Developing the sales force, growing the business: The direct selling experience

Victoria L. Crittenden
Chair, Department of Marketing, Boston College, Chestnut Hill, Massachusetts (victoria.crittenden@bc.edu)

William F. Crittenden
Professor of Management, Northeastern University, Boston, Massachusetts (w.crittenden@neu.edu)

With worldwide sales topping

$85 billion, the scope and scale
of direct selling warrants greater
understanding of its chief asset
the sales representative. Self-employed
individuals, these reps are instrumental to
their firms success and growth. Interviews
with direct selling executives have helped identify universally applicable sales force success variables: selecting the right individuals, maintaining their motivation, developing the appropriate skills, and providing high perceived value and supply. With an independent sales force framework, it is imperative for direct selling firms to implement programs that aid in finding and keeping strong individual sellers.

ver the past few years, a great deal of attention has focused on the market potential of selling via the Internet. Lost in the media crush has been the tremendous growth associated with direct selling (person-to-person, party plans, and so on). Recent estimates suggest worldwide direct sales in excess of $85 billion, and the World Federation of Direct Selling Associations indicates that direct sales representatives number more than 46 milliontriple the number just ten years ago. In the United States, which is the largest market for direct selling, estimates of $28 billion in sales and 13 million representatives easily represent a doubling of the market in the past decade. The number of American adults interested in purchasing in this manner still exceeds the number actually making a direct sales purchase, indicating continued growth opportunity. And direct selling is an economical and largely controllable means of gaining access to new international markets. Globally, numerous firms from a variety of industries regularly attempt to introduce direct selling as a distribution channel. Unfortunately, there is a dearth of knowledge and discussion about the potential benefits and pitfalls. For example, certain regions of the world have seen direct selling adversely affected by economic downturns, while others have embraced the concept. Some cultures, across borders or within a single country, appear more open to it. Underperformance, burn-out, and turnover of sales reps also appear to be widespread, yet few firms have paid adequate attention to either the cause or total cost effect of such a performance shortfall. This study attempts to aid direct sellers in better understanding issues involving company sales growth and their chief organizational asset: the sales representative. Detailed interviews with executives were used to gain a clear perspective of the issues and attributes facing these businesses. Executives from eight direct selling firms were interviewed for the study. Product categories represented in the research include arts & crafts, cosmetics, cutlery, kitchenware, jewelry, vitamins, and wellness products. Initially, in-depth interviews were conducted with four exec-

V. Crittenden & W. Crittenden / Developing the sales force, growing the business: The direct selling experience

utives at a US-based direct selling corporation. Then structured in-depth interviews took place at the Australian headquarters of all eight direct selling firms. Further discussions were held with US-based sales reps.

Figure 2 Illustrative products offered by direct sellers

Aerial photographs Chinaware Cosmetics Home decorations Nutritional supplements Vacuum cleaners Air purifiers Cleaning products Cutlery Jewelry Reference books Wines & beverages Arts & crafts Clothing Electronics Tableware Ceramics Cookware Glass & crystal Toys

After illustrating a model of sales force developmenta critical component of company success in the world of saleswe explain the concept of direct selling and identify its typical products and major global markets. We also identify five major issues that universally apply to that environment. Finally, we discuss the managerial implications of implementing a successful, worldwide direct sales distribution channel.

and adjusting as the firms management and sales reps pursue sales and profit objectives. Because of the nature of direct selling, with its independent sales force, it is imperative that such firms clearly understand the importance of a strong development process.

A model of sales force development

The direct selling distribution channel

Direct selling is a method of marketing and retailing products and services directly to the consumer via personto-person or party plan selling and away from permanent retail locations. Customers are given the opportunity to see, touch, and test a product at their own leisure, often in their own homes. The products sold are diverse and include such traditional fare as cosmetics and skin care, vacuum cleaners, and household cleaning goods. Non-traditional fare includes such products as air purifiers, wine, and lingerie. Figure 2 provides a more comprehensive listing. Leading product sales categories tend to vary from region to region and country to country. Much of the world has suffered economic malaise over the past five years. Fortunately, direct selling has continued as a bright spot, with substantial growth in Korea, Indonesia, Eastern Europe, Chile, Mexico, Denmark, France, Sweden, Switzerland, the UK, and the US. However, for some international firms, significant market upturns have been offset by declines in major direct selling markets like Japan, Germany, and Brazil. Figure 3 provides a view of major direct selling regions of the world. Direct sales reps are generally independent, self-employed individuals who earn commissions and pay their own expenses and taxes. These factors differentiate them from corporate sales personnel, for whom compensation is frequently base plus commission, expense accounts may be available, and taxes are initially handled at the corporate level. Why do people choose direct selling? Reasons include a flexible work schedule, a chance to own a business, and social interaction (it is a good way to meet people). Moreover, and perhaps most important, earnings are proportionate to performance, thus eliminating the artificial barriers often found in corporate cultures. Many view direct selling as a source of empowerment. Worldwide, the vast majority of sellers are married women between 3554 years old who have some post-high school education. In the US, about 43 percent have college degrees.

ersonal selling is generally the most effective tool in the buyer education, negotiation, and sales closing stages of a purchase decision. Given its importance in accomplishing organizational sales and growth objectives, attracting and keeping sales reps is a key organizational function. Although it is well accepted that an attractive compensation package is a necessity in hiring and keeping talented salespeople, or sellers, the promise of monetary rewards is not sufficient in and of itself. It is a great first step that has to be followed quickly by a comprehensive sales force development effort. As shown in Figure 1, sales force development requires recruiting, selecting and training people, providing field experience to reps, and maintaining an ongoing assessment, enhancement, and retention process. The arrows in the figure clearly indicate an iterative process of learning

Figure 1 Sales force development model

Organizational growth and sales objectives Recruitment & selection

Training

Field experience

Assessment, enhancement, and retention processes

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Sales force success: The view from direct selling executives

n our discussions with executives over their firms potential growth, five key issues emerged from our study as having universal application to direct selling. Not surprisingly, three of these deal directly with sales force development: recruiting and selection, training, and performance enhancement. The remaining two issues, product value and delivery, are enabling in nature in that they support the sales force in meeting their objectives.

Several perceptual elements reinforce the lack of selection devices. First, our executives universally acknowledged that successful sellers are extremely diverse. Thus, by implication, any systematic selection process might screen out a good applicant. Second, there is no real cost to the firm when errors are made in selection. Given that the reps are self-employed, there are no start-up costs or overhead costs attributable to the firm. Because they are required to purchase their samples, additional reps are viewed as having only a very modest effect on marginal costs. As such, a direct selling firm may want its managers to try to capitalize on every hiring opportunity. Finally, management reward systems are frequently based on the number of new reps brought into the firm. Unfortunately, note Bonoma and Crittenden (1988), such unsubstantiated views may lead to global mediocrity. In other words, by trying to include everyone, the firm is unable to focus its resources on those most likely to achieve success. This lack of focus can lead to high turnover for both weak and potentially strong sales reps. The performance difference between top sellers and others can be considerable. Applying the Pareto Principle, one could easily expect the majority of results to come from a minority of the sales force. Given the important role previously ascribed to the managers involvement and commitment, there is a tremendous waste of a managers time and energy in recruiting, training, and developing sellers who are likely to be only marginally productive. Because many direct selling managers are often reps themselves, there are also significant opportunity costs associated with choosing and working with a number of marginal sellers in the hopes of finding a successful one. Although good sellers can be relatively diverse, further discussion with our executives found that most firms had an informal profile of what they were looking for in recruiting and selection. Attributes ranged from fairly general (good fashion sense, strong interest in arts and crafts) to highly specific (currently working as a health care practitioner). Some executives also indicated that they sought people who had high energy, were obviously comfortable with making presentations, were seeking lifestyle changes, and/or aspired to greater autonomy. A few reported that they looked for individuals whose socioeconomic background would provide links to likely customers. These are not unlike the attributes that McMurray (1961) identified long ago as associated with effective salespeople: energy, self-confidence, hunger for money, knowledge, and a view of rejection as a challenge. Cort and Shanklin (1998) ascribe a similar set of characteristics to high performers at the prominent direct seller Mary Kay Cosmetics, including positive attitude, persistency, consistency, enthusiasm, strong desire, motivation, goal setting, training, preparation, regular attendance at sales meetings, self-confidence, and product knowledge.
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Recruiting and selection: The seller is key

Seller recruiting was universally identified as the number one issue related to any growth and success. Managerial involvement and commitment were resoundingly cited as keys to effective recruiting. Applicants are generally sought through various means, but direct selling firms must be especially careful about country laws as they apply to soliciting independent sales agents. Moreover, in many cultures, including the United States, college students seldom view selling as a viable long-term career (although ultimately, as previously noted, almost half have college degrees). Current customers were frequently mentioned as an important source of sales recruits. Despite the importance placed on recruiting, none of the interviewed executives appeared to have a systematic selection process. No formal characteristic profile was used in any of the firms that would aid in identifying potentially successful sellers. At the heart of the recruiting strategy for many direct selling firms is a tendency to take on people who appear interested in the product and/or personal selling and then let them sink or swim on their own.

Figure 3 Principal direct sales markets

Latin America 9% Eastern Europe 2%

Western Europe 14% USA & Canada 32%

Asia & Pacific Rim 43%

Source: Direct Selling Association (2003) Source: World Federation of Direct Selling Associations

V. Crittenden & W. Crittenden / Developing the sales force, growing the business: The direct selling experience

Today, notes Kotler (2002), many other firms use personality profiles and tests to help recruiters select those individuals most likely to become strong sellers. Direct sales firms owe it to themselves and their managers to invest resources toward identifying the common attributes of their best performers and creating formal metrics that will enable managers to focus on selecting and training those with real potential and reward them for the effort.

Many companies send their new sales reps into the field almost immediately upon hiring them, after only a cursory training program. The rationale is that time is best spent prospecting and meeting with customers, rather than sitting in a training center. Further, when new sellers are past customers, assumptions are often made about their product knowledge. It is true that detailed training can be costly and may result in lost opportunities when a seller is not in the field. Yet effective long-term sellers must not only have appropriate personal characteristics, they must also know and identify with the company and its products, understand customer buying motives, and be prepared to make an effective sales presentation, counter initial resistance, and close the sale. Moreover, to be successful, the seller has to know how to develop and maintain the records necessary to process orders, service customers, and cultivate repeat sales. Does this mean that direct selling firms need to provide highly detailed training before sending reps into the field? No, but it does have important implications for quickly assessing initial field experience and follow-up training programs. A firm needs to collect data on the effect of training approaches and the timing of additional training on sales performance. It should systematically survey new sales reps, after a brief field experience, to determine topics that should be covered regularly in introductory training. And the iterative process of learning and doing suggests that its managers need to be supportive of continuous training options. Firms may also need to devote resources toward training the trainers. Top sellers who move into positions where they also manage other reps do not necessarily have the appropriate skills, mindset, or disposition to train others. When communicating with customers, these individuals know exactly what to say. But when training and dealing with subordinate sellers, they often lack the skills needed to get their ideas across successfully. This concern was noted by executives from at least one of the subject firms. Unfortunately, top performers were moved quickly into sales management positions only to experience failure and ultimate departure from the firm.

Seller trainingdeveloping the right skills

Training programs and materials were abundant and detailed for many of the firms we studied. However, the focus of these efforts was narrow in scope, with product knowledge the dominant theme in the training programs. Very little attention was given to prospecting, sales techniques, or developmental training targeted to representatives who had exhausted their initial set of prospects (usually family and friends). Topics such as sale closings, customer service, customer follow-up, and customer re-

Many companies send their new sales reps into the field almost immediately upon hiring them, after only a cursory training program.
engagement were never mentioned in the interviews and received only cursory coverage in the training materials. Only one person explicitly mentioned an emphasis on understanding the corporate culture. Most firms indicated that the sellers immediate manager handled sales training. However, responses were mixed on where managers placed priority. Some thought that managers viewed training as a key responsibility, while others thought their managers considered recruiting far more important than training. There was a widespread perception that training in most firms was extremely disparate. Two firms had recently begun offering periodic sales rep training to augment that initially offered by the managers. One interviewee saw technology, such as programmed learning via company CDs, websites, and films, as having great potential for distance trainingespecially useful in large countries or where transportation systems are less developed. Moreover, distance training on company products, particularly with regard to manufacturing quality, would be extremely useful for direct selling firms seeking to develop new markets via exporting.

Performance enhancementhow to keep themand keep them selling

A related area of discussion in the interviews was that of seller performance. All interviewees were consistent in identifying performance enhancement as an area in need of increased attention in their own firms. Central to this discussion was each companys somewhat unsystematic and disparate efforts to identify underperforming sales reps and develop programs for rejuvenating performance. Without exception, a companys compensation system and recognition programs were identified as the motivating forces used to improve performance. Underperforming

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reps, as measured almost exclusively by sales dollars, were frequently perceived as simply having lost their motivation. Interviewees viewed this decline as inevitably leading to turnover. Infrequently, there was a brief mention of a retraining program or of personal contact by the manager when individual seller performance was on the decline. However, limited retention and regular high turnover were often viewed as simply the nature of direct selling. Implicit in any performance enhancement process should be a set of evaluation criteria that will identify, quickly and regularly, the need for a managers intervention or additional training. Successful firms assess performance with meaningful metrics at every stage of the sales process. Sales volume and average sale size are bottomline data points that should be readily available for managers and sales reps. Moreover, profit (or contribution) margin per sale can be useful data if managers are expected to help reps avoid simply selling low-margin items. Comparative datacalls made, appointments per call, sales per presentation, ratio of new customers to old customers, referrals gained per presentationcan be used to gauge motivation and/or the need for specialized coaching. Only by regularly assessing performance and providing timely feedback and intervention can firms enhance each sellers abilities. Maintaining such records, especially data associated with unsuccessful calls or presentations, is not something most sales reps readily want to do. A manager needs to emphasize the importance of such record keeping and demonstrate its usefulness in helping the reps better allocate their time and energy. Because sales reps in the direct selling world are typically independent contractors, they may have unmet needs that, if satisfied, would enhance their motivation and retention. These may include opportunities to develop customer service skills (such as maintaining records to generate repeat business), providing access to group insurance plans, or offering retirement planning advice. Naturally, such motivational extras would not be offered automatically to all sellers. Rather, they could be made available at certain levels of achievement, be it measured in individual sales dollars or recruitment numbers.

expertise, direct selling products are held to a higher standard. Thus, if a product fails to live up to a customers higher expectations, not only does the customers overall perception of direct sales products plummet, the personal relationship may suffer as well. To offset this risk, many direct sales firms have a lifetime replacement guarantee.

Implicit in any performance enhancement process should be a set of evaluation criteria that will identify, quickly and regularly, the need for a managers intervention or additional training.
Others, even when not mandated by local law, also provide for a limited cooling off period during which customers can return products for a full refund.

Sourcing and supplygetting the right product to the right customer at the right time
While explicitly mentioned by only half of the interviewees, sourcing and supply issues were seen as strongly affecting cash flow, company flexibility, and a firms ability to grow. Specific issues identified were ensuring that suppliers have the capability to grow and getting the right quantity of the right product in the field in a timely manner. Successful firms regularly review and update order and support systems and delivery methods. Many, particularly those not vertically integrated, maintain alternative supply sources so they are not held captive by a single source. In essence, not being able to provide a customer with the right product at the right time was thought to be a deathtrap for direct selling firms.

Perceived product value

A discussion topic appearing in all of our interviews focused on why customers buy via direct selling. Reasons included the expertise of the sales rep (to obtain product knowledge or product education), convenience, and the personalized buyer/seller relationship. Moreover, respondents were adamant that the product had to be perceived as superior in quality to similar products sold in more traditional retail channels, such as department stores. Interestingly, direct sellers may be faced with a double jeopardy effect. Due to the likely close relationship between buyer and seller, as well as the sellers perceived

he bottom line for the executives interviewed for this study coalesced on two major concerns: (1) How do direct sales companies find, keep, and motivate a successful sales force? (2) How can the companies provide the right mix of enabling services to ensure continued growth? Based on our interview results, executives recognize each stage in the sales force development model. How the model is implemented, however, appears far too narrow. As we have outlined here, a different approach can and should be implemented. Recommendations include:
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G Corporate-level managers need to consider the implicit costs of recruiting versus the cost of retaining people. G Firms need to identify and principally select sales reps based on the attributes ascribed to their best performers. Such improved targeting and identification would lead to greater organizational fit and better retention. G Direct selling companies need to reevaluate training approaches and materials to ensure adequate development and formalization of follow-up training. Tacit knowledge transfer through coaching and meetings may not be enough to enhance sales performance and decrease turnover. Explicit knowledge transfer through structured coaching/meeting/training sessions and follow-up manuals is needed. G Firms should invest the resources needed to collect and maintain evaluative data that will identify, quickly and regularly, the need for management intervention or additional training. It is apparent that little is currently done to rescue struggling sales reps at many firms. G Firms need to determine how seller performance should be measured and whether more regular, direct intervention would enhance that performance and retain good people. With the growth of an alternative sales channel, such as the Internet, and the continued opening of the worldwide

marketplace, direct selling firms are faced with numerous options. However, it is not enough to sit in the home office and decide to expand product offerings or geographic scope. These decisions may be the easiest part of running a direct sales firm, given the abundance of data in the marketplace. The hard part is succeeding in the field. As with any company, the implementation of corporate strategy ultimately drives performance. Direct selling companies would do well to heed the call of sales managers by providing the assistance needed to help them select and keep the best salespeople in all countries.

References and selected bibliography

About direct selling. 2003. World Federation of Direct Selling Associations @ www.wfdsa.org. Bonoma, Thomas, and Victoria L. Crittenden. 1988. Managing marketing implementation. Sloan Management Review 29/2 (Winter): 7-14. Cort, Kathryn T., and William L. Shanklin. 1998. The wall. Marketing Management 7/4 (Fall-Winter): 42-46. Duncan, Todd. 2003. High trust selling: Make more money in less time with less stress. Nashville, TN: Thomas Nelson Publishers. Kotler, Philip. 2002. Marketing management: Analysis, planning, implementation and control, 11th ed. Englewood Cliffs, NJ: Prentice-Hall. McMurray, Robert N. 1961. The mystique of super-salesmanship. Harvard Business Review 39/2 (March-April): 113-122.

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