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Retention In Network Marketing and Party Plan

Article by: Terrel Transtrum | LaunchSmart
April 4, 2011

If you launch and operate like most direct selling companies, statistically your attrition (drop-out) rate will be 80% per year.

In other words, out of 100 people you bring to your company in January, only 20 will remain by the end of the year. And, if you are like most, you are thinking, “I’m worrying about getting started and I look forward to having an attrition problem. . . that means that I’m seeing people coming in!”

Here’s another sobering statistic: out of the 80% who leave, half of them drop out in the first 13 weeks. This underscores the importance of building your company correctly, so that you employ the best practices that lead to improved retention statistics from the very start.

In January of 2004, our firm received a telephone call from a well respected direct selling company with operations throughout the world. After introductions, the voice on the other line told us that in 2003 the company had experienced 35,000 new recruits in one of its international regions, but that the company had experienced a net growth of only 900. Can you imagine the hard work ahead of them to change so many things that were not working? In the final analysis, the company would have been better off to have 1,500 new recruits then employ key practices to keep 1,200 of them.

The two most important retention questions that you will ask yourself are these:

  • When does attrition (drop-out, inactivity) begin?
  • When must our retention efforts begin?

By answering the first question, you also answer the second question. The forces of attrition go to work the moment that someone joins your company. In the instant that they sign the distributor agreement or press “send” in their online enrollment form, the evil forces of attrition begin to erode the belief a new person has in your company. Therefore, you cannot delay your company’s efforts to begin working on retention, to help keep the forces of attrition at bay, or at least in balance.

Over the course of 20 years of research on the subject of customer and distributor retention in network marketing companies and party plan companies, we have learned the basic five reasons that people leave or go inactive:

  • Communication
  • Training
  • Unmet Expectations
  • Support
  • Life Changes

You will find it very interesting that reason # 5 (life changes) accounts for only 15% of the reasons that people drop out. You cannot do much about life changes, but you can influence the 85% of reasons that people leave. You can take responsibility for better communications, better training, understanding and managing expectations, and providing better support. The responsibility for these ultimately falls on the company, although with the right leadership and systems in place, you can help the field sales force to do their part. Working together with your field leaders, you can win the war on attrition.

Below is a checklist of considerations for assuring your company is in the best position to keep more of the business it will work so hard to bring in.

Retention Checklist & Key Considerations

  • Do we understand the dynamics of attrition in direct selling, network marketing, party plan marketing?
  • Do we have the 4 key retention metrics built into our management reporting system?
  • Does our system have key touch-points and reinforcements in the first 72 hours?
  • Are the incentives, promotions and training geared to assuring a solid start in the first 13 weeks?
  • Are our communications channels clearly defined and do new recruits know how to get connected?
  • Do we effectively convey the unique value of our company, products, and business offering?
  • Does our corporate team know which promises we are making, and are our systems designed to keep those promises?
  • Have we structured our operations and service teams for optimum care and impact?
  • Do our operational practices reflect our commitment to long-term viability and first-rate service?
    • Staff selection, development and pampering
    • Customer service philosophies and work flow
    • Fulfillment and follow-through
    • Technology tools
    • Policy administration
    • Field surveys and research
    • Communications

RetentionSmarts™ Field Retention System

How do direct selling companies escape deadly attrition that plagues them from the first day? How do you avoid becoming a sad statistic? Decades of research and experience have gone into the development of the 22 retention best practices. The first four of the 22 retention best practices are foundational and are essential for start-up and early-stage companies – and detailed training modules for each of the four are included in the LaunchSmart™ System. This system also includes the licensed FieldSmarts™ training tools, a series of articles for your field reps that gives them what they need from the very first day in order to make more money by keeping more of their hard-earned business.



(The content of this article is extracted from ServiceQuest® RetentionSmarts™ Modules. For more information on RetentionSmarts™ training and mentoring systems, contact a member of the LaunchSmart Team.)

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All Articles, Direct Sales Distributor and Customer Retention, How to Run a Direct Sales Company

Terrel Transtrum | LaunchSmart

A respected advisor to MLM and Party Plan companies, Terrel has impacted the lives of customer service reps, executives, and hundreds of thousands of...

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