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 30^th day, 60^th day and 90^th 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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However, all business entities including direct selling companies need to measure the progress towards their goals after determining them. “Key performance indicators” or as often they are called “KPIs”, are the means for these measurements. They help an organization understand how its performance is doing against the goals. Some also call them “key success indicators” or “KSIs”.

There are two important characteristics of all KPIs. They have to be:

1) Quantifiable.

2) In the fields that are critical for the company.

The second point is quite crucial as this process is about measuring what matters to the business the most, but not everything. This is a trap not so few companies fall into. When this happens, the whole process turns into a chaos. It takes much more management time than necessary, ending up with everybody involved questioning the necessity of working with KPIs. There are numerous measurable indicators, but not all are “key” to company’s success.

For the measurements and comparisons to be meaningful, the KPIs should not also change on the road unless that change is really necessary. Consistency allows purposeful period-to-period comparisons, which is a must.



Segmenting the Field and Determining Variables

In a direct selling operation, the indicators that lead to success in sales can be first categorized by dividing the field organization into two segments as “new” and “not-so-new” direct sellers. This segmentation is crucial because most often, these two groups behave quite differently. The definitions of these groups (that is, until when you will call a direct seller, “new”) will depend on the strategic goals and how the company will prefer to see and treat them.

After categorizing the field network, these two groups’ performances will need to be measured according to various criteria, each being important to succeed. Examples are: New recruits, order size, number of orders within a given period, number of home parties, activity rate, attrition, promotions to higher ranks etc.

“Digital” KPIs

For quite sometime now, the whole industry is being transformed through “digitalization”. Some companies are well aware of this and actually leading this transformation, some are not even following it. Digitalization requires addition of “digital KPIs” into the picture. So, as the first step, companies need to determine what they want to do and also what they want their field organizations to do on the digital platforms. And then, the performances will have to be measured against them. The process here is very similar to measuring the KPIs in the “offline” world, but the variables are quite different naturally.

KPIs make up an invaluable set of performance management tools. But alongside this, they can also be very effectively used in focusing the whole organization’s attention on areas that really matter to the company. Achieving this can bring efficiency to many areas. And a big plus is the increase to be gained in team spirit and in motivation through sharing the targets and the progress with all those who are involved.

In this industry, almost all performance indicators are easily measurable and we have the technology at hand to make those measurements real time. It is a matter of picking the right indicators for the company, defining them well, consistently measuring, and stepping in immediately whenever the tendency is not as expected.

If you don’t measure but, how would you manage?

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Hakki Ozmorali is the Principal of WDS Consultancy, a management consulting and online publishing firm in Canada, specialized in providing services to direct selling firms. WDS Consultancy is a Supplier Member of the Canada DSA. It is the publisher of The World of Direct Selling, global industry’s leading weekly online publication since 2010. Hakki is an experienced professional with a strong background in direct sales. His work experiences in direct selling include Country and Regional Manager roles at various multinationals. You can contact Hakki here.

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