Three Ways to Use Loyalty Programs to Drive Customer Growth

The strategic importance of becoming more customer-centric is not a tightly guarded secret in retail. For example, Amazon’s mission statement says it “strives to be Earth’s Most Customer-Centric Company.” And, “customer” is the most frequently used word in Jeff Bezos’ shareholder letters going back to 1997. Recognizing the importance of customer-centricity is relatively easy. Implementing it can be the challenge.

Within direct selling, customer-centricity has been an increasingly important factor in driving growth in the last several years. It also provides opportunities for increased relevance, loyalty, and growth in a highly competitive, post-pandemic retail environment.

First, let’s review record-setting growth in direct selling in 2020, with a particular focus on customers.

According to DSA’s 2021 Growth & Outlook Survey, US direct selling set record highs in 2020 in:

• retail sales ($40.1 billion), a 13.9% Year Over Year (YOY) increase
• direct sellers (7.7 million), a 13.2% YOY increase
• and preferred customers*… DSA began collecting and reporting data on preferred customers in 2017. Since then, the count of preferred customers has increased from 17.6 million to 32.6 million in 2020 in the US. This is an 85% overall growth rate and a 19.4% increase YOY.

49% of U.S. direct selling companies are estimated to have a preferred customer program. Although this percentage has also increased over the last few years, it means that a bit more than half have not created a preferred customer program, representing a large opportunity for direct selling companies.

There are now several success stories on salesforce-customer segmentation and the benefits of preferred customer programs within direct selling, including this example from a recent DSA webinar from Tim Sanson (VP of Global Strategy and Analysis) at Herbalife Nutrition.

The DSA-Ipsos 2020 Consumer Attitudes & Entrepreneurship Study reinforces that direct selling was on-trend in the last year among consumers. According to this study, 79% of Americans are favorable/neutral toward direct selling, and those consumers surveyed value the following most about direct selling:

• “I feel good about supporting a small business” (69%); and
• “The personal service that direct sellers provide” (67%).

In addition to the success stories within direct selling, there are several examples outside direct selling that reinforce the importance of preferred/loyalty customer programs in driving growth:

Source: Forerunner

Below are three ideas to explore on how direct selling companies can create new or improve current preferred/loyalty customer programs to drive growth:

1. Customers have access to unprecedented amounts of information and countless alternatives in making shopping decisions, and loyalty programs can be an attractive differentiator

“We’ve seen that balance of power in the information age, the access consumers have to the info about the brands they want to shop and frequent. It’s shifted even further, and it’s accelerated in favor of the consumer who now shops for anything, anywhere, anytime, and does so with a different mindset from even a few years ago,” said Matthew Shay, CEO of National Retail Federation. “In this environment, understanding the customer and anticipating what they need, what they want, and then offering products, services, and the experiences that resonate with that customer is increasingly critical to the success and survival at a time when the industry is evolving so quickly.”

As the American consumer becomes more knowledgeable, expectations increase, and behavior continues to shift, it’s important for retailers to continue to meet consumers where they are and find more ways to add value.

Loyalty programs may be one such way of adding value as consumer adoption of these programs seems to be high. A Forerunner survey finds 75% of consumers belong to a loyalty program, 48% belong to 3 or more programs, and 61% are more likely to spend where they are a program member.

2. While many direct selling companies have sophisticated salesforce incentive/recognition programs in place, similar types of rewards can be a valuable retention tool for customers.

“Find opportunities for recurring low actual cost and high perceived value rewards and recognition to keep customers coming back, build brand affinity, and create an emotional connection with customers” suggests Jason Bornstein, former director of customer acquisition at Bonobos. “In a market where starting an online business is easier than ever, acquiring customers has become more expensive and competitive… The brands of the next decade will win with loyalty, not acquisition.”

3. Loyalty programs could particularly help grow Gen Z customer-base.

A survey earlier this year from digital experience company, Sitecore, found that although 80% of Gen Zers said they’re more willing to try new brands online than before the pandemic, 57% said they’re less loyal to brands than before the crisis.

71% percent of Gen Zers want the shopping experience to be personalized, and 76% said their favorite brands should reward them for their business, the survey found.

Building long-term relationships with Gen Z is vital for the long-term growth of brands. So, leveraging loyalty programs with customized messaging could be one particularly beneficial strategy of growth among a notoriously fickle cohort.

DSA’s 2021 Growth & Outlook Report (to be released later this summer) will be providing more detail on how direct selling companies can drive customer-centric growth. In the meantime, I hope you find these ideas useful to learn from peers within direct selling and from leading retailers outside of direct selling to meet consumers where they are and earn their loyalty!

*Definition: Preferred customers have signed a preferred customer agreement with a direct selling company where they may be eligible to pay wholesale prices for products/services. They are not eligible to sell products/services to others, and they are not eligible to earn.

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Ben Gamse
Five Key Insights from New DSA & Ipsos Consumer Attitudes & Entrepreneurship Study 

DSA’s Industry Research Committee commissioned Ipsos for the first time to conduct its 2020 Consumer Attitudes & Entrepreneurship Study, which provides insight into:

• American attitudes toward the gig economy and entrepreneurship in general
• How to make direct selling the best opportunity to be an entrepreneur
• Consumer attitudes toward evolving technology such as social media, e-commerce, and mobile commerce and their impact on direct selling.

Here are five of the key takeaways from the study:

1. Americans’ interest in entrepreneurship and supplemental earning opportunities is high.

 Despite the U.S. unemployment rate returning to a 50-year low earlier this month, wages have remained stagnant over the past 50 years. Additionally, credit card, student loan, and medical debt is an increasing burden for many Americans. Younger Americans, in particular, are not accumulating wealth at the same levels as previous generations.

Within this context, this study finds that 77% of Americans desire flexible, entrepreneurial/income-earning opportunities. Interest in these opportunities is highest among younger generations, with 91% of Gen Zers and 88% of Millennials interested in entrepreneurial opportunities.

2. High interest in entrepreneurship has coincided with the rise of the gig economy. Despite increased competition for entrepreneurs, direct selling is seen as an attractive option.

Favorability ratings toward direct selling and gig work are comparable. Direct selling compares particularly well against other options in terms of being low-risk and having low start-up costs.

3. Direct selling has broad, diverse appeal.

Demographics of potential direct sellers generally match the U.S. population/current direct sellers. Men are as interested as women in becoming a direct seller, even though men currently represent only about 25% of current direct sellers. Young people and minorities are also particularly receptive to entrepreneurial opportunities.

4. U.S. consumers continue to be positive about direct selling.

Perceptions toward direct selling have remained stable at about 80% over the last 10 years. Most consumers find value/appeal in the good feeling of supporting a small business (69%) and the personalized service (67%) that direct sellers provide.

5. Social media can help direct sellers be more effective and improve the customer experience.

89% of Americans are on at least one social media platform, and the majority of users say they log in at least once per day. Almost half of Americans (46%) would welcome contact from direct sellers regarding business opportunities on social media.

This study was released to all U.S. DSA members earlier this month. Check out the following resources for even more information about this study:

• Sales & Marketing Conference presentation on How to Make Direct Selling the Best Opportunity to be an Entrepreneur
• Direct Selling News article on: “3 Key Insights from New Study DSA Commissioned from Ipsos on How to Make Direct Selling the Best Opportunity to Be an Entrepreneur”
• Consumer Attitudes & Entrepreneurship Report Infographic
• Ipsos Press Release

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Guest Post by Ben Gamse
Five Ways the Direct Selling Industry Can Achieve Sustained Growth

“Growth & Outlook” is the U.S. Direct Selling Association’s annual market-sizing survey that reports on the size and scope of direct selling, key industry trends, and the industry outlook in the United States.

This year’s survey results were recently unveiled at DSA’s Annual Meeting, and they showed that after a couple years of modest decline, the direct selling industry in the U.S. has returned to growth, with a 1.3% increase to $35.4 billion in retail sales in 2018. Furthermore, DSA is optimistic this growth will continue at between 1-3% for the next three years. However, this projection will not be realized unless the industry takes an active role in shaping its future within a rapidly evolving retail landscape.

I collaborated with DSA’s Industry Research Committee, made up of top market research/business intelligence executives from DSA leading member companies, to better understand market-sizing stats and trends and develop actionable takeaways that can help DSA members and the industry grow. Based on this in-depth analysis, here are five strategies that can help direct selling achieve sustained growth:



1. Segmenting salesforce and customers to better understand your salesforce and become more customer-centric

Segmentation (or better distinguishing between sellers and customers) poses an opportunity for business growth by tracking sales by segment, improving engagement with active and unengaged reps, and tailoring communications by segment. By developing preferred customer/ loyalty programs, companies are more easily able to cultivate customer data and identify how to best empower the salesforce to meet customer needs.

2. Doing research on Gen Z and developing a strategy to attract future generations to products and the direct selling opportunity.

There’s been much research and analysis conducted on Millennials, but few in the industry are familiar enough yet to develop strategies to appeal to Generation Z (those born between 1996-2011). By 2020, Gen Z will make up 40% of consumers and 36% of the workforce, and significant differences between Gen Z and Millennials are emerging.

At DSA’s Annual Meeting, Josh Miller, a 17-year old entrepreneur and Director of Gen Z Studies at XYZ University, informed several DSA execs on how Gen Z is data-driven, competitive, and focused on financial stability and the future. Another fascinating insight Josh shared is that because Gen Z’ers don’t know a world without smart phones and social media, they now prefer face-to-face communication to online interaction. Information like this should help companies recognize if their direct selling strategy and model are poised to succeed with this generation. As the world’s largest upcoming generation, Gen Z represents the future of the labor market and consumer base. The sooner companies realize this, the more likely they will succeed.

3. Learning from the gig economy, which is shaping workforce expectations

With the ubiquity of companies like Uber, Lyft, and AirBnb, it’s easy to forget that the gig economy is relatively new, nebulous, and rapidly evolving. What is evident is that the gig economy has already had a significant impact on reshaping workforce expectations (including direct selling) and will continue to do so for the foreseeable future.

For example, workers are increasingly expecting instant payments. Transportation services like Uber and Lyft allow for immediate payment following a ride, and even Airbnb provides hosts with payment at the start of a customer’s stay.

Another way to learn and adapt from the gig economy is to make connecting with prospects easier. The appeal of many gig roles is that customers are connected to the gig worker through technology. The worker doesn’t need to do anything but show up. Some direct selling companies are addressing this challenge by matching prospects who visit their websites via geographic proximity. Companies may also be more proactive to drive prospects to their commerce sites, but traditionally many direct sellers view this as infringing on their prospect base. This is an area that needs further investigation. But, technology and evolution of e-commerce platforms is likely a step in the right direction.

Another thing direct selling can learn from the gig economy is being able to control the whole business from a mobile device. There are many things we can learn from them that if addressed may make direct selling a better destination for those considering other gig opportunities.

During a tight labor market that’s achieved 50-year lows in the unemployment rate, the gig economy has increased the appeal of flexible, part-time earning opportunities. This should be direct selling’s sweet spot where we can compete and win.

4. Innovating to avoid getting left behind during rapid evolution of retail & e-commerce

Another component of becoming more customer-centric is placing an increased focus on customer retention. It is well documented that the cost of retaining a customer is much less than acquiring a new one. Many e-commerce and gig companies are getting into the retention game with loyalty programs.  A notable example of this is Dollar Shave Club, whose retention rate at 12 months is 50% – far exceeding many direct selling companies. Consider ways to engage loyal customers with targeted communications, product recommendations and promotions, and introducing gamification.

5. Prioritizing key points of differentiation that direct selling offers, and minimizing the impact of perceived weaknesses

The direct selling channel is at a crossroads as the 100+ year old industry sees the retail and labor landscapes rapidly evolving. Questions emerge like how do you stay true to your core identity while embracing technology and change? What is the best path for direct selling moving forward?

The U.S. macroeconomic conditions create favorable tailwinds for direct selling to thrive, and its best path forward likely lies first in prioritizing key points of differentiation.

The late author and management consultant Peter Drucker said, “Waste as little effort as possible on improving areas of low competence. Concentration should be on areas of high competence and high skill. It takes far more energy and far more work to improve from incompetence to low mediocrity than it takes to improve from first-rate performance to excellence.”

Direct selling has the ability to achieve sustained excellence and comparative advantages in certain areas such as personalization, relationships, and experience.

Monica Wood, Vice President, Global Consumer and Member Insights at Herbalife Nutrition and incoming Chair of DSA’s Industry Research Committee said, “Personalization is becoming ever important and is a key differentiator we have in direct selling. Our distributors listen to the needs of their customers and then they customize the wellness solutions we offer based on the individual needs of that customer.”

“Direct Selling, like any industry, needs to evolve with macro and consumer trends, but it should not compromise on its inherent points of differentiation such as the priceless personalized experience a customer has with their direct seller,” says Jeff Kaufman, outgoing Chair of DSA’s Research Committee.

The unique direct selling experience is also a differentiator. As Qualtrics (experience management software company) CEO, Ryan Smith said, “we’re in the experience economy. People will pay a premium for a good experience, and experience is a growth lever… Either you’re intentionally racing to the top with experience or you’re unknowingly racing to the bottom.”



Satisficing on Weaknesses

No matter how hard direct selling companies try, it’s unlikely they’ll be able to beat Amazon on selection, shipping time, and price.

Amazon’s economies of scale, technological expertise, and relentless willingness to incur massive losses to compete for market share/growth make competing across any of these dimensions very difficult.

Will direct selling companies need to be able to beat Amazon on one-day drone shipping? Should direct selling companies match Dollar General on pricing? Beyond egregiously underperforming across these metrics, the answer is likely no. 3-4 day shipping at a breakeven cost or selling cosmetics a dollar above the dollar store prices are likely fine – as long as you have value in other areas (e.g. the personalized ongoing service salesforce members offer their customers). Otherwise, you’re on a race to the bottom.

However, at the other extreme, if we surrender entirely on selection, shipping time, and price, then you’re likely doomed. No matter how good your product is, consumers’ expectations have increased, and no one wants to wait weeks for their next order of protein powder. The answer lies somewhere in the middle. Being good enough to not noticeably frustrate customers here is likely sufficient.

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