Rethinking Big Income Promises in Direct Selling
Ever attended a conference of the Direct Selling Association (DSA)? We certainly recommend it.
Two of the speakers who really gave us a lot to think about were Darren Jensen, CEO of LifeVantage, and Lois Greisman, who’s Associate Director of the Division of Marketing Practices at the FTC.
It’s a shame that the initials “FTC” inspire fear in so many direct sellers. People immediately think, “Uh-oh….I wonder what new regulations I’m going to have to deal with now—and how I might be able to get around them!”
But it’s all a matter of perspective. What if (in some respects) the FTC is pointing us towards a better business? What if, by collecting more data on end-user consumption, direct selling firms can meet the needs of all distributors and customers as well as their leadership? And who wants to pass up free business advice?
Anyway, Lois Greisman spoke at length on the topic of income disclosures. We all know the challenge of making income disclosures. Separating customers from distributors automatically makes them look a lot better. But what if there’s a clue in there as well? Is it surprising that a third party charged with protecting consumers could see these disclosures and marry that with the big promises of (a term coined by Darren Jensen) “bikinis and Lamborghinis” that too many companies still allow to happen, and conclude that something disingenuous is going on?
Here’s a fact: only a statistically insignificant percentage of distributors ever manages to fund a lavish lifestyle off of a direct selling business.
Here’s an even more important fact: most distributors don’t even aspire to fund that kind of lifestyle from direct selling. So if they won’t get it and they don’t want it, maybe those promises are contributing to our incredible churn rates. Why are we promising them something they don’t really want?
As of this article, we’ve analyzed the lifecycle of 14 million reps and their customers in 60 countries. It has taught us a lot. Read on to the next blog for more effective and sustainable alternatives to big income promises.
Why $600 Could Be Your Magic Number
Lois Greisman of the FTC encouraged all of us at the US DSA Fall Conference to consider what the potential distributor wants before we make big promises about his or her earning potential with our company. She seems to believe that most distributors simply want to have a good experience with a brand they can believe in–and that some want to do so while earning a valuable extra income.
It would be easy to dismiss this advice as high-minded talk from a government employee who’s not out there in the trenches fighting to recruit more distributors. But the numbers do bear out what Ms. Greisman is saying.
In fact, Darren Jensen of LifeVantage shared some of his own company’s research into the challenge of distributor retention. LifeVantage has studied how the potential earnings of a business opportunity correlate to the probability of distributors quitting—and found that once a distributor exceeds $600 in monthly revenue, their retention rate will be roughly the same no matter what level of additional income they reach.
Furthermore, the first strong increase in retention rate happens when the distributor makes their first dollar.
Think about what all of this means. We all know it’s important for distributors to achieve some kind of success as soon as possible. And the amount of money does matter. But in far smaller numbers than most have imagined to be compelling.
So, from a pure retention standpoint, there’s no reason to push your distributors to higher and higher levels of earning once they’ve passed $600 per month. And for some, even $600 a month is too much for them. Why? Because pushing people too far too fast, pushes them out!
When most companies dig into their numbers they’ll find that the vast majority of sales are coming from those who are not leaders and do not earn more than $600 a month. Yet the language of most companies and leaders (while motivating to some segments) serves the eventual purpose (either right away or soon enough) of making most of your real producers feel like they’re not good enough as they are. Why would someone stick with a company when they are made to feel inadequate?
$600 is an attainable level of income for a great proportion of your reps who are really committed to regular business activity. And although it’s far from a princely sum, it can be a life-changing amount of income for a very large portion of the population. When we look at the socio-economics of most direct sellers, it actually has a really strong impact on their household income.
If you keep pushing distributors to do more and be more, they’ll worry that they’re not good enough for you—and you might actually drive them right out of your business. There are some who should be pushed. Some who should be nurtured gently. Some who have no business selling at all. It’s the duty of modern direct sales companies to know the difference. To let go of pushing everyone to do what they wish everyone would do and give people the experience that’s right for them. As much as we resist it, the data and the numbers are clear. Focus on modest income for many instead of lavish income for a few and your brand, bottom line, and blood pressure will all be thanking you.
As Darren Jensen put it, “Stop selling bikinis and Lamborghinis.”
He’s right. Most of our distributors don’t even want that. They just want a good experience, useful products and services, and a reliable part-time income. So let’s give it to them.
Is Driving a Leader-Worshiping Culture Hurting Your Bottom Line?
While leaders in the field no doubt play a valuable role, you’ll probably find that the vast majority of your revenues come from your “slow and steady” distributors. Your “little guys” (88% are women according to the Socio-Economic Study on Direct Sellers In the European Union by Ipsos) are collectively your biggest distributor! And many of them are relatively new and don’t last very long. Could it be because many are intimidated by a culture where they aren’t appreciated or celebrated if they aren’t on a path to leadership?
When you aim to meet the needs of these smaller distributors, you’ll not only build a better, more stable business but also be very much in step with the FTC’s advice. You’ll be reasonable and clear in what you promise, and you’ll attract more and more of the kinds of distributors who will be your bread and butter. They’ll stay around longer, take better care of their current people vs acting on the pressure to constantly acquire new people while the ones they have a churning like crazy. Sooner or later their churn becomes demoralizing and they themselves, churn out. Give them stability and a positive community that nurtures them for who they are.and they’ll be far more likely to have something positive to say about your brand. Even if they leave you. That sounds like a good deal to me.
At DirecTech Labs, AI Distro® analyzes customer and field behavior, segmenting all of your people on a daily basis. Distro sends hyper-personalized alerts that motivate the right people into actions they can feel confident in taking. Today we focus on keeping people active longer. Marketing teams use Distro’s insights to create more targeted email campaigns. Sales teams use these insights to rethink how, when, and what sorts of promotions to run. You’ll motivate everyone appropriately for their level, without overwhelming your newcomers or boring your go-getters. Take a closer look at how DirecTech Labs works.
We have a lot more to share about how you can address your retention problem. It’s probably easier if you read our eBook: How Direct Selling Can Use AI to Solve The Age-Old Retention Problem
Learn how PM-International achieved up to 27% revenue uplift over 6 months by extending the lifespan of its distributors and customers around the world. Download the case study here