4 Fundamentals of Reversing a Sales Decline in Direct Sales
Guest author Alan Luce is Co-Founder and Managing Principal of Strategic Choice Partners (SCP), a consulting firm that provides strategic support and services to help today’s direct selling companies thrive.
Alan is a US DSA Hall of Famer, and member of the DSEF’s Circle of Honor. He’s served in executive roles at Tupperware, PartyLite, DK Family Learning and other companies, and has been a part of launching more than 30 direct selling companies over his career.
Guest post by Alan Luce
4 Fundamentals of Reversing a Sales Decline in Direct Sales
Here’s a familiar story: Your business has entered a period of decline in sales and recruiting. After a period of years of solid growth in sales and sales force numbers, the momentum has not only stopped, but appears to be working in reverse. The management team pulls out all the stops using various promotions and incentives that have worked in the past to stimulate sales and/or recruiting. These tried and true “get back to basics” promotional techniques mean that the company is spending more promotionally and it will only pay off if key operating metrics are positively impacted. And that happens less than most executives like to admit. After a year or more of trying the “tried and true” techniques to reverse the decline, nothing has worked. What now?
I know this story well. I lived it as a C-level executive at Tupperware in the 80s and early 90s. Tupperware US peaked at more than $600 million in sales in the early 80s. Then, in the mid-80s, it started into a period of persistent year-over-year declines. At first, we went back to the “tried and true” promotions and juiced up the prizes and values. It didn’t work. Then we decided that we had to redo all of the training on basic sales and sponsoring techniques. That didn’t work. We spent a fortune on the Boston Consulting Group to examine our business. BCG suggested that direct selling as a method of selling may be in decline. They made the prediction that in spite of the fact that DSA annual industry statistics showed that the industry was growing with new players like The Pampered Chef, a resurgent Mary Kay and PartyLite Gifts growing like crazy.
By the time I left in September of 1992, sales were down over $150 million from the peak and declines continued through management changes, layoffs and failed programs that helped the company but did not help the field. What went wrong?
In the wonderful accuracy of hindsight, we now know that what plagues Tupperware were two fundamental changes in the expectations of customers and prospective members of the sales force. In the early 80s, right at Tupperware’s peak, a number of existing and new party plan companies introduced multilevel compensation plan concepts into their plans. Within a few years, it was clear that sales leaders in the companies with multilevel compensation plans could make a lot more money than Tupperware managers and distributors, and with much less effort and risk. Tupperware’s field positions went from being among the best in direct selling to no longer competitive within a period of five years. The trends were clear by the mid-80s.
We ran field tests of simple multilevel pay plans that showed great promise. These programs were ultimately killed as “too expensive” and “not compatible” with the Tupperware culture. It was in the mid 90’s, long after I had left, that the company finally adopted some multilevel pay elements to their career plan and began to stabilize the US business. And while Tupperware has had and continues to have significant international businesses, the US has never regained the status or success it enjoyed in the 90s.
I took the time to share this story because I had a world class lesson in how not to address a direct selling business in decline. Later, I spent a brief period as Senior VP of Sales and Marketing at PartyLite in the late 90s. I saw clear signs of a management team captured in a bubble of more than 10 years of success. They were totally focused on their internal matters and paying little attention to changing forces in the marketplace. “Having seen this movie before,” I chose to resign my position. I just did not want to live through the experience I had at Tupperware again. Within a year or two, PartyLite entered its own long period of decline.
So, what are the lessons I learned from these experiences? What are the steps or techniques a company in decline should employ to figure out the problems and begin to right the ship?
Lesson #1: Always Understand Today’s Marketplace
More often than not, long successful companies that go into persistent decline are in decline because their program is no longer competitive with other programs and opportunities in the marketplace. A company thrives when the combination of its products or services combined with its business opportunity and field services meet or exceed the expectations of customers and prospective sales people. Practices, service levels and technology tools for the field tend to become encased in “mental concrete” with each year of success the company has. The more years of steady success, the more stubbornly the management team will cling to their existing programs as “the basics of our success and culture.”
In my personal executive experience and working with a number of companies in decline, the reasons are usually not the result of poor execution of existing programs. Rather, the products, services, access, training, communications and field income opportunities no longer meet the expectations of prospective customers and prospective sales people.
The lesson here is look first at what is happening in the marketplace. What has changed? What does the marketplace demand of companies?
Study the best competitors in the marketplace. With cold objectivity, compare what you are doing with what they are doing. You may well need outside help to effectively do this in order to overcome internal bias and achieve an objective comparison. The outside help needs to be objective analysts with a deep understanding of what is working best in today’s market environment.
Lesson #2: The Field Leaders Who Got You Here Probably Can’t Get You There
Your senior field sales leaders are usually not good sources of information about what is needed and for ideas to fix the problems. Why? Because they built their success using the very programs, policies and marketing methods that may no longer be competitive! They believe in what they did to build their current success. Too often their response is to “just get back to basics” to fix the problems. Back to basics is usually moving in the wrong direction.
Lesson #3: Keep Up with Your KPIs (and Theirs!)
Compare your company KPIs with the best in the marketplace. Analysis of your KPIs against the best industry standards is a useful way to identify where the company may be spending too little, too much or simply may no longer be competitive. Again, it is often useful to bring in an experienced industry financial management expert to add the needed degree of objectivity and unbiased analysis.
Lesson #4: Focus on the Feedback from Your Newest Distributors
Survey your newest sales people and especially those who leave. The real pulse of your sales force is usually located in your new recruits and first level leaders, not with your long-term senior leaders. What obstacles are they finding when it comes to recruiting? What were their experiences as new sellers? What worked and what didn’t? Why did they leave?
In today’s market, there is an increased focus on meeting or exceeding customer and sales force expectations. Direct sellers now must compete for customers with ecommerce affiliate and preferred customer programs as well as compete with GIG-centric companies like Uber and Grub Hub for folks looking for a side hustle to generate extra income. Your new sellers and first level leaders are in the front lines of the marketplace competition battlefield. Talk to them! Listen!
In summary, a successful turnaround strategy for a company in decline requires the management team to be willing to examine every aspect of their business against the best of best in the marketplace. The focus needs to be “what are they doing that we are not” rather than wasting time with a deep internal look seeking what may have gone wrong. Once in a while there is a slip in execution or service that is the reason, but that is the exception and not the rule. That problem will come to the surface most quickly by examining your KPIs against the best of the best and by talking in depth with your newest sellers and leaders.
Successful turnarounds are difficult on many levels. In some cases, the growth of the company has simply outgrown the expertise and skill sets of the founding management team. Those home-grown company loyalists may need to be replaced with folks with broader experience and more competitive skills. Those are difficult situations emotionally and culturally.
If you find yourself in a persistent decline situation, remember these four important lessons and techniques and, if necessary, get outside help!