel Waterbury. The company doesn’t just color outside the lines; it erases them.
“When I speak with people, even investors, about C+I, I say that we’re disrupting the direct sales industry,” Waterbury says. “But we are similar to other direct selling companies in that we’re an income opportunity for people. When I think about the heart and soul of the industry, they’re all offering opportunity through products.”
C+I’s distributors, called merchandisers, disrupt not only the direct selling industry but also the brick-and-mortar retail industry. They sell C+I’s jewelry primarily through online storefronts, social media, pop-up shops that provide a temporary physical presence, in-home parties if they wish, and by building an individual clientele. Most use a blend of techniques.
Waterbury developed C+I with tech-savvy Gen Y in mind, and virtually all merchandisers—average age of about 26—sell online through the company’s unique e-boutiques. The branded websites are completely customizable, allowing the merchandiser to choose collections, individual pieces of jewelry, or even tips on how to style the jewelry. As a result, every merchandiser’s site is unique, even while they maintain the Chloe + Isabel brand.
The company invests a lot in each merchandiser. First, prospects apply to become a merchandiser, and C+I interviews them to be sure they’re the right person for the opportunity. The next consideration is the market. C+I doesn’t want to oversaturate a given market and place merchandisers in competition with each other. About 15 percent of applicants are selected. The new merchandiser gets lots of corporate-led training. College students, whose needs are unique, get enrolled in a special training program called GEM, Growth and Empowerment through Merchandising. Every new merchandiser is assigned a mentor, who does everything from providing moral support to answering ad hoc questions, to connecting the new merchandiser with a like-minded community of other merchandisers. The mentor is an experienced merchandiser who has been promoted to that position.
“Through that process, we’re making sure they’re fully thinking about what this opportunity is, why they are choosing Chloe + Isabel, what their goals are and why they would be successful,” Waterbury explains. “We’re focused on everyone succeeding.”
The results? Just look at direct selling’s two Big R’s, retention and revenue.
“Let’s just say we’re not having a retention problem,” Waterbury says. “It’s so easy for [a merchandiser] to remain active. She is highly engaged with our community, so she’s going to be producing and selling. When she first comes to us, we’re asking, ‘Why are you here?’—they need to really clarify their ‘why.’ In that environment, there’s a difference in how someone treats it. They’re successful because they’re here for a reason. And with online boutiques, it’s easier to sell when you don’t have to do it in person all the time. She can wake up in the morning to an order.”
And the bottom line: revenue. Chloe + Isabel’s revenue in Q2 of 2013 was double that of the previous quarter.
For Chloe + Isabel, selling without borders is a successful way of life.