Early Signs of a Failing Direct Sales Business

Hakki Ozmorali — Mon, 10 May 2021 05:00:33 +0000

Both direct selling company managers and individual direct sellers have two common goals: Maximizing productivity and business volume in their teams. Some signs and symptoms may emerge which might indicate that things are not necessarily going in the right direction. Some of the issues might be transient and might not hurt the business much, but some are critical. Differentiating the two requires close attention to the warning signs that show themselves the numbers.

Here is a list of areas where you can see the significant early warnings:

Number of New Members

Newcomers constitute the lifeblood of a direct selling business. They boost growth. Check if there is a decrease in their rate of inflow.

Number of Those Who Quit

Some of your field members will leave the organization for a variety of reasons. This is inevitable. However, it is not desirable at all to witness an upward trend in their numbers. Especially dangerous situation is an increase in the ratio of those who give up to the existing direct sellers.

Ratio of New Members to Those Who Leave

As a rule of thumb, the number of those who join should be greater than those who leave at a given period. The opposite would indicate that the field organization is shrinking instead of growing.

Activity Among New Direct Sellers

There may be a downward trend in the sales made to new members. This could be in the form of less number of orders placed by this group or reduced average order size. The worst is a decline in both.

Activity Among Existing Sales Force

There may be a situation where newcomers lose their motivation after being active for a period of time (i.e. when they are no longer considered “new”). This may be due to many reasons each of which require immediate action.

Average Order Size

Within a year at most, a statistically reliable average order size establishes at new direct sales start-ups. A declining trend in the average order size is also alarming: Either the products are not seen as attractive anymore for some reason or the organization is not pushing them to the market as before.

Field’s Reaction to New Products or Campaigns

The sales organization may be getting less enthusiastic about your newly launched products or campaigns. This would be present in the number of orders per member, order sizes or the number of new products ordered from that offering, as compared to previous ones.

Activity Towards the End of a Commission Period

A flat activity throughout the period happens when the field members are not as motivated by climbing the career ladder in the compensation plan. As a result, they don’t work harder to close the period at a higher level. This is a serious problem!

Attendance to Meetings, Webinars and Conventions

If you see less and less people attending your events, this is just another sign of lost enthusiasm. Seeing the same faces come to your gatherings time and time again is just as dangerous.

Demands Coming from the Sales Organization

By nature, a sales organization has to be coming up with new demands, bringing in new ideas. A decrease in the inflow of these from the field shows that the members are losing faith in your business.

This list has not been intended to be in any order of importance. When any of these occurs, it should be considered as an alarm and taken seriously. Once a hiccup has been diagnosed, immediate action is always recommended. If the ball is left rolling in the adverse direction, after a certain point it might be impossible to stop.

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Hakki Ozmorali is the Founder 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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Why Do They Leave Your Company?

Hakki Ozmorali — Mon, 08 Feb 2021 06:00:43 +0000

Growth is important in all industries, no doubt about it. In today’s challenging business environment, this is crucial at least to prevent complete failure. That said, growth is probably more important in direct selling than it is in many other industries. And this is especially so in acquiring new sales force members.

We generally call this activity “recruiting”. What we also generally do is to accept a high level of attrition in this industry as a given… Even from the day those direct sellers join the company. But does this have to be so? Maybe not! Let’s have a look at the common causes of attrition.

1) Personal

Some of those independent contractors who leave a direct sales company do so because they feel they just don’t fit in. Whether the primary motive initially is to pursue a hobby, a way of socializing, a part-time source of income or a full-time business, this can happen to anybody.

As long as this is the true reason and there is nothing else behind it, there is not much a company can do to reverse this decision. But what if in reality, there is something else behind that have caused this?

2) Upline

In some cases, what motivates the direct seller to quit is the sponsor or even the whole upline. The sponsor’s neglect in “training & leading” usually ends up with losing the newcomer. In other times, it is an unrealistic income expectation that is created purely by the sponsor.

Even if it is merely a clash of personalities between two people, I believe there is a lot of homework that can be done by the management, most of it being on the field training side.

3) Company

And yes, sometimes it is the company itself that is the cause of people’s leaving.

Poor customer services, commissions payments not made on time, rejecting product return requests for no good reason, abruptly cancelling promotions, frequent price and/or compensation plan changes, failures in communicating news updates and announcements in a timely manner… These are not unheard of in this industry and they definitely lead to higher attrition rates.

4) Dissatisfaction with the Opportunity

Another common reason is direct seller’s discontent with present or potential earnings that the company provides. It may be that the individuals might have set their own expectations too high. Alternatively, the company might be intentionally or unintentionally sending wrong messages. And in some cases, the compensation plan itself is poorly designed.

Leaving aside pure consumers, most of the field members are part-timers and hobbyists in direct selling. This is a fact. Therefore, probably it will never be possible to even get close to perfection. Yet I believe companies can make significant moves in that direction.

The first step here is identifying the true reasons behind quitting. Once this phase is over, it will not be too difficult to deal with each of them and make improvements. Don’t you think?

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