When companies increase their customer retention rates by just 5 percent, they experience a corresponding increase in profits between 25 and 95 percent. So, how can multi-level marketing (MLM) companies increase their repeat purchase rates? A focus on customer retention across product, service, marketing, compensation, and representative onboarding strategies can be a major driver of MLM sales growth.
Establishing a base of repeat purchasers is at the heart of a successful MLM business – both for the organization as well as individual MLM sales representatives. Research shows a 60 to 70 percent probability of making a sale to a returning customer vs. just a 5 to 20 percent probability for new customers. By definition, direct selling companies focus on building strong, personalized, long-term relationships between retail customers and their MLM field sales representatives. These relationships create a distinct differentiator for MLM companies compared to traditional retail shopping experiences. Therefore, it’s natural that repeat purchases make up a significant portion of an MLM company’s sales.
Having a solid set of loyal customers also aligns with compliance regulations for MLM companies. Direct selling companies are required to emphasize retail sales to end customers in terms of how field sales representatives are incentivized and compensated. Overall, when MLM representatives nurture longstanding customer relationships, they can count on the 80/20 rule when it comes to their sales – approximately 80% of sales will come from 20% of their overall customer base.
Tracking repeat purchase rates
For MLM companies, the repeat purchase rate can be calculated at both the organization and field representative levels. The repeat purchase rate tells you the percentage of customers who have made purchases beyond their initial transaction. Higher repeat purchase rates indicate that the company or representative has a healthy base of engaged existing customers.
Calculating the repeat purchase rate is relatively simple. Leveraging the data captured by your MLM software, divide the number of customers who made more than one purchase during a defined period (such as a month, quarter, or year) by the total number of customers during the same period.
To better understand your repeat purchase rate, it is also helpful to track purchase frequency rates. Purchase frequency tells you the average number of times your customers are purchasing. Purchase frequency is calculated by dividing the total number of sales during a defined period by the number of unique customers during that period. Overall, the goal is to drive purchase frequency up over time, but the type of products or services you sell as well as how long you’ve been in business will influence the purchase frequency benchmarks for your company. For example, if you’re selling high-end goods, your customers may not need to purchase as frequently. Or, if an MLM representative is just starting to build her business, the purchase frequency will be lower because the number of first-time buyers will be higher.
Increasing repeat purchase rates
Turning one-time customers into repeat purchasers isn’t a single strategy. Rather, MLM companies should incorporate customer retention consideration throughout all of their key business initiatives.
Products and services
The repeat purchase success formula for MLM companies when it comes to their product and service offering is two-fold. First, the offering must inspire passionate advocacy among MLM representatives – and prospective recruits. And second, the product or service must have a significant and reachable potential customer audience that values the direct selling model and is willing to pay the determined retail prices. (For most MLM companies, in order to cover the costs of marketing and the multi-level compensation plan model, products and services are priced at a five times margin over the cost of goods.) Conduct research to gauge interest levels and price sensitivity among target customer audiences.
The primary differentiator for MLM companies is the direct selling approach that enables representatives to build strong relationships with their customers. The direct connections mean that representatives can tailor their messages and showcase specific product features based on their understanding of the customer’s personalized needs and challenges. This creates memorable experiences for the customer – and generates positive word of mouth for both the products and the representative. Plus, nearly nine in ten consumers say they’re willing to pay more for outstanding customer experiences.
MLM companies are also well-positioned to combine these personalized relationships with the online shopping convenience that today’s consumers seek. The top MLM software solutions give direct selling companies the ability to provide the latest eCommerce experiences via replicated websites for sales representatives, mobile-friendly site design, shopping cart ease, autoship capabilities, and social selling.
Because of their personalized customer relationships, direct selling representatives can provide highly tailored marketing outreach and promotions. The company’s MLM software provides a wealth of customer insights and information in one centralized and accessible resource. Based on this knowledge, MLM representatives can add a personal touch to customer communications and target their outreach so that it drives repeat purchases through product or usage recommendations, follow-ups after purchases, and exclusive promotional offers.
The best MLM software solutions also carry the personalized marketing through to the customer’s Ecommerce experience with tailored “you might also like” product recommendations and related items based on the customer’s purchase history.
Compensation and incentives
MLM compliance regulations require compensation programs to focus on a representative’s sales to customers, not just recruiting a downline team. Effective MLM compensation programs reflect the company’s specific objectives and the sales behaviors the company is looking to drive, including repeat purchase rates. Depending on the company, the commission structure can be based on a range of MLM plan structures, including unilevel, binary, matrix, and hybrid. Along with the formal sales compensation that’s documented and executed within the company’s MLM software, most organizations also build in defined ranks, titles, and bonuses that representatives can achieve. These programs provide an ideal way for companies to highlight and reward the importance of having loyal, repeat customers.
Representative onboarding and training
The best way for MLM companies to convey the value of long-term customer relationships is to build insights and best practices into the organization’s training program from the onboarding of new representatives through the ongoing sales training for more experienced direct selling representatives. Top MLM software solutions make the delivery of training content easy with an automated, journey-based approach that provides timely content based on rep-specific timelines, actions taken, and milestones achieved. Throughout the training journey, build in modules that showcase the customer retention actions representatives should take, along with guides to the tips and tools they need to increase repeat purchase rates.