By Terrel Transtrum, Co-founder, LaunchSmart™
This article is part two of a five-part series where we explore the powerful and proven principles of retention.
You can help your company become good at retention!
In prior articles, we established that the average annual attrition rate in direct selling companies is 80% per year. We also introduced the 30 best practices of the Retention Leaders, those companies that have managed to beat the averages. We have helped readers to see how even a small increase in retention greatly leverages growth and momentum, and that retention presents one of the best opportunities for high Return on Investment (ROI).
Retention Principles
The four Retention Principles are listed below. In this article, we explore the first of the four principles of retention. Upon these principles the 30 Retention Best Practices derive their power.
The 4 Retention Principles
- Value
- Expectations
- Service
- Leadership
Principle 1 – Value
Creating value for customers is the cornerstone of a successful business system. Creating value for customers and business builders produces loyalty, and loyalty in turn drives retention and builds growth, profit, and more value. Creating value and adequately communicating it at all levels of your company is the first important step in creating long-term success.
The World Federation of Direct Selling Associations reports that they represent 1,000 companies in 140 countries with 31 million independent business people. In the US, it represents $26 billion in annual sales. Sounds big doesn’t it, until you compare it with retail and all the other channels whose sales are $1.3 trillion, or 50 times the size of our industry. Now considering that all these sales channels started around the same time, 130 years ago, why have we stayed so small?
Well, one answer is that magic word again – value. Let’s look at the dietary supplement industry as an example.
I see many companies compete for consumers’ daily vitamin business. Off the shelf in retail stores, the offering is basic—and, many would argue, adequate. Through direct selling, where the product story can be told, the offerings become unique and interesting, maybe even compelling. But is the offering worth the vast difference in price, where a company chooses to inflate pricing, declaring that the uniqueness of the offering justifies the difference? Maybe yes, and maybe no. You decide, but here’s what the numbers show us.
- The average price of vitamin and mineral dietary supplements among the three largest distribution channels (grocery stores, mass market, and pharmacies—we’ll call these “the big three”)—is $6.75
- The average price of herbal supplements among the “big three” distribution channels is $7.72
- The average price of vitamin and mineral dietary supplements sold through the direct sales channel is $19.12 or 283% times the average price of the big three
- The average price of herbal dietary supplements sold through the direct sales channel is $24.16 or 313% times the average price of the big three.
One conclusion we could draw from these eye-opening statistics, is that the direct selling industry is not providing value to the market. Another conclusion is that the direct selling industry provides products that have superior ingredients and manufacturing techniques, and the story needs to be told. What do you think?
The key for companies that are building long-term business—and here’s what I’m driving at—is to offer real value. The value definition is basic and has three components: Price, Quality, and Service. If you build these components into your offering, then what remains is to help your teams (corporate and field) to convey that value.
Conveying value requires that your teams know where the value is in your company (products, ingredients, methods, compensation programs, incentives, corporate management, endorsements, patents, etc.), what are the value elements, what are the features and benefits of each of those elements, and how do they apply to real life.
Too many field leaders in the industry get sidetracked as they ask for higher and higher percentages of payouts, so they can put big bucks quickly into the hands of new people, and take in money without much effort, for the long haul. The company then subsidizes these payout requests with inflated prices, at least for a while. But this model is not an enduring model and sooner or later it loses its momentum.
I am not saying that this is every company’s problem; but the need to create and convey value is everybody’s challenge; companies that are serious about retention are well qualified to step up to the challenge. If you want to create sustainable success at your company, you must bring genuine value to your business, and your business builders must add value to the equation by becoming valuable members of the sales force.
The surest path to success is simple: build a value-driven company that builds lasting value for the field leaders and their customers.
How Your Teams Can Help
Corporate and field teams can make a commitment to increase awareness of value to new prospects and existing participants in your company’s offering. Here is a list of ideas for increasing the awareness of value and using value to fuel success:
- Identify each element of your company’s offering that you consider valuable
- Determine the features and benefits of each of those value elements that you identify
- Become articulate in the ability to speak to each of the features and benefits
- Tie appropriate discussions back to the features and benefits (examples include: sales presentations, handling objections, up-selling at the contact center, averting an auto-ship cancellation, etc.)
- Become “products of the products” by using the products
- Inject product awareness and enthusiasm by increasing the visibility of products (“product moments” at meetings, product displays, product training, product features, etc.)
(The content of this article is extracted from ServiceQuest® RetentionSmarts™ Modules. For more information on RetentionSmarts™ training and mentoring systems, contact a member of the LaunchSmart Team.)