Developing a Modern Compensation Strategy

Today’s direct selling climate demands companies establish a compensation strategy, rather than just a commission plan.

In the world of same-day shipping, the gig economy and instantaneous communication, you want to know where you stand in the direct selling industry and how to stay competitive. The landscape is shifting, and it will soon become apparent who’s been paying attention and who hasn’t. To stay competitive, you need to know whether or not you’re a modern direct selling company. And, if not, how you can become one.

One of the best ways to determine the health of a direct selling business is to look at its compensation strategy. There are some key actions you can take in developing a modern compensation plan that will position your business for success in the current industry

Expand Your Definition Of A Commission Plan

In the past, many companies could get away with having a commission plan that featured 3-5 different commission types. However, as new companies entered the market, compensation plans needed to evolve to better accommodate all of the distributor types and stay competitive in the industry. Now, it’s common to see ten or more different commission types as part of any one direct selling company.

Making your plan more complex, though, doesn’t necessarily make it better. With the rise of technology and good data, you have a huge variety of ways to motivate distributors and customers. Companies are designing more contests, promos, and short-lived incentives now than ever before, and all of them have to be accounted for in the overall compensation strategy. Companies have implemented promos from, say, the marketing team that can weaken the commission plan by draining a pool commission or distracting distributors from building their businesses.

Today’s companies can’t afford to make decisions like these that undermine their commission plan. You need to have a clear picture of all of the ways you’re driving behaviors for your distributors and customers—you need to have a compensation strategy, rather than a commission plan.

Sustain A Flexible Mindset

One of the biggest differentiating qualities of modern compensation plans today is knowing that changes are inevitable. It used to be common practice to cement the compensation plan into a company’s fiber. Not only did early companies refuse to change comp plan brochures, they also opted to never alter the programming around their commission plan and payouts.

It’s not hard to see why companies had this mindset—making big changes to your plan after having a well-established salesforce can cause unexpected backlash and a mass exodus of your best sales leaders. It’s not a good idea to make adjustments that force a distributor to change their build strategy, but it’s imperative to make small changes over time.

“Modern compensation plans also need to be able to distinguish between customers and distributors. The FTC has made it clear that customer-centric sales models have to be a major part of our industry moving forward.”

We’ve noticed a big industry shift in distributor requests. Now that other companies’ plans are more accessible and transparent, influential sales leaders see a good idea in someone else’s plan and want to have the same thing in their own. Requests like these were unheard of in the ’80s and ’90s, but are now a common practice. ViSalus is a good example of this—when they came out with their “Three for Free” program, it was so popular that other clients wanted a similar incentive added to their plan as fast as possible.

Another reason that companies need to have flexible plans is the fact that expansion demands change. As companies reach a global size and enter new markets, they need to account for different direct selling laws and taxes for each country while keeping their plan relatively seamless. Staying consistent but flexible will help you adapt to both internal and external forces while keeping a strong, foundational brand presence.

Focus On The Customer

In reality, though, most people know why they want to join a direct selling company when they sign up and will become the kind of distributor they know they want to be. With the majority of people never signing up a new distributor, your marketing budget and focus are better spent targeting the right people and encouraging the behaviors they know they want to engage in.

How can you clearly distinguish between distributors and customers? Two popular choices are customer loyalty and auto-ship programs. Both options can help your business better care for and keep track of customers while communicating with them much more effectively. They also have the added benefit of giving you a way to reward loyal product enthusiasts with low prices and a sense of exclusive privilege.

Both of these programs provide you with a distinct group of customers, which is one of your best protections if you ever find yourself under FTC scrutiny. As your company designs incentives for finding and supporting customers, you’ll have an added level of defense and a better competitive edge.

Make Data-Driven Decisions

All of these actions are important, but what will make them work to your advantage is having good data to inform and streamline your decision-making process. Which changes to your compensation plan are really necessary, and how can you know when those changes need to happen? The answer is hidden in your data.

Detailed data reports can tell the story of your business’s past, but also map out its future. Emerging patterns will help you to spot trends, and trends afford you confidence in predicting outcomes, like which of your sales leaders has the potential to become your next dream builder. Educated guesses like these help you to stay ahead of the curve and avoid unpleasant surprises.

A modern compensation strategy considers all of the ways you motivate your distributors and customers. Each of your teams will have ideas for how to drive behaviors, and those ideas need to be thoroughly examined and carefully modeled with good data and sound reports to protect your compensation plan.

Great data also helps you deliver essential information to your salesforce to help them reach their goals. Especially for distributors who have busy families or work multiple jobs, they need to be able to quickly see their progress and what steps to take in meeting volume quotas or rank advancement requirements. If a distributor doesn’t know where they stand, they can become frustrated and disenchanted with even the best of compensation plans. Good data shows that you’re invested in your distributors’ success and that your salesforce can trust you to help them succeed.

Your compensation plan is your single largest expense. Developing a modern strategy for maintaining it needs to be a big part of how you protect and grow your business moving forward. Broadening your commission plan, staying flexible, investing in your customers and making data-driven decisions will pave the way for your success.