By Terrel Transtrum, Founder of LaunchSmart™
In Idaho, our economy lives or dies by water. We hope for winters that fill our mountains with snow. In the spring, the snow melts and fills our reservoirs. During the growing season, the reservoirs are drained into the rivers and the water is diverted from the rivers into the fields to water the crops. If the winter has provided sufficient snow, our farmers have abundant crops and can hope for a profitable year.
We provide this as a simple of analogy of what we’ve seen as a common approach to managing direct-sales companies over 15 years of working with over 100 direct sales companies.
Management typically focuses almost exclusively on recruiting and new enrollments. They do whatever they can to drive those up, and they measure them religiously. In the back of their mind, they know people are leaving. They don’t always know exactly when or why they’re leaving. But they believe if they can just “out-recruit attrition,” they’ll have good sales and can hope for a profitable year.
We certainly don’t want to downplay the importance of recruiting and enrolling. These are the life-blood of business. But they are not the entire formula.
Did you know that according to several studies, including a landmark study by Bain & Company, a 5% increase in retention can lead to as much as 25% to 100% increase in profits?
The first thing that we usually get asked is: “Can you really increase field retention?” The answer is a resounding, “Yes, you can!” We’ve helped companies do it. It’s not simple or quick, but it can be done, and the impact on profits is incredible. In the brief space provided here, we’ll share with you the key elements to increasing field retention.
We’ll treat as a given that you have an outstanding product or service that you’re selling and that you’ve got a compensation plan in place that will attract people to join your team and stay involved.
Next, let’s define retention. As people join your field team, they enter into a lifecycle of activity. This lifecycle begins with pre-enrollment, progresses through the first 90 days and into full activity, and finally at some point into inactivity. One significant aspect of retention is to lengthen and increase the activity phase of the lifecycle.
Within the activity phase of the lifecycle, there will be a variety of classes of field representatives. These must be defined. One class will be customers – simply purchasing the product. Other classes will consist of field reps involved in various levels of building their businesses. The classes must be defined specifically for your company because activity and retention levels vary between classes. The other significant aspect of retention is to drive as many field reps into the classes where retention levels tend to be higher – the “sweet spot,” if you will.
The next challenge is measuring retention. If you’re going to increase retention, you’ve got to know where you are today. If you’re going to make changes or implement programs in an effort to increase retention, you’d better be able to measure results and return on investment. Looking at annual renewals is just not enough.
Measuring retention requires the commitment of your information technology department. A series of measures can actually provide you with a “retention profile” that reveals your retention trends and shows how your field as a whole is moving through the lifecycles and classes described above. Historical data analysis will help you predict where the numbers will be without intervention.
We refer to this series of metrics as your “retention dashboard.” Key areas commonly addressed are: Renewals, Autoships, Order Shipments, Order Levels, Inactivity, Cancellations, and number of people entering the “sweet spot” you’ve defined. Specific metrics are identified in each category and aggregate to a level of performance in each category. Target performance levels are identified in each area so management can identify at-a-glance areas of accomplishment and areas of needed improvement. Ongoing measurement must be provided monthly, and a profile created at least quarterly.
Once we understand how to measure retention, we must understand how it is increased. Simply stated, retention is increased as companies implement best-in-class principles and practices to serve and support their field. Over fifteen years of consulting with over 100 direct sales companies, we’ve identified 7 principles and 29 practices that the best “retention companies” use. It is not feasible to review those here. But here is one basic key.
You must identify every point where your company “touches” a field rep – order fulfillment, commission processing, complaint handling, recognition, etc. For each “touch” you must have clearly defined, repeatable processes that result in consistent and outstanding service to EVERY field rep, ALL the time.
Let’s illustrate with one example that has a profound impact on retention – handling complaints. Complaints are good. We can only fix the problems we know about. And once a complaint is raised, it MUST be satisfied.
Industry statistics show the following impact of how complaints are handled. If the person complaining is “dissatisfied,” there is only a 35% chance we will retain that person. If the person complaining is “soothed,” there is a 65% chance we will retain that person. If the complaining person is “satisfied,” there is a 95% chance we will retain that person, and they will actually be more loyal than if a problem had not occurred!
Handling complaints are some of our toughest interactions with the field. We call them “Crucial Conversations.” To handle them well, we must be armed with specific communication skills. One area where we’ve significantly impacted retention is through training customer service organizations in “Crucial Conversations” skills – giving them clearly defined skills and repeatable processes to use in their interactions with the field.
In summary, increasing field retention is not easy. But it CAN be done, IF we: clearly define retention for our company, measure it accurately, and implement industry-best principles and practices to provide consistently high levels of service to the field.
(The content of this article is extracted from ServiceQuest® RetentionSmarts™ Modules. For more information on RetentionSmarts™ training and mentoring systems, contact a member of the LaunchSmart team.)