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Applications
There are 3 basic applications with the aim of increasing revenue:
1. Activation
2. Productivity
3. Retention
1. Activation
Many people who sign up for the business never get started. Studies
have shown that if a new distributor is not adequately serviced and
activated during the first 90 days, an overwhelming majority will never get
activated and ultimately drop out. Yet it is very common that over half of
those that signed up never get started. Even though some of those who
signed up may have done so out of obligation, with no intention of doing
the business, the fact that they have one foot in the door provides the
company and the leaders the opportunity to fully convert them.
A lot of resources are expended to get someone to sign up and
sponsoring a person only represents a small percentage of the work to
be done. New distributors, like babies, will need a lot of attention and
basic information to get started. The same will not be needed by
matured distributors. Personalised communication and marketing to
this group will likely represent the greatest return on investment,
especially if the company can work in partnership with the distributor
leaders to work on the activation programmes.
2. Productivity
With personalised communication and marketing, through segmenting
the distributor and customer base, the company and distributor leaders
will be able to identify many opportunities like distributors who buy one
category of products but not another, and those who buy a product and
require a replacement part or replenishment after a period of time. By
knowing the needs, buying characteristics, and identifying the specific
segments, more effective and targeted programmes can be
implemented. Distributor leaders will also be able to perform their
servicing, training and motivation programmes more effectively.
An example of this is when customers buy a specific consumable
product that can normally be consumed in 6 months. Before the end of
the 6 months, should the company and/or the distributor service the
customer then, the likelihood of that customer making another purchase
will be much higher than if the customer is left on his own.
3. Retention
A recent report by consultancy firm, McKinsey & Company, shows that the
cost of acquiring new customers is 5 to 10 times that the cost of
maintaining current customers. The cost is winning back lost customers
is higher, at 50 to 100 times of the cost of maintaining current customers.
Applied to direct selling companies, the numbers will be even greater for
distributors, as a lot more resources will be spent recruitment, training
and servicing distributors. Yet, many companies have drop out rate in
excess of 90%. If recruitment is a key component of success, then the
market will very quickly saturate and sales volume will rapidly decline. In
order to build a growing and sustainable business, drop out rate should
be no more than 30% to 40%.
CRM will help identify the needs of distributors at every stage of the
life-cycle. Together with their leaders, distributors will be groomed and
serviced way before they become dormant and made the decision to quit
the business.
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