Distributor Churn: Great Challenge, Incredible Opportunity

The power of Direct Selling is palpable. We’ve tapped into something every marketer on earth wants a piece of: Word of Mouth. When a company taps into that, they can rocket to the Inc 500 faster than your reps to the swag table at a convention.

 

And if their products have real quality and market value, they’ll stand the test of time. So, if our model is so amazing, why does direct selling suffer such a negative public image? While there could be many business reasons for this, I’m convinced that the direct selling apple seems rotten for the same reason our industry faces increasing regulatory, speculative and retail challenges: the tremendous inefficiencies of people, and what one executive has called the “distasteful” fact that too few of our reps have any real success in our business model.

 

This is the plague of distributor churn, and it has become so commonplace that most companies have simply come to accept the loss of thousands of reps as an inevitable ‘cost of doing business’. The cost of making a buck seems to be that as you do it, you build an ever growing army of people who just don’t like you very much. But today the individual consumer’s voice has become incredibly loud. The fact that so few make money and so many quit the business has a butterfly effect that ripples out from companies to communities to governments, to the society’s perception that direct selling may not be a legitimate business and its companies are “pyramids”. Make no mistake. We’ve done this to ourselves. The question is, what are we going to do about it?

 

The cost of making a buck seems to be that as you do it, you build an ever growing army of people who just don’t like you very much. But today the individual consumer’s voice has become incredibly loud.

 

Is this really the best we can do? Growing regulatory and Wall Street pressures are causing many companies to put up their fists and fight. But what are we fighting for? Fighting to keep doing things the way they’ve always been done makes no sense. In this age of rapidly progressing technology hasn’t it been proven that those who fight to maintain the status quo go down in flames? Look at Kodak, Borders, Blockbuster (video) and others. Will most direct sellers suffer the same fate? There are those who’re ready to invest in a future where direct selling has levered technology to resolve its ethical challenges.

 

Yes, this is absolutely achievable. But as Albert Einstein said “Problems cannot be solved by the level of thinking that created them.” We must evolve.

 

So, what is that new form of direct selling going to look like? Just like every other industry that’s been disrupted, the answer will come through technology. Let’s look at retention from the perspective of data science and what it could do to our model:

 

1) INBOUND FILTRATION: We all know that most of the people who see and join our business opportunities will never be successful. We haven’t been able to tell the difference and we rightly don’t want to deny someone the opportunity to elevate the socioeconomic status of their family. DirecTech Labs’ (a technology incubator focused on DS) companies are developing a “Distributor Genome”. While a human mind can’t see the patterns of success and failure and predict them reliably to the tune of millions of reps, to a data science pro like DirecTech Labs CTO, Jordan Zommick, it’s an eminently worthy and solvable problem. Imagine if you could know that a potential recruit has a 90% chance of failing at the business within 90 days, but an 80% chance of staying a retail or preferred customer for 18 months? Compound that out to thousands of people and now you’ve saved yourself and your sales leadership a lot of time, earned greater revenues, and that Army of DS naysayers has been denied a new member.

 

2) PREDICT CHURN: Filtering the inbound will already have a big impact on churn, but what about the ones who got through? Leave that to data science. A machine can see patterns far more complex and intricate than people can. It can identify those who are in danger of quitting the business, tell you why, and what to do to decrease their chances of quitting. Cool idea right? It’s nothing new – Zommick built technology like this for other industries resulting in hundreds of millions of dollars in new revenues.

 

We can see that solving the retention problem alone would:

 

-decrease call center expenses by having fewer sellers to support
-increase sales with fewer reps doing more personal volume
-Increase the lifetime value of customers
-Make a huge dent in direct selling’s image problem

 

Curious? Excited? Intrigued? Suspicious? Want to play a part in discovering our future?

 

Contact Michel at michel@directechlabs.com