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August 01, 2017

Working Smart

Lessons in Loyalty: 4 Retention Strategies from the Gig Economy

by Bill Crowley

Click here to order the August 2017 issue in which this article appeared or click here to download it to your mobile device.

The era of 9-to-5 cubicle jobs is rapidly coming to an end. Entrepreneurial individuals are increasingly eschewing traditional work arrangements to make a living by independently selling products, sharing underutilized assets and providing services. This is the Earning Revolution, a fundamental shift in the way that people work and earn—and, like the Industrial Revolution and Digital Revolution that came before, it’s changing the foundations of our society, economy and culture.

Amidst this change, there’s been a lot of talk about the gig economy: companies like Uber, Doordash and Amazon that operate marketplace platforms designed to connect buyers with sellers, and doers with wanters. Optimistic observers have praised this work model for enabling people to take control of their destinies, ushering in a new era of professional and financial flexibility. 

Of course, this isn’t anything new. Direct sellers have been doing it for decades, without all the fanfare. 

How did this industry make the entrepreneurial model work before anyone else? Direct selling companies recognized a long time ago the importance of establishing relationships not just with their customers, but also with their distributors. From an early stage, direct selling leaders promoted the emotional connections that emerged around their product offering. Distributors weren’t just selling stuff. They were offering a better lifestyle: an opportunity to become a health guru, travel to exotic locations or pursue financial independence. Direct selling has always been about more than just the transaction: It’s about a community of like-minded individuals coming together and fulfilling their personal and professional ambitions. That sort of connection builds brand loyalty.

Still, to say that direct selling is a master of retention doesn’t mean that there’s nothing left to learn. Gig economy companies are only now facing challenges that the direct selling industry encountered decades ago—and when it comes to loyalty, they have some new solutions that are worth exploring.

Gig Economy, Meet Churn

First, some history. In the mid-1990s, we caught an initial glimpse of the gig economy as we know it today. Fueled by growing consumer adoption of internet services, two-sided e-commerce marketplaces like eBay and Amazon emerged to facilitate product purchases between geographically dispersed buyers and sellers. Then came smartphones, which opened additional opportunities for peer-to-peer transacting: ride-sharing, home-sharing, even dog-sharing. Marketplaces, harnessing the new technologies of our modern world, were making it easier to find and perform independent work than ever before. 

But these marketplaces ran into a problem. Many had put their primary focus on the consumer experience: smooth onboarding, slick interfaces, extensive support. In their efforts to draw consumers to their platforms, these marketplaces often neglected a key component of their business model: the people selling, sharing or serving on the other side of the transaction. And, as a result, they were having trouble retaining these users.

As the Earning Revolution hit its stride, competition amongst marketplaces for supply-side users increased. Companies in the gig economy began to recognize what direct sellers have known for the better part of a century: The supply-side experience matters as much as (if not more than) the consumer experience. If the people who are powering your business model aren’t happy, they’ll leave—and then everything falls apart. Loyalty is the name of the game.

Motivating Factors in Loyalty

No longer startups but established brands, some gig economy platforms have made efforts to foster the kinds of communities that we see in direct selling, but it’s still a far cry from the huge annual meetings and sprawling online groups that have come to be associated with brands like Herbalife, Jamberry and Isagenix. Instead, many gig companies are approaching the loyalty question from a new perspective, looking for opportunities to boost retention by improving the transaction itself.

Earlier this year, Hyperwallet conducted a survey of e-commerce sellers on marketplaces like Amazon, eBay and Etsy to find out what drives loyalty in that space. On the surface, some of the answers appear to be segment-specific (a platform’s shipping options, for example), but the underlying concerns will register with any independent worker: things like earning potential, transactional convenience, sense of trust and access to funds. Bottom line: People want to earn a decent income securely, without having to clear too many hurdles to make it happen.

These are the motivating factors in retention that the top marketplaces are actively working to address, and they’re going to influence independent workers’ expectations in every segment. Let’s examine them more closely and consider what they mean for direct sellers.

Earning Potential
At the end of the day, most people who take on independent work are driven primarily by the desire to earn an income. It’s not surprising, then, that more than half of sellers on major e-commerce marketplaces (and up to three-quarters in some cases) rank the number of buyers on a platform amongst the primary reasons that they stay loyal to a company. After all, more potential buyers means a higher potential income for sellers.

Earning potential as a motivating factor in loyalty is more complicated for direct sellers. Many distributors participate in a direct selling opportunity simply for discounted pricing, or to be a part of the community. Nonetheless, if distributors feel that they don’t have a real shot of making some money, they’re not going to stick around for very long. Direct selling companies need to ensure that distributors have a real path to success, with competitive product offerings and attractive compensation plans.

Transactional Convenience
Transactional convenience refers to how easy (or difficult) it is to complete a transaction. In e-commerce selling, one major concern is shipping options: the geographies in which marketplaces allow sellers to market their products. For example, if a marketplace won’t let American sellers market to German buyers because of shipping restrictions, we can reasonably expect some sellers to move to a platform that will facilitate that transaction. 

In direct selling, transactional convenience might be the ability for distributors to flip through product catalogs on their tablets, or submit orders from their smartphones. Like it or not, the direct selling industry is now playing alongside companies whose identities are fundamentally rooted in tech. Direct selling companies need to harness the new technologies available to them to make transacting easier for distributors.

Sense of Trust
Independent work requires a significant degree of trust: trust that the other party in a transaction will act in good faith; trust that the company will handle personal and financial information with care, and will step in when something goes wrong. This concern is amplified online, where individuals are often required to put their trust in faceless strangers on the other side of the world. Understandably, e-commerce sellers across all platforms rank trust highly when determining which marketplaces deserve their loyalty.  

Trust is something that the direct selling industry has always done very well. The nature of the model means that distributors often remain in close contact with their peers. Still, direct selling companies need to demonstrate that—should a problem arise—they’re prepared to protect the distributors’ interests. 

Access to Funds
It wasn’t long ago that e-commerce sellers could only receive their earnings through a single method: paper checks. Not only are checks slow to deliver and a hassle to deposit, they’re also difficult to track and offer little in the way of transparency. If a check disappears in the postal system, the intended recipient might not see those funds for weeks— even months—and receives no indication as to when their funds might arrive. 

According to the e-commerce sellers surveyed, the speed of marketplace payments plays a major role in determining their loyalty to a platform. Companies are increasingly migrating their payments to other, faster solutions, whether they be automatic bank transfers or a portal model that enables payees to manage their earnings and request their preferred payout method online. Direct sellers need to look at their payout schemes and ensure that they’re competitive in speed, convenience and optionality.

Standing Out in the Earning Revolution

Though independent work has exploded in recent years, many projections suggest that the Earning Revolution is just getting started. A study from Intuit estimates that more than 60 million Americans will be independent workers by 2020—roughly 40 percent of the country’s workforce. We’ve also seen the line between independent earning opportunities become blurred as partakers utilize more than one opportunity: Lyft drivers, for example, are selling cosmetics through Mary Kay, and Plexus ambassadors are hosting their property through Airbnb. It’s very likely that competition for these supply-side users is going to intensify.

As newcomers enter the independent earning space, the challenge for companies will be to stand out as one of the most attractive options. By addressing the four motivating factors in loyalty—earning potential, transactional convenience, sense of trust and access to funds—direct selling organizations can ensure that they’re at the top of the list when new independent earners are choosing their next opportunity, and that they hold onto supply-side users when they get them.

Bill Crowley is Chief Product Officer at Hyperwallet, a global payout platform specializing in commission distribution. Crowley has more than 15 years of experience building forward-thinking payment solutions for the direct selling industry.