The Table Stakes for Success as a Direct Selling Company

Written by Jeff Dahl. Jeff is recognized as an industry leader and innovator, with over 35 years of experience working with global consumer brands and direct selling companies. He is passionate about helping direct selling companies transform and adapt to the rapidly changing business and consumer environment, as well as helping smaller companies launch and scale.

In addition to serving as an advisor in the private equity space, Jeff serves direct selling companies as an advisor and Fractional Executive as part of Strategic Choice Partners.

The Table Stakes for Success as a Direct Selling Company

Business Model Fundamentals for the Direct Selling Industry

We all have witnessed the rapidly changing business environment. Specifically, the rise of the Gig Economy which brings with it competition for participation. The rise of Social Media Influencers and traditional businesses launching Affiliate Marketing models also creates consumer competition. Most of us are also scrambling to keep up with changing consumer shopping preferences, online marketplaces, social and community platforms, and all the technology and system requirements to play in this new game.

However, with that said, our industry is still one of the purest forms of commerce, still relevant and growing, with some basic business model fundamentals that have both evolved and withstood the tests of time.

The Art and Science Can Be Difficult for Outsiders to Understand

It wasn’t until I stepped out of the industry for a couple years to advise in the private equity space that I realized how complicated direct selling is to understand for those outside of the industry. When asked to explain how it works, I naturally started talking like they were one of my direct selling peers. As you can imagine, their eyes quickly began to roll!

Financially brilliant and grounded in data, many struggled with the concept of Art & Science. Motivating and incenting a volunteer work force (versus salaried employees), variable/multi-level compensation plans (versus fixed salaries), and building a fun and rewarding community (versus just do your job) were equally perplexing. One highlight, and most comical, was when a Senior Partner asked me to explain the purpose behind all those extravagant “rah-rah events” and how to justify the ROI. The Art, which is intuitive for many of us in the industry, is a difficult concept for many outside the industry.

Full transparency: I also struggled with the Art when entering the industry 18 years ago. In fact, I have seen multitudes of CPG (consumer packaged goods) and traditional business executives enter our industry only to fly out the revolving door never really figuring it out. My best advice? Get them out of the corporate office and into the field ASAP so they can witness the Art (and Heart!) of our business. Make no mistake: Our industry needs the expertise and experience of these “outsiders” to help us evolve. We need to do everything we can to help them “get it.” At the same time, if the struggle to sync up with the spirit of what we do scares them away, we’re better off knowing that sooner rather than later.

Early in my direct selling career, I was fortunate to help lead a global research study for a legacy leader in our industry. It specifically addressed why distributors join and stay with a direct selling company. The findings were fascinating, varied some by country, and permanently altered the way I looked at our industry. It provided a structured view, like a Business Model, that all could understand, and more importantly could guide strategy, business planning, and investment needs. Much of it was intuitive to industry veterans, but it was a life-saver for this new executive. Since, I have seen other studies within the industry that touched on similar findings.

Over the years, I have combined these findings along with new learning to build a model that frames out a successful direct selling business. Needless to say, I eventually used this model to better explain direct selling to the private equity community. Basically, the model has 6 fundamental elements that direct sellers need to attract and retain distributors:

1. Flexible Income Opportunity
2. Product Pride
3. Business Support & Service
4. Community
5. Self-Improvement
6. Reputation & Citizenship

Again, these elements vary in rank importance across different countries and channels depending on cultural and socio-economic factors. If I recall, in one study “Flexible Income” over indexed in the US, “Product Pride” over indexed in Canada, and “Community” over indexed in Japan. I recall one women in Japan commented, “I come to the meetings for the cookie and conversation.”  She clearly was looking for community with other women.

So, What About Customers?

If your distributors are happy, engaged and effective, a growing customer base will quickly follow. I firmly believe that you need to start with the distributor, even in an Affiliate Marketing model.  A difficult concept for CPG executives that typically start with the end consumer. I, too, struggled with this one.

Not saying that building strategies to reach out directly to end consumers are bad ideas. But I consider these secondary activities, and only if done in a way that won’t disrupt your distributor base. Help your distributors first, they will help you build a customer base. This model may look distributor-oriented, and it is, but do it right and customers will follow.

So, Let’s Dig a Little Deeper

First, let me say that I believe that all these fundamentals are required, in varying degrees, regardless if you consider yourself Single-Level, Multi-Level, Party Plan, or Affiliate Marketing. One can also argue that they play a role in any Gig Economy opportunity.

Flexible Income Opportunity

• Low-risk, low-cost startup. I recently talked with an international jewelry company that said they were SLM and doubted we could teach them anything. Hmm, last I checked, a mandatory $250 Starter Kit is not “low cost start up.”
• Simple to understand Compensation Plan. Good luck with this one! Just remember confusion leads to doubt and suspicion.
• Easy to make money quickly. The founder of one of our legacy companies taught me that the first check, even if only $10, kept the new distributor engaged and moving forward.
• Meaningful and clear return for effort. If you break down weekly earnings into hours worked, is it really meaningful? And does it meet expectations communicated up front?
• Choice to set own hours, location, and income goals. I think we all get this one.

Product Pride

• Wear the brand. Will your distributors wear your swag in public and proudly talk about it? Are they regular users of the products and “Brand Ambassadors?”
• “Quality Confidence” with a positive product reputation. Back it up with proven science and a free return policy. Efficacy is key!
• Easy to demonstrate and sell. This is where training plays a key role. It’s hard to sell something you really can’t explain.
• Consumer buzz. Traditional PR and advertising always helps… as well as newer approaches across social media. It’s a very noisy consumer marketplace.
• Multiple categories. Let your distributors choose one they are comfortable with and grow into a subject matter expert versus pitch a large catalog of SKUs. I experienced one company scale to over $300M with only two primary SKUs before expanding. A commitment to focus and simplicity here, especially early on, is powerful.
• Package and price. Science is key. Have you really researched competition and the broader marketplace? Remember, Amazon is one click away. If you want to grow your customer base, you need to dig deep into analysis.

Business Support & Service

• Easy to do business with. Ask both your distributors and customers for their opinions on your service levels, delivery time, website navigation, payment process, returns process, etc. “Death by a thousand papercuts” is a very common cause of leaving for distributors. If they are spending all their time chasing down orders and fixing shipping errors, they are not growing their (and your) business.
• Deliver the promise. If you can’t deliver on a consistent basis, it’s better not to promise anything.
• Reliable customer service with easy access. This can be a real deal-killer, regardless of how well you do in every other area. If a customer has a poor experience with your brand, and especially with your customer service, not much else matters.
• Reliable distributor support with easy access. Is your back office optimal? Does it provide the tools and reports to build and manage a business? Is it really easy to use? I can’t count the number of companies I have worked with where the field is spending too much time playing in the back office.
• Getting started. This includes onboarding, providing a complete and professional-looking Starter Kit, and a clear “First 90-Day Road Map”.
• Business-building tools. Mobile Apps, Social Media content, CMS, CRM, etc. The new digital space is both rich and complicated. Get some outside help to get it right. New distributors need help selling and growing your customer base.
• Customer experience. Have you defined and built plans to make it the best experience possible? Sticky loyalty programs? These are key drivers for customer retention.

Community

• Join a fun and exciting community. Some companies point to a “Family,” others to a “Sisterhood,” and many more. Regardless of what you call it, is it authentic and engaging? Or just lip service?
• No tribes. One for all, all for one!
• Fun and rewarding events. Yes, those rah-rah events! Are they the right frequency? Do they balance thoughtful education with recognition, or is it just a boondoggle?
• Personal and team recognition. It’s a great way to cement and rally field teams.
• Mentorship and peer support. Methods vary by SLM and MLM. Have you ever talked with an Uber driver? Many feel like they were left on a deserted island to figure it out on their own. All humans need personal relationships.

Self-Improvement

• Robust training curriculum. Do you have a “Learning Management System” that’s easy to access and navigate? Many point to a company “University,” but is it really comprehensive, engaging, and customized to your business and product? Back in the day, both my wife and I worked for different Fortune 500 CPG companies, and both received multiple boxes of training binders and materials during orientation. I’m not promoting a wall full of binders, but training has always been an expectation for any company. Are you meeting that expectation? There are several vendors in our space that can help you build a state-of-art LMS, both in pathway and competency models.
• Add “Free” to the “Easy” above. Again, it’s an expectation, not a revenue stream.
• Personal development. Our industry has a rich culture in motivation, but take it a step further and add life skills. For example, home budgeting, financial management tools, conflict resolution, and team management. Again, I strongly advise “Free” for training like this, instead of looking at it as an additional revenue stream. You win when they win!
• Oh yea, add “Voluntary”. If you force it, they will just check off the box. If your training is real and adds personal value, others will promote it for you.

Reputation & Citizenship

• A trustworthy company. Yes, our industry still struggles a bit with a bad rap. It’s interesting to watch even pure Affiliate Marketing companies get tagged and thrown under the bus. A PR firm can help you bake out a strategy to tackle this one. Supporting the DSA and DSEF is also important… Help them help us!
• Join something “Bigger”. Many in our industry have done a great job giving back and paying it forward. I know from personal experience that global organizations like Habitat for Humanity and World Vision really appreciate our industry’s support. Just make sure it’s real, and not just a photo opp. Your field is looking for authenticity!
• Include both field and corporate teams. Pull everyone together under a single purpose. Don’t just send them a magazine with pictures. Build opportunities to get all engaged locally or supporting a broader initiative.

That’s a lot. I could spend hours talking about each one these elements. I’m sure many of you could, too. My hope is that this breakdown and overview sparks a thought or two for you and your company, an area where you feel like you could do better. When I engage with a company as an advisor or fractional executive, I always start by assessing these fundamentals. We can all go about addressing these areas uniquely and in line with our culture and approach, but we cannot ignore them. They are table stakes for success in direct selling.

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