Understanding your company’s Distributor DNA : The First 3 Steps
1: Get clear on “Churn”:
- Companies have very different definitions and criteria for knowing when a rep has churned. The first step in decoding your D-DNA is to have a definition of churn that’s clear across all company departments. Here’s a hint: Failing to renew their distributorship is not that marker (especially an annual renewal). By then it’s probably not much you can do to influence them to stick around.
- “What is Churn” really? And how do you know it’s happening?: Now we’re getting somewhere. When a rep has churned they’re no longer interested in or believe they can succeed with your business opportunity. Have they stopped approaching and following up with new prospects? Have they even stopped buying products for their own consumption? What kind of data do you have that indicates any of this is happening? Make sure every relevant department knows these markers and has the same EXACT definition of churn. For example you may know that if a rep doesn’t place an order for 90 days, there’s a 96% chance they will not place an order again, nor renew their distributorship. This might work as a definition for you, but challenge yourself to get as specific as possible. Clarity gives you the power to act on real data vs anecdotes and gut, greatly increasing your chances of retaining more people.
2: Know your ROI
- Know their LTV (Lifetime Value): Now that you’ve identified a specific point of loss you can calculate some critical metrics. Knowing the LTV of your reps can give you tons of insights into where the real value lies. Remember, if you have an MLM comp plan, you’ll need to take their downline into account because a rep leaving can cause the loss of more revenue than their own personal sales. Often many members of their team become demoralized and will churn with them. Some immediately, and some in the next 30,60 or 90 days.
- Now that you’ve assigned a value to them, project that value into the future. If you could get them to stay for another 6 months, how much revenue could you earn? This is your projected future LTV if you save them.
- Ideally you need to come up with an estimated ROI figure attached to your retention rate. Spend time on the math and discover this simple equation: AR + 1%= $X IGAR AR=Annual Retention. IGAR=Increased Gross Annual Revenue. REMEMBER: If you have an MLM comp plan you must not only count the revenue of a saved rep’s current personal volume but from their projected future personal volume and the volume of those who would be added to their line (and those on their team who are also retained) if they stay, with the assumption that they too retain 1% better. Forgetting this compound effect in your math will cause you to grossly underestimate. Rule of thumb: Your math is likely to return a IGAR of 3-7%, If you’re not in this zone, try again to be sure. This is not easy math, but if you don’t know how much money you’re leaving on the table, then how can you know how much you’re recovering in your retention efforts?
3: Identify the influencing factors that contribute to churn
- OK Great. Now you’re whole team is on the same page. You know what churn is to you, how you know it’s happened and what it’s worth to prevent it. The next step is to start understanding the influencing factors. What are the factors that cause someone to churn? There are the obvious ones like how much volume they generate, or whether they “Activate” after being recruited, but there are potentially hundreds of factors that could have an influence on churn. Each of your distributors is a unique person with a variety of influencing factors happening in their life. How many of these can you identify and relate to churn? Here are some types of data you may have that can influence churn:
- Personal and team behaviors over time
- Upline behaviors over time
- Local market culture (Country, State, City, Team)
- Call center interaction
- Participation in training
- Convention and other event attendance
- Behavior on social media
So in review:
1: Identify the exact moment of churn.
2: Know your ROI formula R +1%= $X IGAR
3: Know you’re influencing factors.
There’s a lot more you could do from here, but get the ball rolling to understand how much revenue is on the table and one basics around cause and you’ll be better equipped to decide on what it’s worth to invest into more robust data analysis and the behavior change you could affect when armed with the right tools.
Have any questions? Need help getting the ball rolling? Contact us for a free consult. firstname.lastname@example.org