Why is Attrition so High in Direct Selling?
Michel Bayan, Co-Founder and CEO of DirecTech Labs
Many recognize that attrition (or churn) is the Achilles heel of direct selling. The relentless current every company fights and so many companies finally succumb to. Despite this few stop to consider the reasons why it happens.
Have you ever thought about why the churn rate or the attrition rate in the direct selling industry is as high as it is?
We have one of the highest churn rates compared to other industries. Why do other industries that often sell the same products and services have lower rates of churn than we do?
They’re dealing mostly with customers; so are we. 80 percent of the people that buy from us are actually just customers —never really going to sell anything to anyone. So if all this being true, then why is churn really such a problem?
The question could be What are these other companies, outside of direct selling, doing that is getting their churn rates to go down while ours are at best flat if not looking like they’re getting higher. Let’s look at the quality of the experience that these brands are giving people. Amazon is something we talk about all the time. They are responsible for almost 50% of all online sales in the United States. And, they’re really taking the time and the effort to understand the individual and create an experience for that individual that is based on who that individual is and what that individual wants from their brand – not what they want from that individual. I’m sure Amazon would love it if every single person that landed on Amazon.com spent a thousand dollars every single time. But that’s not what they try to make everyone do.
But in direct selling, it’s quite different. What we do is we really work on giving people an idea of how much they could get —rather than what is their capacity or what is it that they came in really expecting. Sometimes we make the mistake of setting an expectation that’s too high for them or too high for them right now. And a lot of times our training material is built on this idea of ranking up and leveling up even though most people never really make it past level 2 or maybe 3. As soon as you get past about 3 or 4 in your company, You’re looking at low double digits or maybe even single percentages of people to actually make it that far. Yet the communication is to go that far. When we know that most of them will never do so.
So what if you landed on Amazon and they were like “let’s spend a thousand dollars today. What can we do to spend a thousand bucks here’s what’s the stuff that’s worth a thousand dollars buy buy buy it”. You’d be like “What’s wrong with you. I’m out.” You leave you to go somewhere else, you wouldn’t buy from Amazon anymore. But no what Amazon does is they say well was this person going to buy? And what can we do for this individual based on their threshold to maybe just give that little bit a stretch today? And more oftentimes than that they’re pretty successful at it.
And so us as direct selling companies. How do we do this? The good news is the answer is already there. The key to treating all these people like individuals for who they really are is already there, It’s already in your data! It’s just a matter of finding out what’s in there, using it to get those insights from them, and then turning those insights into operational systems that you can test and prove and work.
So think about that. How do we meet our people where they are versus trying to make as many of them who we wish they would be.
As always I welcome your comments and suggestions and thanks for listening. Take care.
Michel Bayan is the CEO and Co-Founder of DirecTech Labs, a behavioral science and AI company partnering exclusively with direct selling companies. Known as a futurist within the DS space, Michel has been working with DS companies around the world since 2011.
Learn more at www.directechlabs.com