Time for a Remodel

How and why you need to put your customers ahead of your opportunity.

Do you want fries with that?” The classic upsell line. It works at McDonald’s because customers are already buying food, so the odds that they’ll want a little bit more food are good. But when direct selling customers hear “Would you like a business building opportunity with that?” it doesn’t have the same ring, because most of them are shopping for products, not a job selling those products.

The statistics bear this out: There are about six times as many retail customers (36.6 million)

in our industry as there are business builders (6.2 million), according to Direct Selling Association (DSA) Growth & Outlook research. Eighty-seven percent of direct sellers are part-time with many of those not interested in building downlines according to DSA research. And direct selling analyst Gordon Hester says, that among those who do consider becoming distributors, 80 percent of them ultimately are “unwilling or unable to build an organization.” But we can be a stubborn industry. “We too often try to turn customers into business builders,” Hester writes in his new book Positioned Right: The Forces Shaping the Future of Direct Selling and Network Marketing.

The mantra for this new decade must be, “We are a customer-centric industry.

In the book, Hester urges direct selling companies to move from the “Historical Path” to the “Next Generation Path.” The Historical Path is built on the “But we’ve always done it that way” mentality. Companies on this path cling to the status quo while competitors (in this and other industries) embrace new ways of thinking and operating. One of the hardest status quo habits for our industry to break (or at least loosen our grip on) is leading with the opportunity. Hester calls it “hope marketing,” in which we focus too much on the opportunity and the aspirational elements of being a distributor and not enough on what our products mean to customers.

Companies on the Next Generation Path, however, are all about what it takes to recruit and retain loyal customers who buy our products, because the more real, satisfied customers we have, the more successful our entrepreneurs will be.

The mantra for this new decade must be, “We are a customer-centric industry. We build strong retail bases, and the opportunity seekers follow.

 2019 Was A Tough Year

 The gospel of recruiting retail customers and segmenting them from distributors is beginning to resonate. Direct selling companies have created preferred customer programs, for example, to properly identify those who buy products on a regular basis but have no intention to sell them or build a downline. According to the DSA, there are 26.2 million preferred customers in our marketplace, up 48.9 percent from the year before. Companies also are creating new channels that invite customers to browse and buy with no talk of joining or obligation to join the compensation plan. Still, the headlines in 2019 suggest that we have more work to do to earn the trust of the marketplace and regulators.

Last year, Plano, Texas-based AdvoCare, and its former chief executive officer agreed to pay $150 million and be banned from multi-level marketing to resolve Federal Trade Commission (FTC) charges that the company operated an illegal pyramid scheme. AdvoCare subsequently announced that it would no longer pay distributors on the sales of the salespeople in their downlines but will pay only on sales to retail customers.

The headlines in 2019 suggest that we have more work to do to earn the trust of the marketplace and regulators.

On the heels of the AdvoCare settlement, Neora sued the FTC, releasing data that the company says contradicts and questions the legitimacy of the agency’s charge that Neora violates compensation structure rules, among other regulations. The FTC then filed suit against Neora.  LuLaRoe also faced legal action, in Washington state, in early 2019. In China, the industry’s biggest market, the government investigated direct selling companies country-wide and revoked selling rights for 49 products.

Most companies in our industry play by the fast-changing rules. But some of those companies may inadvertently fall back into familiar patterns. Some, as we found out last year, may have hoped no one would notice that they were playing by the old rules the whole time. Writes Hester, “If the leadership operates with an arrogance that everything is okay and apathy that causes us to follow our current path, I suspect the future will be unkind to this industry.”

 Retail and Recruiting Can Coexist

What does a customer-centric direct selling company do? It certainly doesn’t leave the recruitment of business builders to chance. As in any sophisticated sales-driven organization, salespeople are the ones who develop customer relationships, which fuel revenue growth. But when distributor recruitment becomes a direct selling company’s sole focus, they risk losing sight of the importance of real retail sales. And that’s where our industry gets in trouble.

Smart direct selling companies know how to be customer-centric and distributor-focused at the same time. They imagine their prospective customers and distributors entering the same highway from separate on-ramps and then traveling in their own clearly marked lanes.

In the retail lane, customers find products quickly and purchase them easily, online, or in-person from a distributor. They never get an offer that even implies that they’re agreeing to anything other than paying for the products. Raleigh, North Carolina-based Touchstone Essentials revised its online shopping portal so buyers can purchase without even seeing a check box that could enroll them as a distributor. By separating the back office from the shopping experience, the company created an environment where customers can have a traditional e-commerce-style shopping experience. Sandy, Utah-based LifeVantage, used to reward distributors more for recruiting other salespeople than for bringing in new customers. Now, they receive the same benefit for recruiting both.

It is okay to let retail customers see what’s happening in the distributor lane and make it easy for them to merge into that lane if they want to. But savvy direct selling companies let them do so at their own pace and according to their own timetable, realizing that most customers will never change lanes.

Traffic in your customer lane should be bumper to bumper, while your distributor lane should have fewer travelers in it. That’s the reality of the direct selling business model: Only one-sixth of the people involved in our industry came to us because they wanted to sell, and only about half of them are motivated to stay for the long-term income potential. Our pool of potential entrepreneurs is smaller than we’ve been willing to acknowledge, and the pool of potential high-earning business builders is even smaller.

Hope Marketing Isn’t A Strategy

 If you’re strategic and authentic about how you direct people into your distributor lane, you have a better chance of keeping a larger percentage of them. You’ve heard us say this before, but we can’t say it often enough: Your recruiting strategy has to be grounded in transparent messages about results.

Our industry markets “hope,” Hester writes—hope for everything from clearer skin to a more fit body to financial freedom. But we are drawn to sharing examples of distributors and customers who have achieved dramatic outcomes. Such examples may be valid, but they’re rarely typical. Our industry must stop traveling the Historical Path and resist marketing hope for something that most people won’t reach. “Hope is only valuable if it leads to results,” Hester writes. “We need to set realistic expectations if our goal is to keep them in the industry. Relationships are built by keeping people on a journey, not setting their sights on unrealistic expectations.

“A customer-centric approach increases all parts of the growth funnel.”
—Gordon Hester, Direct Selling Analyst

Direct selling compensation consultant Dan Jensen says that shooting for too many high-performing salespeople may actually hurt you in the long run anyway. “These very successful direct selling professionals can bring tremendous short-term success,” he writes. “But they can also be a major cause for failure when they grow bored with your company and join another, often taking many of their downline with them.

Hester and Jensen both believe that focusing on part-time entrepreneurs—what Hester calls the “lifeblood” of a direct selling organization—is a smarter strategy. “One must never forget that ordinary part-time people are the ones who must be motivated by [the compensation plan],” Jensen writes. “Plans designed for the part-timer always generate bigger checks for your full-time leaders.”

This link between part-time and full-time salespeople is part of what Hester describes in his book as “relationship stacking.” The bottom layer of the stack is a loyal retail customer base. Without people who regularly buy and use our products, our industry will not survive. The next layer is made up of what Hester calls “micro-entrepreneurs,” who recruit most of your distributors but also most of your customers. Remember, on the Next-Generation Path, you create a more customer-centric organization is, which makes it easier for those micro-entrepreneurs to make enough money to stay in business. If your micro group is strong and satisfied, then higher performers will emerge from that group, and even higher-performing distributors will come out of that group, and so on.

“In the end,” Hester writes, “the income earned by a distributor is directly correlated to critical mass and successful relationship stacking.

Look for Inherent Talent

 Whether we’re recruiting micro-entrepreneurs or top-selling distributors, our industry must be more realistic about who has the talent and the desire to be a business builder in the first place. This is where that idea of not upselling a business opportunity to people who aren’t shopping for one comes in. Yet, the majority of our distributors do come to us because they loved our products. So how do you distinguish product-only shoppers from shoppers who might be suited and in the market for something more? Try cross-selling instead of upselling.

Cross-selling involves digging a little deeper to determine a buyer’s underlying goal and then providing a path for meeting that goal. You may find that after digging, a customer’s goal is still just better health and well-being. But by asking the right questions and listening closely to the answers, you will discover some customers who have the true desire to join your sales ranks.

But desire doesn’t necessarily translate into talent. Sales is a hard job. According to research by the Bridge Group, one in three salespeople will voluntarily (or involuntarily) leave an organization every year. Look for distributors who aren’t deterred by the inevitable rejection that comes with sales, as well as those who want to grow personally and professionally in an organization that makes a difference in people’s lives. Those are the ones who will stay with you, whether they want to make an extra $500 a month or a full-time salary.

A Better Future

 Being a customer-centric industry means we will have to get used to more measured revenue increases. Our channel has been known for fast, exponential growth. But such growth is not sustainable in any company or industry. It’s critical that we change our mindsets and our expectations about what success means for us.

Says Hester, “If consumers do not continue to buy products and services through the direct selling channel, we will not have a better future. If entrepreneurs choose other business opportunity models, we will not have a better future. If our future is controlled by outside forces, it is only because of the behavior we practice within this industry.

The NINE Timeless Fundamentals

By Gordon Hester

The nine timeless fundamentals are foundational to all business, not just our industry are:

1. Getting Customers (Customer Acquisition)
2. Keeping Customers (Customer Retention)
3. Getting New Entrepreneurs to Join the Industry (Recruiting)
4. Enhancing Distributor Engagement (Relationship and Culture Building)
5. Enhancing the Direct Selling Industry Brand (Personal and Business Branding; Perception Management)
6. Enhancing How We Develop Distributors (Personal and Business Development)
7. Expanding the Global Footprint of Direct Selling (Marketplace expansion)
8. Mastering Cultural Addition (Making the industry a home for consumers and its entrepreneurs)
9. Attracting Better Talent (Leader Recruitment)