Direct Selling News, August 2012

by Teresa Day

Just over one year ago, DSN issued a special report titled S.W.O.T. Analysis on Direct Selling, redefining the common business acronym S.W.O.T. as Strengths, What’s Important, Opportunities, and The Future. The report is a collection of perspectives on the industry and the future, and included input from academics who study entrepreneurialism and ethics, business consultants and suppliers, as well as industry experts and insiders. The report is still available on our website www.directsellingnews.com. In the segment under “Opportunities” the report explored the idea that the Internet had created a more “self-empowered” consumer. Collectively, these self-empowered consumers could actually remodel how business was being and would be conducted across all buying and selling sectors, regardless of the distribution model.

In that report, DSN postulated that those companies that “monitor and manage their Internet presence will benefit from the speed at which information now flows. Those who do not will find that others will manage their brand for them.” One year later, this idea is even more true, and the consumer trend it powers has even more force to shape how a business conducts itself.

Knowledge and Engagement Still Rule

Consumers have gained significant power to influence the businesses they frequent, and much of this article will address that. Even so, the process of acquiring customers is still the foundation of any growing business. Without customers to purchase the product offered, the business fails. This is no less true in direct selling, where the acquisition of customers actually has two dimensions: the distributor customer (direct customer) and their individual customers.

Acquiring customers is a process with many parts, entailing finding the customer, presenting to the customer, persuading the customer to purchase and then maintaining the customer. Even with leaps in technology, the core tenets of this “customer life cycle” remain critical and vital and haven’t really changed. We attract someone’s attention enough to activate their interest into purchasing what we sell. We hope to activate their interest enough to induce additional purchases, as well as motivate them into sharing their experience and talking about it to their friends and family so enthusiastically that they also become customers who share with others. And as we often report, the direct selling model has several inherent traits that facilitate this process beautifully—personal engagement with an individual consultant who is invested in their business, and opportunity to educate and demonstrate through the party or one-on-one meeting.

We believe that the core strengths of our industry are still the same as they were 150 years ago—people interacting with people, word-of-mouth advertising, sharing products and services with those you love and trust and who love and trust you, opening new doors through the networks of friends and family to meet new customers, and then walking through their doors to other circles and more new customers. Additionally, offering stellar customer service that’s personable and knowledgeable is a key component of the model. The process has always facilitated “knowledge transfer” to the customer through the passion and belief of a motivated seller, the independent contractor.

Even marketing experts that comment on various customer acquisition strategies agree that engagement and education are fundamental necessities for success. For example, the Forrester Report “Competitive Strategy in the Age of the Customer” (Bernoff, 2011) makes the following statement in its Executive Summary: “In this age of the customer, the only sustainable competitive advantage is knowledge of and engagement with customers.” This statement points out an interesting change in the role of “knowledge” between company and customer. A new aspect has emerged—knowledge of the customer is playing a new and important role in business transactions.

Dr. Larry Chonko, The Thomas McMahon Professor in Business Ethics at The University of Texas at Arlington, says in his book (with Dr. Eli Jones) Selling ASAP: Art, Science, Agility, Performance that customers are always concerned about four things: Price, Convenience, Quality and Value (PCQV). Historically, direct sellers have been able to create a unique distinction in the selling transaction by adding great value (V) through the personal touch. Technology even further extends the reach and scope of this value by giving the independent contractor tools that enhance the process. The big opportunity? The acquisition of knowledge of the customer, knowledge transfer and customer engagement supported by technology.

A Fundamental Shift

For the past few decades, customer service has been under the strategic microscope, and the strategy that emerged was “the customer is always right.” In following this strategy, businesses decided that it served their interests well if they adopted the philosophy that would give way to their customers’ demands, even if the customer happened to be wrong. In treating the customer as if they were always right, businesses became “customer-centric” and developed plans to make the customer a “priority.”

Though the philosophy certainly did serve the customer as well, it was still the company that maintained the power in the relationship, “bestowing favor” upon the customer by choice. Herein is the change—the balance of power has shifted from the companies’ hands into the collective hands of individual consumers. The 5.3 billion individuals across the world who are now connected by mobile devices have staged a coup—it is now the customer who bestows the favor of shopping with your brand, not the other way around.

Not only do the individuals have the power, they bring their friends along. Author and social media guru Gary Vaynerchuk explains, “The Internet has matured so that the power of social media can allow all the ants [at a picnic] to collectively gather under the table, and they’re strong enough to haul it away if they chose.” This is the collective power that technology has handed to the customer. Vaynerchuk goes on to say, “Any businessperson who can’t see the repercussions of that much potential word-of-mouth has his or her eyes closed.”

The truth is that advertising has lost its power to advocacy—that is, telling consumers what to think about products or brand has been lost to getting a current customer to advocate for you to others about the products. The Forrester Report also says that “It’s no longer sufficient to be simply ‘customer-centric’ or ‘customer-focused.’ The only successful strategy in the age of the customer is to become customer-obsessed.”

Early adopters of this customer-obsessed philosophy, such as weight-management company ViSalus, have capitalized on this power shift and the word-of-mouth advocacy of its distributors, called Promoters. Rather than use the traditional methods of advertising the features and benefits of their weight-loss shake, the company created an easy-to-share marketing campaign around their Body by Vi™ 90-Day Challenge. New tech tools, including proprietary social media platforms, were developed and utilized. Promoters, who are first of all their own best customers, share a personal experience with meeting their own 90-day challenges as much as they share a product or service. The result has been exponential growth over the past two years. Blake Mallen, Co-Founder and Chief Marketing Officer of ViSalus says, “The customer now has a voice and is being heard. Today, trust trumps control.” ViSalus was able to increase the speed of customer acquisition and the effectiveness of a good marketing campaign by mastering the new technologies available.

Relationship Building

As technology has impacted the speed of information transfer, it has also impacted the speed by which relationships can be built and trust between the seller and the customer be attained. Chonko and Jones also speak to the “trust factor” in their book. They consider becoming a trusted advisor as the second timeless sales competency, especially for direct sales people. Becoming a trusted advisor is at the foundation of the essential relationships that have to be built between the company and independent business owner, and the customer and independent business owner. Attaining trust is critical to obtaining mind share of both audiences.

Traditionally, trust between the direct seller and customer was built over a period of time, which likely included several interactions, usually personal. Technology has now impacted the process. Today, within minutes, a consumer can find any company through Google as well as any of the products or services being sold, and possibly even the person who is sharing the information with them. This can be done while in a telephone conversation or even while sitting in a party. The increased speed of information transfer increases the speed of relationship building. Direct sellers will be the first choice of prospects with needs and wants because enough information can be easily attained and the person delivering the message is a trusted source. All of the preceding impacts the speed of customer acquisition, the acquisition of new recruits and, ultimately, business growth.

Companies must also operate in this age of the customer with authenticity—anything less will backfire, as it did for Wal-Mart in 2006. The consulting team of Don Peppers and Martha Rogers relate in their latest book, Extreme Trust: Honesty as a Competitive Advantage, the story of a series of blog posts that began to appear online, apparently posted by the RV travelers Jim and Laura, who were making their way across the country and visiting Wal-Mart stores, glowingly commenting on their experiences with Wal-Mart. Only it wasn’t true. Other bloggers soon began to suspect the posts were not genuine, and called them out.

It turns out Jim and Laura were paid writers, funded by Wal-Mart’s PR firm to create a series of pro-Wal-Mart customer experience articles. This is a classic example of a company not understanding the nature of social media, and attempting to use it as if it were a traditional advertising channel. This incident also underscores the shift in the balance of power from company to consumer.

Brand-Building Accelerator

Brand image has always been important to brand building. The challenge for those utilizing the direct selling channel has always been to duplicate the corporate branding look, feel and primary message throughout a salesforce of thousands of independent contractors who each have their own personalities. In the past, corporate brand building was primarily owned by the company. Advertising was never the primary method of brand building for direct selling companies, which resulted in the company packaging and catalogue being the primary brand-building tools. Now that advocacy has trumped advertising, direct selling companies are expected to accelerate their brand-building possibilities and options—providing all independent business owners with branded templates and guidance allowing for personal touches that can easily be pushed out to family, friends and networks in seconds. The speed of customer acquisition will continue to increase as the speed of branding increases.

Social Media

Armed with technology, the customer has become the Chief Strategy Officer. Having a customer feedback mechanism in place is therefore essential to success. Listening online is something companies are just learning how to accomplish, although more and more companies are opening up to this idea. “We primarily use our social media platform as a tool to engage consumers,” says Yvette Franco, Vice President of U.S. Marketing for Mary Kay Inc. “The main plus for social media is that you can hear directly and immediately from consumers.” Listening to customers and being responsive to their issues can have very serious repercussions in the hands of self-empowered consumers. Gone are the days when a disgruntled customer tells nine people about their bad experience. Recent stats show that when they receive poor customer service, they will share that with 53 people! Happily, the reverse statistic is also expanded—those who receive great service spread the word to an average of 42 people.

In the transfer of power from the company to the customer, frequently the first place a company looks to make an impression is in social media. There are many ongoing conversations about how to best utilize the various types of social media that have developed. Companies and brands start Facebook pages and count “fans” and “likes,” wondering how to monetize those contacts and turn them into sales. Social media consultant Mike Magolnick says looking for ways to make a sale on social media is not what it’s all about.

Magolnick says, “Social media will help you do one of three things: understand what people like, understand what people dislike and understand what their challenges are. Utilizing social media is first about listening.” In other words, Twitter and other social media sites have for the most part replaced the traditional focus group with an informal—and surely more honest—social gathering of talking customers. Social media is the new coffee shop where executives get to eavesdrop on what their consultants really think.

Opening the door to the virtual coffee shop is easy. On Twitter’s web page twitter.com/search there is a search bar with a sentence above it that says, “See what’s happening right now.” That’s because Twitter—unlike Google or YouTube—reveals what people are saying immediately about brands, programs or companies. “The difference between Twitter and Google,” Magolnick explains, “is that Twitter is real-time. Google and YouTube are huge catalogs of information, but Twitter tells you what’s happening with your brand right now.”

Even better than eavesdropping, though, Twitter allows executives to join the conversation. Any company facing a problem can create immediate and direct interaction, with an opportunity to publicly solve their customers’ problems. This is the heart of social media—engagement. And, circling back to what the Forrester Report concluded: “In this age of the customer, the only sustainable competitive advantage is knowledge of and engagement with customers.”

Social media management consultant Olivier Blanchard, author of The Brand Builder Blog, has some advice for those still hesitant to venture into the social space from fear of not getting it “right.” He says engagement with the customer doesn’t have to be perfectly crafted before getting started; just getting out there is the key. “Find your community and join it. Start getting to know everyone. Wing it a little. Let your edges be a little rough. Respect your community enough to drop the corporate mask and be real with them.”

Second to joining in conversations with your consultants about your company, providing generous content either on the corporate website or through social media sites is another place to begin making connections with your “strategic customers.” Coming across generous content from a company is like receiving an unexpected gift with no strings attached, and it elicits the same sort of reaction—happiness.

The Need for Speed

While it’s true that, to stay competitive, companies must embrace the customer and fund technological developments that continue to reach out to and empower them, it’s also important to avoid using technology as a panacea for all customer woes. In the end, technology is only a tool—a great tool that increases the speed of practically everything important to a business, especially customer acquisition, but it’s still a tool.

A great software program or app can enable your consultants to reach out to and serve their customers instantly; it cannot provide insight and thoughtful guidance. Many of the conversations that lead to a new customer or consultant are unstructured and unplanned, such as those taking place at soccer practice or the grocery store checkout line. Again, these are some of the core fundamentals that direct selling is so good at: knowledge of and engagement with customers.

It’s just more likely that at that soccer game or in that checkout line, both parties are carrying their “office” with them on their smartphones. When the consultant is equipped, capturing that moment becomes effortless. This also means that the business of a direct seller can be completely open wherever they are and whenever they desire. There are no limitations when the complete business can reside in the apps of a mobile phone. Richard Branson, CEO of the giant Virgin conglomerate, was recently interviewed by a reporter on a small boat, and he mentioned his enjoyment for being able to do so many things in support of making the world a better place. He then pointed to his smartphone and said, “With this I never need to be in the office.”

Efficiency and fast access matters more and more, not only to the tech-savvy Gen Y’s, but to millions of other customers as well, according to a study conducted by the mobile web measurement firm comScore Inc. More than 13 million consumers access retail content by way of their smartphones, and over 8 million visit mobile commerce sites. Smartphone users love apps, and they expect websites to be optimized for use on their mobile phones. The study concluded, “It has become imperative for retail brands to commit to a mobile strategy to connect with these consumers where they are currently researching, comparing and purchasing products.”

While the direct seller can deliver a relationship far more personal than a big-box retail company can achieve, the need for meeting the customer where they are in this technologically driven world is no less true. From presentations to ordering to demos, even marketing apps, technology has enhanced the process and increased the speed of all-important aspects of growing and sustaining a business. And customers are happy too. It brings the engagement they crave and the value they want from a source they can trust.