The Top 5 Reasons People Leave their Direct Sales Company
Estimated reading time: 8 minutes
5 Reasons People Leave Their Direct Sales or MLM Company
Multi-level marketing (MLM) companies rely on people rather than retail stores or shops for selling their products. The people they depend on to sell their products aren’t employees, however. They’re independent distributors or, rather, sales representatives. While some MLM businesses have infamously been shut down for being pyramid schemes for their controversial business practices, other companies have operated in the MLM business structure quite legally. Yet, even when all practices are above board, MLM businesses struggle to retain their distributors. Why? Here, we’ll explore why distributors leave MLM businesses.
First, before diving into our topic, it may be useful to note that Service Quest bases our findings on extensive research of MLM companies and distributors. We interviewed more than 500 independent sales distributors who left MLM businesses to find out the chief reasons why they left. We support MLM businesses with research and services designed to help them succeed. Upon learning why their independent sales reps are leaving, they can develop strategies for successfully retaining them.
All companies face HR challenges. While technically not employees of the company, distributors operate as company representatives. As such, the company invests in its representatives and relies on them to sell its products. Today, there are more than 124 million individuals working as direct sales contractors for MLM businesses. This represents an increase of six million since 2019, meaning the industry is growing. In an economy where people have begun to prize their remote and flexible work schedules, it’s not surprising that people are interested in pursuing direct sales careers.
By improving their understanding of direct sales contractors and why they leave MLM companies, these businesses can find ways to retain them in greater numbers. By retaining distributors, companies can prevent sales disruptions and reduce the necessity to continuously recruit and train new distributors. We asked our interviewees for honest and direct answers. Now, we’ll share the insights we gleaned from those interviews with your MLM business.
Poor communication is a common retainment issue for companies across the board–not just MLM businesses. And, yet, communication is the cement that builds relationships. In order for distributors to sell successfully, they must communicate and market products effectively. Good communication from the business affords them with the clear information they need to operate successfully within the business structure.
Where Does Communication Break Down?
During the course of our interviews with distributors who left MLM businesses, we determined that poor communication involved these issues:
Infrequent communication: many distributors felt that the infrequency of communication left them vulnerable–without helpful resources when they needed them. It’s true that working as an independent seller means working on one’s own most of the time, but with more communication as a form of support, sellers might have felt comfortable remaining in their career.
Misrepresentation of products: some MLM distributors left companies because they felt that the products simply weren’t as described. In order to sell effectively, distributors need a clear understanding of the products from the start.
Misrepresentation of earning opportunities: direct sellers in the U.S. earn, on average, $5,208. Do your new recruits know this when they sign on? Many distributors believed that the earnings potential was far greater.
Confusing messaging: some distributors reported that confusing marketing messaging or progress reports made them feel uncomfortable about remaining in their positions.
Complicated process: other distributors commented that the process for purchasing materials or recruiting other distributors was too complex to meet with success.
Knowing that communication issues are among the top reasons that distributors leave can help MLM businesses transform how they approach messaging.
TIP: Take your communication practices as seriously as the products you provide. You can have the greatest products and compensation plan, but if your communication isn’t clear, you cannot earn the opportunity to sell.
Lack of Results
It’s not uncommon for sales distributors to sign on very enthusiastically with MLM businesses. Direct sellers are often eager to sell and achieve success. When faced with unmet expectations, this enthusiasm can quickly erode. During interviews, some of the most frequent comments we heard can be summed up with this:
Most respondents said that they worked hard but received no financial results.
Some respondents admitted that their financial and product expectations may have been unrealistic.
Surprisingly, some distributors reported believing that they “expected” their role with the company not to work out. From that, we can’t help but surmise that their negative expectations may have colored their experience.
During our interviews, we dug a bit deeper into these results-based circumstances to glean deeper insights. We asked distributors if they gave 100% effort to their role. Less than 25% of respondents answered ‘yes’ to this question. Half of our respondents said that they had not truly tried. We know that it will be clear to MLM companies that this lack of effort will, necessarily, result in a lack of success. Nevertheless, it continues to be another top reason why sales distributors leave.
Lack of Training and Support
During our interviews, we found that 60% of respondents believed they had received inadequate training. Many interviewees said that they should have received more training and more support from the company as well as their team leader. As many as 30% of our respondents reported that they didn’t hear from team leaders after they had been assigned to teams. From our experience, we believe that this type of upline oversight was not intentional; instead, it appears that the systems and processes that can prevent these oversights may not be in place.
MLM businesses must note, however, that 90% of our interviewees reported that a “lack of support” was a key factor in their decision to leave the business. That’s a startling statistic, but does point to a clear opportunity for improved retainment. Interviewees also mentioned that they expected greater leadership from team leaders. With improvements in leadership and support, more distributors may have remained in their roles.
Our interviews with distributors uncovered that a lack of belief in products and promises caused them to sever their ties with MLM businesses. With closer inspection of the products and witnessing how the products were received by clients, many of our respondents say that they lost belief in the products. They made comments like “I stopped believing.”
Sellers found it difficult to impossible to promote products that they didn’t believe in. Others said that they lost their belief in what they were doing or lost belief in what the company had promised them. It should be noted that broken beliefs did not merely stem from distributors’ disappointment with products. Many distributors continued to believe that the products they were selling at the time of their departure were quality products.
Instead, they pointed to lost beliefs in company promises about compensation or support. It’s certainly possible that with support and stronger leadership, many distributors may have hung on longer and have been able to overcome the initial challenges that caused them to lose belief. Again, this is another area of opportunity for MLM companies. By nurturing direct sellers with more support and fostering their success, businesses could prevent distributors from giving up on their roles with the company.
Many interviewees said that changes in their lives forced them to halt their networking efforts and put their selling efforts on a back burner. Regardless of the industry, businesses do lose employees because of their life changes. However, one of the advantages of working for an MLM business is the flexibility that comes with the job of working as a distributor. This is another area where MLM companies have an opportunity to support sellers who may be thinking of leaving because of some change in their life such as relocation or a pregnancy.
Such life changes in many jobs would be grounds for severing ties with a company, but while these changes may be associated with temporary interruptions in selling, they don’t have to require leaving an MLM business. MLM companies could provide support for sellers by highlighting the flexibility aspect of their job. With the right supportive systems in place, sellers experiencing life changes could still continue to sell. That’s the insight we’ve gathered from our interviews on this subject.
What priorities are they currently committed to and which would need to change in order to grow their income through direct sales. This reason may simply be a “this isn’t the right priority for me.” That needs to be accepted and celebrated by you. When you have distributors who join the company because they want to prioritize it, it breeds success and an environment of enthusiasm for everyone!
Next Steps to Keep Happy Distributors
Take a deep look at your opportunities to improve. Once you do, you can build a company and culture that gives more reasons for staying with you. True leadership creates a culture that attracts the right distributors and customers.
We’ve mentioned it before–there are a number of opportunities for MLM businesses to stop their valued distributors from leaving. If you have great distributor retention, you’re probably already doing these things. If not, it’s time to invest in solutions for retaining your talented direct sellers. After all, product sales equal business success. You rely on your sellers to market and sell your products on a consistent basis.
To motivate and nurture your direct sellers, it’s important to reflect on some of our key takeaways:
Improving leadership at the team leader level may prevent the loss of distributors, especially if leaders focus on building communication, improving systems of communications, and providing high-quality support–especially for new recruits.
Being clear about compensation and products from the start could ensure that sellers know what they’re signing on for
Providing more and better training. Set your distributors up for selling success by offering more training.
Your MLM company can keep its distributors happy and prevent them from leaving. Remember that so many sellers come to your business filled with enthusiasm. Striving to maintain that enthusiasm is possible when you make it a goal. If you want your sellers to remain on your team, they have to feel part of a team–a successful team where their effort matters. If you can communicate this successfully, we think that you’re on your way to retaining more of your direct sellers.
Terrel Transtrum is the world’s leading consultant for Customer Service in Direct Sales. He is most widely known for attacking all inflection points from startup, fast growth, and downturn. In his book LaunchSmart, Terrel shares his more than 30-years of experience in starting and running a successful direct sales company. He owns two successful 7-figure businesses and has supported more than 800 direct sales companies on six continents. Read More