September 01, 2016
Keys to Success Part 1: Customer Acquisition
by Andrea Tortora
Of all the misinformation about direct selling, perhaps the most often repeated—even by those who work most closely in the field—is the description of direct selling as an industry.
Most common dictionary definitions of the word “industry” refer to a collection of enterprises that deliver a common category of products or services, such as the skincare or nutritional supplement industries. Both of those industries include a number of direct selling companies, but they also include companies that sell products through wholesalers, in traditional retail stores, via e-commerce and direct to consumers. Direct selling, then, is a channel by which some companies opt to distribute products and services.
Why is this distinction important? By studying direct selling not as an industry but as a channel of distribution, it becomes easier to focus on the shared fundamentals of success. Over the next three months, Direct Selling News plans to use this lens to take a closer look at three of the drivers of direct selling as a distinct channel for distributing products and services: customer acquisition, recruiting and onboarding new consultants, and retaining those individuals as active members of an independent salesforce. By honing in on the factors that make direct selling effective when compared to other channels of distribution, we can accomplish two things: identify best practices that can both promote sustainable growth for companies and promote a broader understanding of the unique value proposition direct selling offers in the marketplace.
To begin the project, the DSN team conducted a review of the websites and key marketing materials for the direct selling companies experiencing the fastest growth in the U.S. market. This provided insight into the techniques leading direct selling companies are using today as well as served as a framework for conducting in-depth interviews with company executives, researchers and other thought leaders.
CUSTOMER ACQUISITION STRATEGY No. 1: DELIVER QUALITY
As with any channel of distribution, getting products and services into the hands of customers is the ultimate measure of success in direct selling. The direct selling companies that do it best are laser-focused on the quality of the products or services they offer.
Take for example Florida-based Team National, which sells two-year or lifetime shopping discount memberships for a variety of products and services from mobile phones to furniture. The company saw its net sales increase 38 percent from $399 million in 2014 to $549 million in 2015, ranking No. 36 on the 2016 Global 100 list and placing it among the fastest-growing direct selling companies operating primarily in the U.S. market. The company’s top priority, says Vice President of Membership Services Andres Forero, is to make sure its vendors deliver savings.
Team National tracks how members use their memberships and which vendors they purchase from most often. If no one is using a specific vendor, that relationship is severed and replaced with a new one that customers are more likely to find beneficial, Forero says. The company also is investing in system improvements that allow members to more easily access their discounts through mobile devices.
“We are always looking at the quality of products we are offering,” Forero says. “That is the glue that holds us together.”
CUSTOMER ACQUISITION STRATEGY No. 2: COMMUNICATE THE VALUE
Having a high-quality product or service is critical, but so too is communicating that value to potential customers. This is where the personal service of an independent salesforce adds so much to the value chain. “It’s about conveying the idea that the products available are as good as or better than what the consumer can get in a traditional retail channel,” says Michael Solomon, a marketing professor at St. Joseph’s University in Philadelphia and a consumer behavior consultant who also serves on the board of the Direct Selling Education Foundation. “When sellers dig deep and find the pain points for people, they can help them gravitate toward a solution that makes their life easier.”
How can companies accomplish this? It could be a product demonstration or strategic use of social media that puts the desired product into the hands of blogging opinion leaders or gatekeepers who are influential within consumer communities. Millennial customers especially pay attention to online networks. Fashion bloggers are one example; such writers are not part of a particular industry but have made themselves influential. Consumer products giant Procter & Gamble realized the pull of mommy bloggers and harnessed the voices of these women to help sell its Pampers brand of diapers. The strategy played a big part in making Pampers a billion-dollar brand.
A company’s website is often the first or second place (after talking with an independent business owner) that a customer may go to learn more about a product or the company itself. Given that fact, it is difficult to overemphasize the importance of establishing and maintaining a high-quality, consumer-centric website. “Transparency on the website is what most people look for in terms of answering the question, ‘Do I trust this company?’ ” says Dr. Brenda Cude, a professor in the College of Family and Consumer Sciences at the University of Georgia. “Being transparent is positive messaging.”
The homepage reveals much about a firm, its philosophy and what is driving the business, and the functionality of the site can promote a level of trust between the consumer and the brand. Simple, everyday language is appealing to consumers; websites that use jargon and make it hard to understand what the product is are not customer-friendly. Customer-centric websites should answer questions such as:
- How does the product work?
- Are there clinical studies to back up results claims?
- Is there proof that the stated product results are correct?
While customers are, by definition, most interested in the product information on a company website rather than the business opportunity, the language used to describe the business opportunity also can influence purchasing decisions. The key here, according to Cude, is to keep things simple. “The standard consumer advice is that if you don’t understand it, back away,” says Cude, who also serves on the Direct Selling Education Foundation’s board of directors.
Direct sellers should also let go of stale jargon, Cude says. For example, the average consumer may not understand the phrase “network marketing,” but certainly would “peer-to-peer.” “It is a best practice to fill in the blanks before others do it themselves,” Cude says. “Direct selling companies could be pushing people away just by the language they are using.”
CUSTOMER ACQUISITION STRATEGY No. 3: DEVELOP and REWARD BRAND LOYALTY
Once customers make that first purchase from a leading direct selling firm, how does the company keep them coming back for more? With loyalty programs, discounts and free shipping, to name a few techniques. When done well, repeat customers feel like VIPs.
To achieve this goal, anti-aging and beauty products company Nerium International zeroes in on a customer’s first 90 days and techniques that will make the company’s products part of his or her daily routine. “We want them to use the product and take their own before-and-after pictures to see the results, reinforce the product and give them reasons to stay,” says Chief Marketing Officer Amber Olson Rourke. Nerium loads in plenty of rewards and incentives in those first three months, including 10 percent off an order, free shipping and other perks for maintaining an order, such as welcome calls and frequent follow-up calls from a dedicated customer support team. These “happiness heroes” nurture the customer’s relationship with the company and between the customer and his or her Brand Ambassador. It has paid off for the Texas-based company, which saw net sales increase 28 percent from $403 million in 2014 to $516 million in 2015, ranking it No. 38 on the 2016 Global 100. “We treat our customers like gold,” Rourke says.
What companies like Nerium know is that it’s cheaper to keep a customer than get a new one. Loyalty programs and discounts that keep customers coming back or re-engage them in new ways are critical to maintaining the customer relationship. In some cases, customers receive better product deals than consultants. When that happens, watchers in the channel say, it’s clear the company is truly customer-centric.
CUSTOMER ACQUISITION STRATEGY No. 4: TRACK THE METRICS
Some companies having success with customer acquisition have found truth in the management maxim “that which is measured gets done.” One of the most fundamental metrics in the area of customer acquisition is the ratio of customers to consultants; the higher the number of customers per consultant, the more successful a direct selling company is at customer acquisition.
At health and wellness products maker Isagenix, the average customer-to-consultant ratio is above an 80:20 split, usually hovering around an 85:15 ratio, says President and Chief Operations Officer Travis Ogden. The Arizona-based company saw its net sales increase 23 percent from $725 million in 2014 to $890 million in 2015, ranking it No. 22 on the 2016 Global 100. To ensure its customer growth and loyalty remain strong, Isagenix also tracks such metrics as average monthly order size, retention rates and the success of various promotions.
This data gives Isagenix business intelligence that then informs strategies for enhancing customer loyalty. Ogden points to two programs that have been particularly beneficial:
- 60-day programs. These regimens guide customers through the use of specific Isagenix products to see transformations in their health and body image. Isagenix uses online programming and social media to connect customers so they can hold each other accountable, motivate each other and cheer each other on.
- IsaBody Challenge. This is a 16-week program that preferred customers can enter. Participants form a community of people trying to transform themselves and their bodies. The company offers $200 in Isagenix products to everyone who completes the challenge, plus the chance to win $200,000 in cash, prizes and trips.
“Once people see the results, then they become committed to incorporating our products into their daily habits and they become more long-time users for us,” Ogden says.
CUSTOMER ACQUISITION GROWS ALL ASPECTS OF THE BUSINESS
Customer acquisition is a critical component to successfully using the direct selling channel to bring products and services to market. And the four strategies outlined here—focusing on product quality, communicating value, developing brand loyalty and tracking metrics—are driving growth at many of the fastest-growing direct selling companies in the U.S. today. Taken as a whole, these strategies bring direct selling’s advantage as a source for products and services to the forefront for consumers while providing effective guidance for companies pursuing longevity in this channel.
Customer acquisition also is inextricably linked with the next driver of direct selling: recruiting and onboarding new salespeople. At Florida-based It Works!, for example, people lead with the product. Interactions usually begin with “Do you want to try the product?” followed by a demonstration of the company’s signature body contouring wrap. That gives a consultant the opportunity to make a sale to a new customer, and it introduces the new customer into a building block of business building: product demonstrations. At Le-Vel, the Thrive brand of supplements and shakes is actually bigger and better known than the company itself. The product is front and center, which means so are its customers. This can make it easier to sell the opportunity when the time is right. Both companies experienced strong growth in net sales from 2014 to 2015—254 percent for Le-Vel and 39 percent for It Works!—thanks in part to a product-first, customer-centric approach.
As first-time customers become loyal consumers, the opportunities to convert those buyers into sellers follow. The October issue of Direct Selling News will delve into this next concept more deeply, considering that while not every customer will want to pursue a business opportunity, when customers are treated well, making the leap into business can occur naturally and seamlessly.