This time the question to a group of experts from the industry was: “In your opinion, is negative online reputation a potential threat for the direct selling companies and if yes, how to cope with that threat?”

Let’s see what some of the wise persons have to say on this…

Jeffrey Babener, Legal Counsel at Babener and Associates

“The Internet is a global public square and social networks and blogs are its town bulletin boards, offering great opportunities for marketing and productive communication… even honest disagreement. Direct selling companies can offer distributors guidelines for online etiquette and enforce those guidelines through their distributor policies. Our law firm frequently drafts guidelines and protocols. Companies can even sue non-distributors for libel when identity is clear. Anonymous posts of disparagement, rumor and defamation, however, are a real challenge, as posts on the Internet are ‘forever’. Here, companies must use search engine optimization to drive their positive message to the top of search engines, and negative posts to page two, and lower, of search inquiries.”

Mari Daly, Head of Marketing at Nikken Europe

“Social media is an essential part of our businesses although one that is still to be fully discovered. Many today use social media actively and successfully but you do need a consistent strategy for your activities. Like a fire, social media can create energy and heat for the business when well-managed, yet it can be completely unpredictable and even damaging if left unchecked. While people are more quick to comment online and say things they might not say offline, it is more rare to see extremely negative comments. Developing an open communication is essential and it starts from delivering on our promises to our customers. It can drive business improvement and excellence if done correctly.”

Cindy Droog,  Global Public Relations Lead at Amway

“A negative online reputation is a threat for any industry because it’s a reflection of people’s unfiltered impressions and experiences. Yet it’s changing our culture in ways that are positive, including supporting overall transparency and helping us police those whose behaviors are unethical or irresponsible. We should embrace this is an opportunity to boldly, unapologetically tell our industry’s story: That we reward individuals for their efforts; provide valuable training and personal development; help people take back their time and their lives; and make communities better. Driving positive conversation isn’t the only tactic we should use, but it’s a great place to start. The effects will be cumulative, lasting, effective, and offer an authentic, balancing viewpoint.”

Jennifer Fong, Social Media Consultant and Speaker at Jen Fong Media and Social Media Associate at Luce & Associates

“A negative online reputation is of course a threat, one that many direct selling companies pay dearly for as they hire SEO experts to clean up a mess. When the source of negativity is the salesforce, the solution is clear policies, training, and a password-protected area like a forum where grievances can be aired out of the public eye. When it’s customers, the path is harder. One solution is providing excellent corporate customer service (and training the salesforce to do the same), along with a monitoring program so that you can respond online and make things right when necessary. You can’t control what people say about your company online, but you can make sure your side is heard in the right places, and do good, ethical business always.”

Jonathan Gilliam, President of Momentum Factor

“Our clients tell us they see immediate upticks in enrollments when move negative online links off their page, which tells us this problem directly affects company growth. Our industry is more vulnerable to negative online search results than almost any other type of business – a nasty blog or forum can easily kill any motivation to join. The only real way to deal with the problem is hire a reputation firm, like ours. Ignoring it is the worst thing you can you, and trying to do it on the cheap is ineffective at best. And a word to the wise: SEO firms usually know nothing about ‘reputation repair’. It’s not the same.”

Tim Haran, Senior Manager of Social Media at USANA

“Online reputation management is extremely important, especially in an age where information – text, photos, videos, can be shared and re-shared many times over with a few clicks. The conversation, whether it’s positive, negative, or neutral, is taking place online and it’s important for companies to be active participants in these conversations. I would argue negative information isn’t the greatest threat – it’s the way companies handle such information that could have a greater impact on reputation. Pay attention to the conversation, respond where appropriate, and don’t delete. Educate your independent distributors to avoid online shouting matches, which only increase the content’s relevance.”

Joe Quilter, Principal Consultant at PSP Group

“First and foremost we should remember it is a ‘conversation’ type medium. With conversations, we tend to be more relaxed and this is where many people have fallen foul. For the direct selling industry this issue is increased many times, as how can member organisations control what is said about their products by affiliated independent businesses? I would say with difficulty. The answer is to ensure each member organisation have a social network policy that each new direct seller signs up to. The sector could also look at having a short eLearning programme which each distributor could view and have this tracked in a management system as proof of compliance. The other is to encourage our communities to use less chaotic and controlled environments such as closed forums, blogs and community websites. We could also consider internal closed social media websites for our own sector.”

Your turn:
What do you think about the importance of online reputation? Is this an area where there is a significant potential threat if not managed well?  What would you suggest to turn this into an opportunity?

The champion in growth rate is Herbalife with 21% revenue increase from last year’s same period. Nu Skin follows Herbalife with 17%. Natura ranks 3rd place with 11% growth. Tupperware and Oriflame came with figures that were almost in line with last year. And Avon reported a revenue decrease of 2%.

Avon

Yes, Avon’s total revenue decreased 2% in the first quarter. Total units sold declined by 1% and active representatives were down 2%.

Avon’s core US business which excludes Silpada was down 2%, as average order growth, which benefited from product portfolio enhancements was offset by a decline in active representatives. Silpada sales declined 17% due to declines in both active representatives and average order.

Avon’s biggest headache is probably in Brazil where sales was down 4% last quarter. The company has been facing for some time distribution problems and fierce competition from local rivals. There is similar trouble in Russia, which once looked like a dream market. Avon’s sales in Russia was down 1% too, but the company enjoyed an increase in active representatives in Russia.

Kimberly Ross, Avon’s Executive Vice President and Chief Financial Officer said, “While our first-quarter operating performance remained challenged, we are making progress toward addressing some of our operational and cost-cutting opportunities.”

Herbalife

While commenting on the results, CEO Michael O. Johnson was once again happy with the geographical distribution of growth. He said, “Our business momentum has continued into 2012, with strong sales performance from each of our six regions.” The highest growth came from Asia-Pacific region (38%),but Herbalife also succeeded in achieving a volume increase of 23% in North Ameica, a region where quite a few direct selling companies are having difficulties in growing. Another interesting area is definitely, Russia. Compared to the first quarter 2011, this quarter’s volume was up 26% together with a 43% increase in new distributors.

Herbalife uses the name “daily consumption” to refer to distributor business methods that allows for frequent customer interaction and focuses on creating long-life consumers. Herbalife sees this one of the key drivers of its growth. Today, company estimates that more than 1/3 of its volume is coming through daily consumption.

It is interesting to note here that Herbalife announces it will begin testing a “maximum volume point limit” for first-time orders this year. The test will place a cap on first orders from new distributors. Herbalife expects limiting first orders will help the new distributors develop solid foundations for success, taking the extra time to understand the company, the products and the business before making any larger financial commitments.

Natura 

Natura net sales rose 11% percent to 1.28 billion Reais, from 1.15 billion Reais a year earlier.

The company sales went back to a double digit percentage growth after slowing down to an average 9% in 2011, less than half of the 21% growth achieved in 2010.

The number of Natura’s direct sellers grew by 17% to 1.43 million.

Nu Skin

Nu Skin holds the second place in the growth race. The company’s revenue increase was 17% in the first quarter.

In North Asia, Nu Skin’s highest-volume producing region, the growth was 2%. In China on the other hand, the company enjoyed a 35% sales increase, together with a 25% increase in active distributors. In South Asia/Pacific, the growth was 55%, in Americas 19% (14% in US) and in Europe 4%. Apparently, Europe continues to be an insigificant region for Nu Skin. Only 9% of Nu Skin’s volume was generated in Europe last quarter and 2 points down from what it was (11%) in the same period last year.

“Following a record year, we continued to generate great momentum in the first quarter as a result of the positive response to our ageLOC product launches and healthy trends in each of our regions,” said Truman Hunt, president and chief executive officer.

Oriflame

Oriflame’s sales were flat at €395.7m compared to €396.8m in the same period last year. The company’s closing sales force decreased by 6% to 3.6 million consultants. Unit sales were also down by 5%.

Oriflame’s problem-region CIS and Baltics remained to be as such with a negative growth for the fourth consecutive quarter. Euro sales decreased by 2% and closing sales force was down by 13% compared to last year. The company comments on this region, “The market dynamics remain challenging, and the actions addressing recruitment, reactivation and activation of Oriflame Consultants continue.”

“I am pleased with the first quarter results, despite the lower average sales force, primarily coming from the setback in recruitment during the end of the third quarter 2011. Our efforts to return to growth and improve profitability have led to promising results on sales, productivity and margins – however, market dynamics remain challenging.” said, CEO Magnus Brannstrom.

Tupperware

Tupperware reported first quarter 2012 sales up slightly as compared to first quarter of 2011.

Rick Goings, Chairman and CEO, commented, “I am pleased with our first quarter results including that we were able to beat the high end of our first quarter guidance range. Our emerging markets, that generated 59% of sales in the quarter, were up 4% and drove our overall increase as our established markets were down 3%.”

Tupperware had 6% sales decrease in Europe and 3% in North America (Beauty’s decrease is 13%). South America posted 24% and Asia-Pacific 11% increases.

Visualize for a second, a newcomer to the industry… S/he easily registers to the company through its web site, reviews the digital catalogue, orders the initial set of products, pays for them, and tracks the parcel… all through the same web site. After forming his/her downline, s/he monitors team members’ performances and sends them reminders, organizes conference calls when necessary. In today’s world, all direct selling company web sites have become “B2BC” online shopping sites. Oriflame has recently announced it received 80% of its orders through the Internet in 2011 worldwide. This ratio is 94% in Amway’s case in Turkey!

The things direct sellers can do on the Internet is definitely not limited to shopping and downline management. They can also promote their businesses through the social media platforms like Facebook, Google+,Twitter, LinkedIn and Pinterest. Plus, they can organize webinars for their groups or attend to those organized by their companies, through their notebooks, tablets or smart phones.

In short, direct selling is being digitalized at an amazing pace. I am not saying the face-to-face “real world” activities are losing importance. They are not! But  today, the way we do our business has had a new and very strong additional dimension. While we only had the “offline world” before, now we have both offline and onine worlds. That is having (at least) twice as much power on hands.

Hannah Parish was among the first direct sellers who realized this power. She realized and utilized it to make her lifetime dream of going to the Sundance Film Festival come true. This happened in 2009 and was found so interesting that it appeared on the New York Times! You can read the whole story here. Now, there are millions of direct sellers who are using online tools very successfully alongside the offline ones.

Today, it is not possible to think of setting up direct selling operation without providing e-shopping facilities to its members or social media platfoms to communicate with them. So, this is a huge transformation and it impacts two fields simultaneously: Direct selling industry being the first field, e-commerce the second.

That’s why I am saying, “What will enhance the growths of e-commerce and direct selling is the integration of the two.”

Shall we start with knowing more about you? How old are you, what have you studied so far, what did you do before joining direct selling?

Elcin Yildiz: I am 29. I got my B.A. in management. Then, I received my master’s degree in anthropology. I worked for a large company in their export-import department for a short while.  

Mert Yildiz: I am 31. I studied economics. After that I got my MBA in the UK and now I am doing my PhD in economics in Istanbul. Before doing direct selling, I worked in the field of corporate banking.

When your mother Simber Yildiz started network marketing in 1992, very few people had an idea about this concept in Turkey. So, in a way you two were born into network marketing. Did you help your mother’s business during your childhood?

Elcin Yildiz: Honestly, I was not of much help other than showing the catalogues to my friends at school.

Mert Yildiz: We had a very busy school life. So, we didn’t have much time left to help her.

When and how did you take the business over from your mother?

Elcin Yildiz: It was three years ago. We made a fresh start just like a new recruit. However, we knew the company and the existing opportunities. It has always been on our minds.

Mert Yildiz: This business can be carried out under a limited liability company, too. At the point when our parents transferred their company shares to us, our Oriflame consultancy business technically started. In fact, we also had a small event to celebrate this among us. We were in the network and knew the team members. So, we had a vision as to how to grow the business further.

Were there people around you trying to change your minds?

Elcin Yildiz: We did not see any negative reactions. On the contrary, we received many positive comments and encouragement.

Mert Yildiz: One of the best aspects of this business is that it can legally be left to children. Within the last three years, numerous Oriflame consultants approached us saying they were planning to do what our parents had done.  

Are you doing this full time now? Is there any distribution of responsibilities between you two?

Mert Yildiz: Our business volume requires us to do it full time. We need to work full time to be able to develop ourselves, to follow what is going on around us and also to provide coaching to our team. We work six days-a week, and rest on Sundays. A beginner on the other hand can easily make good money by working few hours every week, too. The money you earn is only dependent on how much time you are willing to dedicate.

Elcin Yildiz: We do this on a rotating basis. We emphasize teamwork very much and  try to complement each other. 

What aspects of this business do you like the most? What keeps you here?

Elcin Yildiz: If it’s security that you’re looking for, they say you need to be on payroll with a company. If you want freedom, you can establish your business, but this time, you won’t have the security. But you know this business has no risks at all. One of the reasons for me in choosing this business was that it provided both security and freedom at the same time.

 Mert Yildiz:  There are countless reasons! As a career, direct selling is the rising star of the 21st century. This is evident by the yearly growth rates of this industry. Moreover, home-based business has become a global trend that is followed even by the largest corporations.

Oriflame consultants are their own bosses. Besides working home-based, they can also determine their working hours. Personal development is very important in our business model. The consultants are supported through numerous training programs on selling, human relations, presentation techniques and time management.

Every year, Oriflame takes hundreds of its consultants from Turkey to conferences abroad. Most recently, we were at the global conference in Rio de Janeiro that was attended by over 1,000 consultants from all over the world. We were very proud there to have been announced as having the 3rd highest-growing team in the world!  

These are few of the aspects that I like the most in our business.

Generally speaking, do you earn substantial amount of income?

Mert Yildiz: What one earns depends on individual performances, so it varies. A newcomer can have a monthly income of TL 1,000  (approx. USD 550) after working for a few months. In 2011, Oriflame Turkey paid in excess of TL  25 million (approx. USD 13.9 million) as bonuses. This is an impressive amount. I know many consultants who bought their homes and cars through their Oriflame businesses.

My last question would be regarding your age group. In your opinion, what should direct selling companies do to make this business model more appealing to younger generation?

Elcin Yildiz: The income, travel, personal development and job satisfaction opportunities that the network marketing model provides can be found only at a few companies elsewhere. So, the younger generation must be made aware of all these. Young people can very well make use of what they learn at the universities in this model. We must show this to them. I, for instance, make use of my education in management while I lead our teams, and of my education in anthropology when trying to figure out consumer behaviours. When we attend the career days at universities, our program is always the most crowded of all. We receive very positive reactions from the students. And on top of everything, social media is now adding an additional dimension to our business. So, one of the ways to make our business more appealing to younger generations is to be more active in social media.

Thank you so much for this interview. You absolutely set a very good example in our industry, worldwide. I sincerely wish you the best in your careers. Would you like to add anything before we end this?

Elcin Yildiz: Network marketing provides tens of thousands of women with financial independence. I see it as a career with an idealistic aspect and even as a social responsibility project. We are proud of being a part of it!  

Mert Yildiz: Oriflame’s operation in Turkey has been among the three highest-growing in the world. Turkey on the other hand, is still behind many countries in terms of direct selling’s penetration. This shows us the great potential here. I believe Turkey will be one of the leading countries in the global direct selling arena in the coming years. You made great contributions while you were Oriflame Turkey’s Country Manager. And now, as the members of the second generation, we are very happy to be able to have this interview with you. Thank you!

Gamification is a very interesting area. Totally new and a very strong trend in the digital world. It is not online game, it is not the game “app” you have on your smart phone. It is much more serious than that. It is just as fun as these, but gamification is all about business! Gamification is using game elements in a non-game environment. It is turning fun into functionality. One very simple example to this is LinkedIn’s profile progress bar that I am sure many of us all aware of.

Gamification started gaining popularity in late 2010, and booming in 2011 and 2012. It is expected to be a USD 2.8 billion-industry by 2016. According to the survey results shared during the conference, of those who have already chosen to use gamification, 47% say they have done so to increase user interaction, 22% loyalty, and 15% brand awareness.

Apparently more and more companies “gamify” some of their internal processes where they want better results. It is fun afterall! One example here: LiveOps is a call center providing services to its clients with its 20,000 operators working independently from home (Does this sound familiar?). This company built a portal and trained, incentivized, and grew its workforce with amazing results. This portal had missions for people to complete as well as trainings. The incentives they used were simple: People who get more points get more business and earn more money. (Does this sound familiar, too?)

Results? Their portal achieves a 80% adoption rate in the first week. These adopters outperform non-users by 23%, with an average of over 9% increase in customer satisfaction.

What I clearly see is that there is a huge opportunity here for the direct selling companies. Especially for those companies who are looking for ways to make improvements in key behaviours on the field: Recruitment, activity, team-leading, retention, participation to training events… you name it. You can surely add to these the internal processes such as order processing, complaint handling, etc.

It is not a secret that the members of the Gen Y just love games! However, you are completely wrong if you think gaming is restricted to this age group. Statistics from the 2011 Los Angeles Games Conference tell us that 30% of gamers are over 45!

Mike Walsh, one of the leading futurists adds to all these, “If your web sites do not act like a game, the new generation will not pay attention.” In fact, as Debby Hemley, a prominent social media consultant puts, “More and more businesses are using gamification to create brand awareness and drive user engagement. Gartner Inc. predicts that more than 70% of Global 2000 organizations will have at least one gamified application by 2014.”

To me, few industries are as well-suited to gamification as direct selling. The trend is there. It is up to the companies to be a part of it…

This month’s topic is “selling skills”. We asked if selling skills were important to succeed in direct selling. Here are the responses in alphabetical order:

Richard Berry, Former Director General of UK DSA (Direct Selling Association)

“Apart from big ticket products, the answer is ‘No’, in my view. Devising ways of making it simple and easy for a direct seller to attract attention and generate interest in a product (the first two steps in the traditional five stage selling process) should be a company’s top priorities in supporting inexperienced direct sellers – many of whom are initially turned-off by the word ‘selling’. Coupling these two tools with the power of personal recommendation and peer group relationships is the reason why direct selling will always be more effective than conventional retailing – particularly for novel and innovative products.”

Deb Bixler, Home Party Plan Trainer, Direct Sales Radio

”Many people coming into direct sales do not want to be sales people. As a matter of fact it frequently is an objection to joining a direct sales company. Many times a direct seller sharing their opportunity hears: ‘I hate sales’ from their potential new consultant. Good sales people are actually just good connectors. Sales comes from a Scandinavian word meaning ‘to serve’. A direct seller who keeps the focus on serving the needs of the market and/or of their customers will always do well. Whether working online or offline sales is creating connections. When you connect on a personal (emotional) level you will become a good sales person. Consultants who stop selling and start making friends, focus on others and create connections are the most successful in the industry.”

Garry Ford, Owner of Garry Ford & Associates

“Network marketers talk about ‘sharing’ the products versus ‘selling’ them. Products to the consumer or no business-building occurs. Mary Kay Ash once said something like this: ‘Until someone buys something, nothing happens’. So, whether ‘sharing’, ‘selling’, or ‘retailing’, we do have to transfer products from our company to our customer. I have always taught that the three things we do in direct selling are: Use the products, share the products, and share the opportunity. Everything we do falls under one of these categories and each one is vitally important.”

Charlie Orr, Executive Director of DSEF (Direct Selling Education Foundation)

“Of course, ‘Yes’ is the answer… We’re direct sellers! Often, though, a new direct seller’s early success is not because of sales skills, but because of passion for their company’s products and a desire to share that passion. Then, it’s up to the individual and surrounding team to access direct selling’s full potential. With company and upline support, the consultant is empowered to develop a thriving business. Now, consider one quality which underlies successful selling: The ability to build authentic, enthusiastic relationships based on trust. Relationship building is the core of the direct seller’s skill set. How are relationship’s built? While books on selling skills are plentiful, the basic principles involve behaviors like asking questions, listening and solving your customer’s needs. Did I mention listening? Serve your customers and your customers will reward you!”

Lisa Wilber, Avon Senior Executive Unit Leader

“Although I do believe that selling skills are important, in direct sales our business is based on relationships so I believe a skill that is needed more by direct sellers is the ability to build relationships with customers and maintain those relationships. I understand that many of the traditional sales ‘steps’ are the same, such as asking for the order (close), but in direct sales it is my belief that establishing relationships with a lot of people and maintaining those relationships is paramount because usually it is not a one time purchase and the success of the salesperson relies on repeat business.”

Edward Zieba, Owner of Direct Sales Systems

“I strongly believe that ability to attract people who will sell products to final customers is one of the core skills of any direct sales company (maybe apart from those creating consumers’ clubs). However, I equally strongly believe that ‘hard’ selling skills will work just short term. Direct selling is more about social skills, ability to make friends, helping people to realize what their problems is, how to solve it and showing empathy. If that works then you don’t need to make hard selling but rather telling people how the product helped you and how happy you are about it. Sounds pretty emotional but really works and keeps your customers with you over long periods!“

Below table shows us that the company has increased its sales by 83% in the last five years. The situation is even better in its profit generation ability: 119%. As a result, while Herbalife was making $136 operating profits out of each $1,000 of sales in 2006, this is now $163. So, Herbalife not only grows, but grows and increases its profitability. Quite a success!

When commenting on the 2011 results, CEO Michael O. Johnson said, “The momentum in our business continued throughout 2011 as we set new records in net sales, earnings per share, and free cash flow. Equally important, we continue to set records in many distributor metrics that are the foundation for continued growth, including activity levels and retention rates of sales leaders.” In fact, the below table showing the company’s progress in various metrics is striking:

To me, another area where Herbalife is very strong is its global geographical distribution. When a company grows in a region where its volume depends heavily on, things might seem OK. But what if the situation changes due to some external factors or to some hiccups at the local / regional management? Oriflame is a good example to this. Oriflame has traditionally been very strong in the CIS and Baltic countries in Europe. In 2010, this region constituted 57% of Orflame’s business. A drop in sales in this region by 12% in the last quarter of 2011 impacted the company by a negative 7% worldwide. When we look at the geographical distribution of Herbalife’s business on the other hand, we see a much more even picture. Herbalife divides the world into six regions: North America, Mexico, South-Central America, Asia-Pacific and China. Of these, the strongest is Asia-Pacific but still makes only 27% of Herbalife’s worldwide business. The diversity of the markets Herbalife opened in 2011 is an evidence:  Georgia, Belarus, Lebanon, Mongolia and Ghana!

Just as important as this evenly distribution is that Herbalife enjoys healthy growths in all regions. We do not witness this quite often at other direct selling companies. We know for instance, not many companies are very happy with their North American operations. Herbalife managed to increase its sales in this region by an amazing 14% between 2010-2011. This is something CEO Michael O. Johnson proudly stresses in almost all his quarterly comments and I think he has all the rights to do that.

Many of the times, good results follow professionalism.You might want to check Herbalife’s most recent Investor Day Presentation .

Setting Objectives (Why are we doing this?)

The first step is defining the objective of this action. The usual failures here are defining wrong goals or setting goals that do not support each other. Oh, there is one more that is probably even worse than these two: Setting contradicting objectives.

Typical objectives in direct selling could be product trial; new customer acquisition; cross selling; upselling; getting rid of slow-moving products; increasing average order, recruitment, distributor activity, and retention, to name a few.

Determining Targets (What do we want to achieve in terms of numbers?)

If you want to be precise, this is possible only if we have statistical information or past data on hand. In many of the cases we don’t have this luxury so we have to rely on experiences or intuition. Being realistic (that is, being neither over-optimistic nor over-pessimistic) is of utmost importance at this stage.

Deciding on Reward (What will be the “carrot”?)

a. The carrot?

This is one of the most important decisions during the planning process. As a general rule, the carrot can be anything that can induce the desired action. Using a slow-moving product as a reward could be a mistake. It is hardly possible for a product that is not being demanded to miraculously make a promotion succeed.

Another consideration here is about the value of the reward. We should always remember that a reward’s perceived value and its actual cost are entirely different. The wider the gap between the two is, the more likely the reward will be succesful.

One last point, somehow in relation to the above issue is the offer’s “real cost”. Most of the time, the least costly alternative is one of the company’s products that it is already selling. However, if the promotion succeeds, this means that product will sell much less at least for a certain period of time. This is a hidden cost that needs to be taken into account.

b. Which level of activity are we going to reward?

This is another point of importance. The desired action should always be the “maximum possible”. However, it is not always easy to know in advance, what that maximum possible is. If you put the bar too high, the promotion will not work regardless of how attractive the reward is. On the other hand, if the bar is set too low then the company will end up with unnecessarily high promotion expenses.

Maintaining Control (What if the promotion goes out of hands?)

Some promotions are costly. Actually, some are very costly. There is no problem with this as long as that route is chosen with a purpose. Control though, is even more important in such a situation.

Try to maintain control from day one. That is, keep the tools at hand to be able to stop the promotion at any point before it gets out of control. One way to do this to announce the promotion “until stocks last”. As no one but you would know what the real stock level is, you secure yourself here. Another alternative is setting an ending date that is sooner than the actual ending date you have in mind. This leaves you with the possibility of extending the promotion, as needed.

Communicating (What and when are you telling?)

Unfortunately, communication stage usually does not receive the emphasis it deserves. However, regardless of how well-planned a promotion is, it just cannot work unless it is well-communicated. All those who constitute the participants (company management, employees, goods and service providers, direct sellers, and the end-users) should be informed comprehensively and soon enough to be able to respond to that promotion.

Measuring (What did we say this promotion was for?)

Typically, every promotion should be measured for the results achieved against the original aim. This step provides us with the following: 1) The discrepancy between the results and the targets. 2) More importantly, lessons for future promotions.

Punishing (Who should you blame if the promotion fails?)

If the promotion does not produce the desired results in the end, we should never point out and complain about external factors. Obviously, we should have made something wrong at one (or maybe more) of the stages mentioned above.

Would you like to share any comments or experiences?

1. Nu Skin

If we take last five years’ picture combined, Nu Skin is the winner with a considerable margin. Nu Skin has succeeded in increasing its operating profit from USD 55 m in 2006 to USD 234 m in 2011. This is a growth of 327%! In the same period, Nu Skin’s sales growth was 56%. From a different angle, Nu Skin’s operating profit was 5% of its sales in 2006. This increased to 13% in 2011.

While noting this amazing performance, a careful eye will notice that Nu Skin’s profitability slowed down significantly in 2011.

2, 3, 4. Tupperware, Natura, Herbalife

The next three companies have growths in their operating profits that are similar to each other in percentage: Tupperware 125%, Natura 121% and Herbalife 119%.

It is important here to stress the fact that among the three, Herbalife is the only one that managed to increase profits significantly in 2011. And this increase in profits in 2011 (45%) is almost twice as much the one it has in sales (26%) in the same period.

5. Oriflame

Oriflame ranks the fifth with a modest 25% operating income increase in five years. Oriflame’s operating profit generation has been unsatisfactory especially in the last three years: -22.4% in 2009, +8.3% in 2010 and +0.5% in 2011. It seems as if the company put a brake on profits at the end of 2008 and has not released it yet.

6. Avon

Avon sits at the last place with 12% operating profit growth in five years. The company is the only one among the six that reported decrease in two years out of the five. Moreover, Avon’s 2011 profit performance (-20.4%) was much worse than its sales growth (3.9%).

………….

Any comments or feedback on Big-6’s profit generating ability?

This month’s topic is “multichannel marketing”, the strategy where the companies utilize multiple sales channels simultaneously to reach their customers. The question was whether this strategy was a viable option that could consequently further grow the direct selling industry.

The answers are below (respondents in alphabetical order):

Kent Grayson, Assoc. Prof. of Marketing at Kellogg School of Management

“For some companies, adding direct selling as a distribution channel is attractive because it gives the company a chance to attract a customer segment that is different from its current customers. However, any company that uses multiple distribution channels needs to worry about competition between channels (or “channel conflict”). Especially if all of a company’s channels offer exactly the same products, this can demotivate channel partners and hurt sales. So, direct selling can be a viable option as part of a multi-channel distribution strategy, but only if the company has an excellent system for handling channel conflict , and/or explicitly offers different (and hopefully non-competing) products in each channel.”

Rick Harris, Managing Director of Customer Faithful

“One of the biggest impacts of today’s fragile economy is high unemployment, especially amongst young people. This group is typically better educated than any previous generation, including university degrees and multi-lingual skills. In addition, they are ‘digital natives’ – born into a world of Internet, mobile phones and social media. They effortlessly switch between digital and physical channels, and ‘connect’ with their social circle almost 24/7. Yet, despite such digital freedom, the combined cost of education and unemployment has restricted their income. This generation represents a huge growth potential for manufacturers and direct selling companies – a unique opportunity to reach out to a ‘naturally-networked’ community.”

Nancy Laichas, Director of Marketing & Communications at Direct Selling Education Foundation

“The demographics of your distributor and consumer audiences can determine the receptivity and fit of various channels and technologies that can complement your distributor’s efforts. Channels – the Internet, catalogs, face-to-face marketing- should be viewed as tools that support your salesforce, and companies must weigh every decision based on whether it will benefit the field. Anything that represents a threat – real or perceived – to your salesforce can turn a potentially good idea into a problem. Ultimately, direct selling is a business based upon and driven by people, and maintaining this focus is critical to sustained success.”

Sandra Lizioli, Owner of Bridge the Gap

“Yes, as long as it’s integrated. With an integrated approach, it gives customers a wider choice of where and how to buy, and manufacturers and distributors a greater opportunity of where and how to sell and engage with existing and new consumers. Simply put, multi-channel marketing helps boost referrals, retention, and repeat buying in a cost-efficient way.”

Paul Southworth, Director General of UK DSA

“In todays fast moving and ever evolving routes to market I strongly believe that all companies need to consider multi channels operating simultaneously within their organisations. We currently have many examples of direct sales companies who have developed multi channel options successfully. Companies who have traditionally sold their products through person-to-person, catalogue distribution or home demonstrations, are now, in some cases, combining all three and have also added direct electronic access to products and services. When you then add the enormous impact of social media and the dramatic increase of business generated through that channel, you realise we are truly living in the world of multi channel marketing and sales. This is the present and I have no doubts that the trend will continue to develop and therefore continue to enhance the growth of direct sales.”

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Please click here for a recent article on multichannel retailing that appeared on Customer Retail Experience.