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 a 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.
Lessons from the Lockdown: Part Three: The Pandemic Is Over, Now What? (*)
Imagine, if you can, that it is some point in the future and the threat from the Covid-19 pandemic is now mostly behind us. We have all has the vaccine and can begin to return to normalcy. Granted, we don’t know exactly what the new post pandemic normal is going to look like. We’re pretty sure that it will not be a return to exactly what it was before the pandemic but it is widely agreed that the following will be true:
- Unemployment levels will continue to come down to 5% or so as the economy kicks back into high gear. Many of our current part-time sellers who are currently unemployed will have the option of going back to an employment position. Can your company’s income potential for a person willing to work at your business 20 to 40 hours a week compete with employment opportunities?
- Our potential customers and sellers will once again be participating in weeknight events outside the home; church, clubs, kids’ sports, classes, hobbies, etc. etc. Getting their time and attention will become more difficult again. How are direct sellers going to capture their attention and motivate them to devote some time to our sales demonstration?
- Will direct selling ever return to a majority of sales coming in person events either one to one or one to many (parties) sales demonstrations? If direct selling becomes effectively an online selling process, what does this mean to company cultures and stories built around the idea of developing personal relationships. What’s more, virtual online sales force meetings have been well received by the sellers. Will virtual conventions replace in person national and regional sales meetings very personal hands on recognition and sales leader bonding during the down times. We have believed that these events are essential to building the culture and instilling company values. Can virtual conventions accomplish the same goals?
- Social media platforms and smart phone technology tools have been immensely important in allowing direct sellers to switch from in person relationship selling to online relationship selling.
- The regulatory environment continues to evolve with no clear rules that direct sellers can rely on as they develop their product claims, recruiting pitches, and compensation plan structures. One element of the regulatory drive is to make the industry more strongly focused on retail selling to end user customers who are not participants in the compensation plan.
Some companies are going to have to make changes to their compensation plans to create more profit potential from retail sales and shift the story from depending on aspirational “change your life from rags to riches” stories. Selling the new plan and business building strategies can be a real challenge and implementation of the new strategy is high risk to say the least.
These are some of the key issues that company senior executives must recognize and prepare strategies to address. But preparing the strategies is only part of the story, persuading senior field leaders to accept the changes and adopt the new strategies and tactics is the real challenge. Based upon our work with client companies during this time, it has been quite apparent that finding the ways to work online during the lockdown has been primarily led by mid-level leaders and part-time sellers. With a few notable exceptions, top field leaders have not been the driving forces behind developing new tactics and driving change.
Moreover, top leaders have too often led the resistance to change, especially if proposed changes to the compensation plan to improve retail profitability might reduce their income potential.
So, Now What?
What follows is a suggested process of defining your post pandemic strategies and implementing the changes you feel will be needed for your Company to make a successful post pandemic transition:
1. Identify your best lockdown performers in the sales force and learn what makes them so successful. Take those learnings and create training programs to promote those lessons and build or buy the online tools to make them as effective as possible. What each Company is looking for is a message that tells prospective sellers why joining that Company is the best part-time income opportunity available and train your sales force to use that message for sponsoring.
2. Game out the possible consequences of a return to a more normal time without the necessity to for social distancing, limited group gatherings and fully open restaurants and bars. What will this mean for your business? How will this help or hurt a person’s ability to be successful selling your products and services? How will a return to more normal employment rates impact your Company’s ability to attract sales people who, in turn, bring new customers? How will that change help and how will it hurt?
The job of senior management, among other duties, is to understand the marketplace and the civic environment and chart a course of action that will give the Company the best chance to be successful in a time of change. Gaming out the possibilities and planning strategies to optimize helpful trends and other strategies to counteract negative trends is a critical management skill. Producing such strategies is quickly becoming a business survival imperative.
3. If your Company has not moved toward providing your sales force with the technology to essentially conduct all aspects of their direct selling business on their smart phones, you need to move in that direction quickly. During this lockdown many, if not most, of our sellers, have learned to conduct their business online.
But the ability to sell and sponsor online was not the only things they learned. They found that doing business on line was easier, more convenient and required less time. No to and from travel time. No to and from expense for gasoline. No need for a car for that matter. No need to worry about child care when you are out of the house doing business. As a matter of money earned for time spent, working from a computer at home is far more efficient and raises the income received for the time spent on the business by the sellers.
As our society returns to some levels of pre-Covid-19 activities our sales forces expect their companies to provide them with the ability to conduct business on their phones. The rapid advance of mobile phone technology to enable the sellers to do so is indicative of that demand. Ignore or put this off at your peril. Not offering up to date mobile sales capability, access reports, CRM customers information and catalog access will put your company at ta distinct recruiting disadvantage.
4. Anyone who tries to tell you that they can predict where the regulators are going with the evolving rules to govern direct selling simply does not know what they are talking about. Between the court case challenges of FTC authority and the ominous statements coming out of FTC officers the only thing we know for sure is that a final set of rules that we can all rely on has has yet to be promulgated and approved.
So, what do we do in the meantime? Among other lessons coming out of the lockdown is that those companies that offer a reasonable profit for selling at retail to end user customers who are not members of the company compensation plan are the companies that are doing the best during the lockdown. This retail focused trend started several years ago and the lockdown impact has simply accelerated the shift from consumption to retail selling that had already been underway.
If your company is looking to revise their program to focus more on retail sales, keep the points I set out below in front of mind as you consider the options:
1. To make a successful transition to a more retail focused plan you must be sure to make selling at retail as profitable and easy to accomplish as possible. Typically, that means offering a retail profit of 20 to 25% of the retail sales price of the product. To recruit sellers successfully they must see the opportunity the company is offering provides a good opportunity to make $15 to $25 dollars for every hour they spend selling.
2. If you are modifying an existing plan, making retail selling more attractive and compelling will require either reducing company profits or shifting comp plan payouts from the middle and the top of the plan to fund the retail profit payout. In this situation it is imperative that the company senior management communicate and win the support of the field leadership to make the change.
To garner this support requires that management be more transparent than they may have been in the past about the percentage of revenue that is paid out to the field and the market trends and forces that are driving the need for change. It is really important that the field leaders fully understand that the shift toward retailing is not being forced upon direct selling by regulators. Market trends, the competition of the gig economy and the rise of ecommerce retailing are forcing this change even more than regulators.
In fact, one could argue that the regulators are simply trying to move the rules to conform with the unstoppable, unchangeable market forces. That does not mean that the regulators may not have gone to far. When believe that to be true, then the regulators must be challenged. However, in my view the evidence on an inevitable trend are clear.
3. Test your programs to find effective retail focused initiatives before making changes to the compensation plan. Top management should not expect the field leadership to simply accept a major change without proof that what is being substituted and driving that change works and that the data unequivocally demonstrates the new initiative’s success.
All in all, there is much for us to learn from the impact of the Corona virus lockdown about our businesses and our society. Don’t miss this opportunity. Take the time to really think about what has changed, what may stay the same and what your company must do to be successful in what is a very dynamic and rapidly changing environment. We may never see an opportunity like this again!
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