Written by Brett Duncan. Brett is a “transitionist” who specializes in helping direct selling companies as they transition into the new era of direct selling. He is co-founder and managing partner of Strategic Choice Partners, a business development firm that helps direct selling companies take their next steps.
3 Stats Direct Selling Companies Must Pay More Attention to in 2022
One of the things I love about my job as a consultant to direct selling companies is that I get to work with a variety of companies at a variety of stages. And while I see little nuances and differences among them all, I can promise you that all direct selling companies have much more in common than they think.
So, when I start to see some work that I’m doing with several clients resonate at a really high level, it makes me think, “That would make for a great article!” And today’s article is most definitely birthed from that very experience.
Even though my roots in direct selling are as a marketing guy, I’m really quite the data hound. In fact, I would say all great marketers in today’s digital age need to be. So I’ve had a lot of fun over the past couple years helping companies uncover the data that matters for the strategies they’re considering. And there have been three reports that, over and over again, seem to get the most attention.
So as we kick off 2022, my resolution for all of us is to pay more attention to the right data. And the right data is data that shows us the real-life behaviors and responses that our Customers and Distributors are having to our company. These three report suggestions are definitely capable of creating your next big “a-ha” moment, so if you’re not tracking these KPIs, I urge you to begin.
Purchasing Segments for Customers and Distributors
Over the last couple years, I’ve worked with lots of companies to put together updated Customer Programs to increase acquisition and retention. These are programs that are typically called things like “Customer Rewards” or “Loyalty Program” or “Preferred Customer Programs,” or a little bit of all of the above. Regardless, there’s no doubt that today’s direct selling company is more focused on acquiring more new Customers and getting current Customers to purchase more.
As I start working through a program that makes sense for the company, I’ve found that there’s one report I request that always clarifies where the focus should be more than others. Some companies track this info regularly; most do not.
What you need to understand is how often and how much your current Customers and Distributors purchase from you over the span of 12 months. To do this, I like to create about five buckets, or segments, and place all of your current Customers and Distributors into one of these buckets:
- Purchased only 1 time the past 12 months.
- Purchased 2-3 times …
- Purchased 4-6 times …
- Purchased 7-10 times …
- Purchased 11+ times …
Then, for each segment, I want to know the total revenue generated by that segment, the total # of orders and the average order size.
Split up your Customers and Distributors so you can look at the data for each separately (which means you end up with a total of 10 buckets). Also, adjust the ranges in a way that fits your company. If it makes more sense for the top tier to be 12+ orders, change it. But I would not change the first two, at the least. You definitely want to know how many Customers only purchased once, and you certainly don’t want to mix up your 4-timers with your 2-timers.
When you put this data together, you will be shocked at what it reveals pretty quickly, and how it will help you a) set reasonable expectations for these segments and b) create program updates that match those new expectations. The other thing it should do it also underscore the importance of segmenting your communication across all of your members (rather than just sending everyone everything).
There are all kinds of insights and industry benchmarks I can share here, but I’ll leave it with just one: the biggest group, at least for Customers, will be the one-timers (which may surprise you). I’ve seen the percentage of the total vary quite a bit across a few different companies, but it’s always the majority. The range I’ve seen has been as low at 55% and as high as 85%. So run the numbers for your company and see where it ends up. Inevitably, you will recognize that the real opportunities for increased productivity and retention are among those who order only 1 to 3 times a year.
Acquisition Segments for Distributors
Most companies have a decent handle on how many of their Distributors are active recruiters. But there’s another level you should take curiosity to that can help reveal opportunities in your business.
First, notice that I call these “Acquisition” Segments, instead of “Recruiting” or “Sponsoring.” I do this because, for many of us, “recruiting” implies signing up other Distributors. Some companies get so focused on Distributors getting Distributors that they lose sight of the Distributor’s primary job, which is to get Customers. “Acquisition,” to me, speaks to both Customers and Distributors.
So, for all of your existing active Distributors, create the following data tables:
Table 1: Customer Acquisition
- Distributors who have acquired zero Customers in the last 12 months.
- Distributors who have acquired one Customer ….
- Distributors who have acquired 2-3 Customers …
- … 4-6 Customers …
- … 7-10 Customers …
- … 11-15 Customers …
- … 15-20 Customers …
- … 20+ Customers …
Like before, once you get past 4-6 Customers, you may want to tweak the ranges in a way that makes more sense for your company. And, if you ever see a segment that looks too big, divide it into two if it helps you gain insights.
For each bucket here, find out the total revenue generated by Customers, the total orders and the avg. order size. This gives you an idea of the annual value of Customer Acquisition of your Distributors who are engaged at different levels.
Then, create similar segments for Distributor Acquisition
Table 2: Distributor Acquisition
- Distributors who have acquired zero Distributors in the last 12 months.
- Distributors who have acquired one Distributors ….
- Distributors who have acquired 2-3 Distributors …
- … 4-6 Distributors …
- … 7-10 Distributors …
- … 11-15 Distributors …
- … 15-20 Distributors …
- … 20+ Distributors …
For this group, you can pull numbers in a way that makes the most sense for you. At a minimum, show the revenue generated by the new Distributors brought in and their organizations (including personal purchases, Customer purchases and Distributor volume). You can add to it if you want, but what you’re really going for here is to understand the annual value of an acquisition. Among other things, once you have this information, you can make some great decisions on what and how you should invest in acquisition campaigns.
Fast Start Production for New Distributors
Most direct sales companies have a fast start program. And… most direct sales companies try to accomplish too much with their Fast Start Program. I’ve worked some companies that I felt really didn’t need a compensation plan because their Fast Start Program pretty much already covered it all!
I’m a firm believer that a Fast Start Program should cater to the “lowest common denominator” Distributor at the beginning and help reveal potential up-and-comers by the time it’s finished. And I’ve found that pulling some pretty simple data can help reveal just exactly where in the process a company should focus its Fast Start efforts.
So, let’s assume you have a 90-Day Fast Start Program, with three tiers, each ending on the 30th day, 60th day and 90th day, respectively. In this case, pull the following data on your Fast Start participants:
Of all of the New Distributors who joined over a given period …
- How many didn’t achieve Fast Start at all?
- How many achieved Tier 1?
- How many achieved Tier 2?
- How many achieved Tier 3?
Now, for each of these segments of Distributors, show the following data two different ways. The first way is to show these numbers over the actual 90-day Fast Start period. In other words, what volume/activity did they drive during their actual Fast Start? Then, show the same data for their first full 12 months as a Distributor (which should include 3 months of Fast Start Period and then 9 months after). This should give you an idea of their first-year results.
- Total # of Distributors in this segment
- % of Total Distributors shown here
- Total Volume (this varies by company, but should account for all of their personal purchases, their Customers’ purchases and any volume driven by Distributors they sponsored.
- Total Customers acquired (or “sponsored”)
- Total Distributors sponsored
You can obviously slice and dice more data into this, but I would encourage you to start with just these basics and make sure you have a handle on the data before you start stretching it out.
If you’ve done this correctly, you should be able to figure out pretty quickly things like …
- What does a Tier 1 New Distributor typically produce in a year?
- Do we have the right balance in terms of how many New Distributors are escalating through the program?
- Is the criteria too difficult? Would we be better off engaging more people with easier criteria?
- What’s the value add when someone moves from Tier 2 to Tier 3 longterm?
Know Your Numbers
There’s no shortage of data in today’s world. The real issue that most direct sales companies deal with has more to do with a) paying attention to the right data and b) taking the time to actually assess the data and let it inform decisions.
We throw around the phrase “Key Performance Indicators” a lot, and they typically refer to ALL of our data. Which is why it seems so overwhelming to us. We forget that the whole idea of the concept of KPIs is “KEY.” We want to really pay attention to those “key” indicators, because they seem to influence a lot of the other stuff.
I certainly wouldn’t suggest that the three reports I’ve mentioned here cover everything a good KPI report would cover. But my experience shows me that most companies aren’t really tracking their data this way, and inevitably I’ve seen when they do, it brings visibility and clarity like never before.
Commit this year to tracking the work that actually matters in your business when it comes to your Customers and Distributors. Serve them best by truly understanding where they’re at and what they’re interested in. So often, we put together programs that never resonate with our people because they miss the mark of the masses.
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