Rick LoyRick Loy is a sales strategist and training specialist with more than 20 years of experience as a Senior Executive in direct selling. As an Associate with Strategic Choice Partners, Rick helps companies update their sales efforts in a way that works in today’s direct selling climate while also taking into account the quickly moving landscape from a regulatory perspective. As Senior Vice President of US Sales and Training at AdvoCare since 1998, Rick has a unique perspective on how direct selling companies can best move forward now. Learn more about Rick here.  

Guest post by Rick Loy
7 Clear Signals That Today’s Direct Sales Company Must Embrace 

Since 2015, three prominent direct sales companies have publicly faced regulatory scrutiny in the United States. While there were similarities in the issues addressed – such as multi-level compensation systems – each company faced a different journey, and a different outcome. Yet, there is a commonality that we are wise to acknowledge and embrace now: Change is here; it’s our challenge and our opportunity to understand it, respond to it and embrace it.

So, what do we do? What merits attention now? What else is ahead? The questions are legitimate and important. And, while I cannot answer them definitively, I can offer perspective, insight and ideas on matters that may be worth your careful consideration based on my own personal experiences.

A Sober and Courageous Reality-Based Assessment

The first suggestion is obvious, but essential: Gather your team and begin a careful, open and honest assessment of the state of your company relative to the signals coming from regulatory bodies. You cannot afford to be nonchalant or partial in your approach here. Do not look at what you do through the eyes of someone familiar with and favorable toward direct selling. You must view your company through the eyes of our critics and see what stands out.

In his book, Leadership Is An Art, Max DePree says, “The first responsibility of a leader is to define reality.” That’s the starting line. The conversation must be no holds barred. Nothing can be off limits. It cannot be constrained by “what we used to be,” or “what we want it to be.” It must a reality-based assessment, looking soberly and courageously at potential threats to the business, internal and external.

A traditional SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is the right approach. Yet, it must be approached with the discipline to see your situation for what it really is, for better or worse. The value of a careful, open assessment of this nature can be the springboard for positive change in your organization, and should be empowering for you and your team in an environment that feels unpredictable.

And one last thought: include MORE team members than usual in this conversation. Hear many voices. New and fresh thinking typically requires new and fresh perspectives and people.

So, what topics merit review right now? Here are the seven areas of your analysis that I believe should serve as the core of your assessment.

1. Corporate Messaging in General
Assess current corporate message for clarity, accuracy and integrity. Look at ALL forms of your messaging: Product positioning, earning opportunity claims, promotions language, policies and procedures, etc. Are they congruent? With so many departments creating and weighing in on so many points of communication, it’s easy for messages to get mixed, or be in contradiction with others.

2. Field Messaging to their Distributors, Preferred Customers and Retail Purchasers
When it comes to how the field communicates with others, are they saying what you’re saying from the Home Office, or are they using language that either minimizes the Company’s emphasis or distorts it with more sensational themes? It’s not enough for the field to communicate the essence of the corporate messaging, or its general meaning. The company messaging must be the absolute standard for field messaging. Good people with good intentions can create challenges for everyone with their “creativity” and put the entire company at risk.

3. Income Claims/Statements, from the Company or Distributors
The concerns here are straightforward: Income claims may be true for a given individual, but they are not the whole truth. They speak to what may be possible, but not to what is typical. Typical is a notably different scenario, and it must be accurately represented. Explicit or inferred income claims are quite problematic; that’s reality. So, setting very clear parameters for what Distributors can/cannot say is the role of the Company. No doubt important conversations with the Field will be required. Yet in this arena, clear direction must take precedence over Field preferences and passions. For the sake of clarity, here are some examples of explicit and inferred claims. As you read them, take a moment reflect on why they may be problematic. Wisdom seeks to understand different perspectives and viewpoints, even those that are difficult. Ask yourself: “How might others interpret this differently?”

Examples of Explicit Income Claims:

“I’m on track to be earning “$XXX” in the next 3 months”
The phrase “on track” is a projection that may or may not be achieved, and can be construed as a warrant or guarantee.

“I was able to leave my full-time job…”
The message is that earning in the direct sales venture equaled or exceeded the income earned from employment, yet there is no information provided as to how much time was required to achieve that income, what work was done to create income, exactly how income is actually earned, and the multiple variables that are involved in the business activity that can impact earnings.

“I paid off “$XXX” in debt with my income from our business.”
On its face, this appears to state that a person earned that amount of money directly from their business activity, which may or may not be accurate/truthful. It’s possible that some of that debt was paid off by earnings from the direct sales business, but possibly other debt payments were simply made by managing their finances better during the same time, etc.

“Last month I earned “$XXX” from my business.”
This may be true for a given Distributor, but it is likely not typical of the vast majority of Distributors, and is thus a misrepresentation for the consumer.

Now let’s look at inferred income claims. “Inferred” refers to images, photos and statements that infer income, even though they don’t directly make the claim. Examples could include pictures of houses, cars, boats, luxury trips and much more. If it’s tied to the business at all, it is an inferred income claim. To the regulatory community, there is no difference, or tolerance, for claims of this nature, either.

Statements such as “If I can do you it, you can do it!” can be very problematic, regardless of how innocuous they seem. The number of variables impacting anyone’s earnings is very large and the typical Income Disclosure Statement makes that clear.

Those variables could include…

* Is a person willing to receive training and ongoing coaching in business practices?
* Does a person have a disciplined, committed work ethic that sustains them in the process of learning and building a business as a functional volunteer?
* Does a person have the ability to organize and discipline their use of time?
* Does a person have a “warm market” wherein some success might be achieved?
* Does a person have skill in selling?
* Does a person enjoy providing service after the sale, and will he/she do it?
* Is a person able to see a business as a process requiring time and effort?
* Does a person have emotional strength to deal with “no” and rejection?

4. Scope of Corporate Responsibility
This may be the simplest of all the points to offer. The company is responsible for…

– All of its messaging via all channels and in all forms;

– All Distributor messaging via all channels and in all forms, including social media, webinars, calls, Zoom meetings, public/home meetings, materials (including Distributor created material).

There is empowerment here for everyone. The corporate team can lead with compassionate strength to ensure a bright future for everyone. Corporate can amplify and deepen the partnership with the field and navigate the journey of change together. The continuity of messaging from both corporate and the field reduces risk for everyone, strengthens the brand over time, and simplifies on-boarding and learning for new participants. Precision and unity in all these things are a win for everyone.

5. Policies and Procedures
There’s a familiar phrase that fits here: “Simple is duplicable.” Are your P&Ps simple? Are they easily understood by the typical person who may or may not be familiar with legally binding documents? Is common language at least equal to or greater than the amount of legalese? Do the policies demonstrate respect and gratitude for those who place their reputations on the line in their communities as they represent your brand, or are they heavy-handed in tone, and thus fear-inducing? Remember, the more complex these are, the less attractive they are.

6. Policy Enforcement
Whatever the policies are, be certain they are honored and enforced without respect to tenure, rank, or any other factor. For example, your “top-tier” Distributors are typically your most influential people, and may also be generating large volumes through their organizations in each pay cycle. The specific question here is this:  Do you require – in every detail – their full compliance with every policy you have published? Or does their success and achievement earn special treatment? There can be no distinction whatsoever between how policies are applied for any/every Distributor; your corporate responsibility is to ensure an absolutely level playing-field for all.And,  be certain every corrective action in response to a policy violation is fully documented, in a timely manner, with notice delivered to all concerned parties.

7. The Compensation Plan
I saved this for last, knowing it is not a simple topic. The good people who represent your company are your greatest asset. They work functionally as volunteers, and they do so using discretionary time. So, if they earn income, it likely matters to them, regardless of the amount. Any proposed amendments or changes to the compensation system typically create anxiety and unrest.

Yet, the culture today places a premium on simplicity, and some comp plans simply don’t provide it. Take a look at simplifying, compressing, and making the plan “brick to the forehead” simple for the masses.

This may be one of the most important conversations you’ll have.  Items worth reviewing include enrollment fees, the cost of starter packs, volume requirements and their frequency, thresholds for rank advancement, components of compensation that are tied to sponsoring and/or recruiting.

Additionally, making a careful assessment of where your volume comes from in a pay cycle would be very wise. How much comes from retail purchasing? How much from Preferred Customers? How much from those who are eligible to participate in the compensation plan? Knowing exactly where you are in all of this, and embracing the “product-sales first” mindset will likely serve you well in the future.

All these items can potentially open great opportunities for companies to enjoy increased field engagement, an infusion of energy and a refreshing of the hearts and minds for Distributors. Decide now to take the comprehensive look toward the future you want.

Some Final Thoughts

I’m not a lawyer; I’m a traveler alongside you, suggesting things I believe merit attention. My areas of expertise and passion have more to do with equipping and empowering the field, and helping the Home Office strategize how to best support those efforts. But I recognize that, for me to do that well and appropriately, I must be clear on what is and is not acceptable in today’s direct selling environment.

“Oaks grow strong in contrary winds, and diamonds are formed under pressure.”

A season of cooperative, collaborative efforts inside our respective companies, and in partnership with each other, will reveal who we are and what we are capable of creating and achieving. A better future is within our reach.

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