Guest post from Direct Selling Symposium partner, compensation plan expert Dan Jensen. Dan is one of the most sought-after compensation plan specialists in the direct selling industry. Having worked with hundreds of successful MLM, Party Plan and direct selling companies over the last 30 years, his breadth of experience provides immense value to direct sales companies needing a better compensation plan strategy.
Retailing Is the Root of Direct Selling Success — Or Failure
Retailing is the root of direct selling success – distributors should be compensated based on its health!
Too many compensation plans are designed around rewarding the top distributors, leaving retailers to shoulder the load, unrewarded. Companies have an opportunity to improve their retail volume, if they can read the signs hidden within their ordering data.
Here are 5 signs that you may be leaving retail customers on the table:
- Order Size: If average order size remains small, it is a sign distributors are buying inefficiently order-by order for retail customers, or consuming the product themselves (internal consumption).
- Order Frequency: A regular monthly order, that doesn’t vary in size, is another sign of internal consumption.
- Recruit turnover: If a recruit were not making money from their main source of income, retailing, why would they stay?
- Lack of new recruits sponsoring: Sponsoring is much easier when the recruit is already experiencing success in retailing.
- Leader only sponsoring: Similar to the last point, if leaders are the only ones adding new recruits, it is a sign that a decline is imminent as their downlines get stalled by high turnover rates.
Once you recognize the signs of retail distress, there are proven ways to fix most the problems quickly:
- Well defined pricing levels and commitments: Recognize the difference between retail and wholesale customers. If retail customers are easily allowed wholesale status without any real commitment, it diminishes the ability of the distributor to make a profit.
- Auto-ship program: Long-term commitment can be rewarded with a discount off retail price, but still above wholesale price.
- Realistic pricing: If the majority of retail customers are paying the “wholesale” price, while the published retail price adds another 40%, there will be a lack of interest for people to ever buy at the retail price level, again diminishing distributor profit.
- Product marketing and sales tools: Hi-impact brochures and videos help to ensure a consistently excellent message allowing for increased sales.
- Distributor sales training: Along with the marketing and sales tools, the distributor also needs to be trained on how to sell the product, and how to sell in general.
- Internet retailing: Creating a win-win-win situation for the customer, distributor and company. Order process becomes more efficient for the customer, the distributor receives their retail profit while reducing their time input, and the company gets more orders.
Companies can compensate their sales leaders in many ways, but they need to focus on making sure the retail roots are solid and healthy before focusing on that fabulous trip to Hawaii.