As a compensation plan expert, I’ve written extensively about the 12 key behaviors all compensation plans should motivate and reward.
The 12th behavior is staying active and engaged in the business. This is retention. You may be wondering how a compensation plan should specifically reward retention.
WHAT IS RETENTION?
Retention starts with recruiting. If your company isn’t recruiting new representatives, your business will grow smaller.
You may be surprised to learn that retention is just as important as recruiting. Retention is keeping your recruited representatives active in the business as long as possible.
Activity is usually measured by the generation of personal sales volume.
Attrition is the opposite of retention. Attrition is a word that describes what happens when an independent representative stops generating personal sales volume (he or she quits).
HOW TO MEASURE RETENTION
Retention is usually measured by direct selling companies in one or both of the following ways:
- The count of independent representatives with personal sales volume over a 3-month or 6-month period of time.
- The percentages of independent representatives who have personal sales volume in their second, third, fourth, fifth, etc. months with your company.
MANY WAYS TO GROW
Independent representatives can grow the sales volume of their downlines by (a) increasing the number of independent representatives with personal sales volume each month, (b) increasing the average monthly amount of personal sales volume per downline consultant, (c) reducing attrition or (d) recruiting new representatives.
The best way to grow sales volume is to do all of the above.
SHOULD RETENTION BE REWARDED SPECIFICALLY?
The answer is clear. It’s “no.”
If your compensation plan specifically rewards retention, you will experience undesired effects. In their quest to meet or beat your retention requirements, some of your representatives may choose to not recruit people they believe won’t stick with the business.
You don’t want to give your representatives any reasons not to recruit, because they can’t tell who will be successful in the business and who won’t. No one can.
If your compensation plan has volume and structure requirements, retention is rewarded in an indirect way. The higher the retention, the less necessary it is to recruit.
HOW TO IMPROVE YOUR RATE OF RETENTION
The impact of retention is huge. Do you know the average rate of retention of direct selling companies?
According to the Direct Selling Association, the average direct selling company retains only 20% of those enrolled one year earlier.
This means if your business enrolls 1000 representatives in January, one year later only 200 will still be active (if your retention rate is average).
A retention rate of 40% is great, while a retention rate of 50% or more is outstanding!
Here are some steps you can take to improve your rate of retention:
- Retention begins as early as the day the representative receives his or her starter kit. Ensure that the kit provides a great first impression.
- Within 24 to 48 hours of the receipt of the starter kit, follow-up by telephone with each new representative to offer support and to answer any questions.
- Design your income opportunity so that it is as easy, fun, and lucrative as possible. When an activity is easy and fun, people stick with it longer.
- Not every sponsoring representative is a good trainer. Do your part to fill in the gaps. Offer company-provided training in multiple methods (including in-person training, telephone training, web training, and text-based training materials).
- Listen to your sales force. They’ll tell you where they need help. When you listen, your sales representatives will feel that you value their input.
- Set weekly, monthly, quarterly, and yearly goals. Most salespeople are very goal-oriented. Goals give people focus. Give your people focus!
- Monetary rewards are great, but verbal and written recognition of achievements is just as important. While you sell products and/or services, view yourself as being in the recognition business. When you do this, your retention rate will improve appreciably.
- The company’s attitude is contagious, so have a positive attitude. Also, show your enthusiasm and excitement. People like to be around others who are enthusiastic.
- Make communication with your sales force a top priority! Be consistent in your ongoing communication with your sales representatives. Become the support system that can be counted on, day in and day out.
When you do your part to improve retention, you’ll have happier independent representatives. Happy independent representatives are more productive. When they are more productive, they will stay active in the business longer.
LEARN MORE ABOUT COMPENSATION PLANS
If you would like to learn more about compensation plans, register to attend the Compensation Plan Conference Webinar on June 7-8, 2021 at https://www.compensationplanconference.com. You can attend live and/or watch the recordings afterward.
Jay Leisner is the President of Sylvina Consulting, a top direct selling and compensation plan consulting firm. Learn more about compensation plans at https://www.sylvina.com.