Simplicity and Specialization: Enkrateia Strategies Advisor Discusses Modernizing Direct Selling
Tyler Whitehead has spent the past 20 years as a leader in the direct selling industry. In addition to his consulting work leading Enkrateia Strategies, his experience has included key C-level roles leading the development and deployment of beauty, skincare, nutrition and personal-care products and devices in the world’s leading direct selling companies, including serving as CEO of Arbonne and president of Nu Skin Enterprises. Whitehead has also served as an active board member of the CEO Council, World Federation of Direct Selling Associations (WFDSA) and the Direct Selling Association (DSA).
SSN: Can you tell us about your journey from CEO of Arbonne to founding Enkrateia Strategies?
Tyler Whitehead: My main focus and work while I was with Arbonne, and remains today, is focused on business model innovation. I loved my time at Arbonne working with shareholders and an amazing field of leaders to bring a fresh approach to a 45-year-old direct selling enterprise. The environment challenging direct selling has required updating and transformation at every level.
Rather than staying in a more traditional role within a heavily matrixed organization, I have been fortunate to serve in many C-suites across the industry. My focus continues to be to help develop a new blueprint—a model for what the next 30 years of a modern direct selling enterprise should look like, and how we can successfully compete within the gig economy and embrace the digital marketing world, while retaining all of the personal, human connections that create so much value in our industry.
It’s been an amazing experience leading during the past few years both inside and outside corporate direct selling environments. Many companies desire to fully embrace modern social selling networks and digital marketing approaches with a funnel orientation. They can frequently benefit from outside perspectives in that process. The current shifts in market dynamics have taken many companies out of their comfort zones, and it is rewarding working with both legacy and brand-new companies to support plans for growth.
SSN: What do you believe are the most pressing challenges facing direct selling companies today?
TW: I wrote a white paper that outlines the five domains of direct selling and how they’ve been disrupted over the past decade. It includes where customers are, how they achieve product awareness, work-from-home opportunities, and the increasing ubiquity and unlimited flow of information about complex products and direct-to-consumer deliveries.
What used to be a defensible market category for direct sales is now a highly competitive, “bloody ocean.” For example, if the average person selling your products is only making $4 or $5 an hour while building some experience with your products, when they could earn 5-10-times that, in excess of $20 an hour working gig jobs or dare we say, even at Taco Bell, then you’re not competitive financially. To attract and retain people, the basic time/value-of-money equation must be competitive. If not, your attraction models will suffer from pressure to engage in more simple, gig work.
In addition to reviewing the attraction mechanism and compensation at every level of participation, pressures are rising to address operational efficiency. One area of a lot of focus today is portfolio optimization. Many companies are only beginning to understand its significance on a thriving direct selling enterprise in today’s brand-centric world. Evaluating the number of SKUs a company offers to focus on key hero products, while providing an overall consumption portfolio, can boost innovation into the right future launches. If you have 500 SKUs and only 12 are driving 90% of your business, you need to ask why you’re offering the rest. The 80/20 rule certainly applies in spades here.
Finally, integrating digital tools in both B2B and B2C operations is critical, but it’s an area where many companies have struggled. Despite massive capital investments in this space over the past eight to 10 years, the industry has yet to make significant strides toward being truly competitive in digital marketing, advertising and deployment of funnels that support the sales channel effectively. Working with key vendors that understand the direct selling space, your unique portfolio and digital capabilities as an enterprise are important metrics for success. Many of the leading companies I have worked with are more and more turning to outside of their companies for these services, tools and partnerships. The digital buy-vs.-build decisions are driving many conversations about where to invest.
SSN: As a consultant now, what hard truths do you think many companies in this space need to hear?
TW: One area I see is that brand building is a helpful focus. Modern brands are fluid, dynamic and singularly powerful, driven by viral sensations. Brands today can come and go more quickly, and large brands are trying to capture a share of wallet by selling everything from skin care and cosmetics to personal care, nutrition, and services. However, specialization has become more important, and companies have an opportunity to evaluate their portfolios more strategically. Instead of offering many products across categories to simply increase volume, they should be taking a more critical look and focusing on what they’re particularly good at and what spaces they want to definitively be known as experts in. The goal should be to specialize and align the brand to meet the viral moments that more often become the drivers of today’s market.
Another major challenge, potentially bigger than compensation plans or portfolio management, is digital marketing, and tools continue to be an area of priority. In spite of the massive investment I mentioned earlier, a lot of waste and misdirection continues. Many deployed tools either don’t meet the needs of the sales channel, or they are just simply poorly developed or executed with respect to a company’s particular set of needs. I know this is a challenge in every industry, however, it seems to be particularly vexing for direct selling companies. Direct selling companies operate in a B2B2C environment, but the tools typically available—whether from Google, Amazon, Instacart, or Shopify—are built first for B2C models and don’t always fit off the shelf with direct selling models. The industry has been continuing to navigate this transition, trying to further develop tools that serve both the independent sales channel and the customer.
SSN: How do you see the role of social media and influencer marketing evolving within the direct selling model?
TW: Integrating an affiliate system into a culture or recruiting model—or even a product-centric model—often seems like it will be accretive at first look. The “affiliate” craze I think is over as many companies take a harder look at what they do well and how to integrate the right expansion into a more retail-oriented focus. Many attempts to add affiliate models are still works in progress, or end up being a distraction to the core competencies of the business. This happens because the culture, products and compensation model weren’t originally designed for such an addition. When you try to bolt something onto an existing ecosystem without seamless integration or great fit, it creates new complications. It can divide the company’s energy, foster internal competition against duplication models, and even lead to cultural clashes on what behaviors should be taught and replicated. These conflicts can be difficult to manage, but they are now without value to pursue.
Many alternative gigs are attracting participants because they are so simple and appealing due to ease of use. The straightforward compensation models of affiliate plans—like knowing you’ll get 15% for one clear behavior, 20% for another, and being able to calculate earnings based on sales is transparent and easy to understand. In many direct selling companies, compensation can be more rewarding for added behaviors like building a team but also much more complex for entry-level participants. Finding the right balance of rewards, transparency and simple behaviors can accelerate growth.
SSN: What will be the key to successful compensation plans in the next few years?
TW: The compensation plan needs to be what I envision as an inverted model. That model needs to be viewed from the bottom-up, flipped so that new entrants are compensated at competitive market rates, and ideally much better, to make the opportunity attractive against alternatives. Ease of entry and simple, focused plans with clear behaviors at each stage will win out.
A key factor is the need for a compensation plan evolution and continuing to create an attractive front-end structure that allows newcomers to succeed and earn fairly, and immediately for the time they put in. This is crucial because 80% to 90% of participants are part-time or early-stage participants. While many companies have installed daily and weekly pay to compete with other opportunities, the levels of compensation and complexity can still be simplified.
On the flip side, there’s high value in the traditional model where leaders can work and build teams to sell more volumes of product, which takes time—essentially relying on delayed gratification. While this should be attractive, and certainly a hallmark of traditional direct selling, it’s challenging for companies to sustain if new participants are expecting instant rewards. These delayed gratifications benefits can be trained, but they must be balanced against attraction, immediate benefits and simple structures.
SSN: What advice would you give to direct selling companies looking to improve distributor retention and engagement?
TW: It’s about simplicity—helping your new participants know exactly how they can be compensated, for which behaviors and activities, without extensive training or having to wade through pages of policies and procedures or marketing materials to get on board. It is all about ease of entry and smoothing that friction out. The goal is to make things straightforward and integrate that simplicity and focus into your existing organization without causing distractions or friction with the current known behaviors and culture.
The shift from the company being the brand to allowing affiliates, influencers, or independent contractors to become the brand themselves is also a new dynamic. These influencers and affiliates are more uniquely individual and frequently driving their own personal brands, and they need the flexibility to represent your brand alongside others—whether that’s four brands or 40 if they have the audience and consumer reach.
This transition has been the topic of policy discussion for many direct selling companies. The C-suite must be willing to share the full picture—the good, the bad, and the ugly. Where I’ve seen issues arise is when companies withhold information to protect operational or profitability targets, fearing that the field might view it as a zero-sum game. Open, honest conversations within that partnership for all stakeholders are essential. Sharing the actual retention rates, customer purchasing rates and lifetime values are all great metrics to help field leaders and distributors focus on key metrics for success.
After 20-plus years in this industry, I still believe the No. 1 asset of any direct selling company is its field and its leaders. They are the source of value—whether that comes through creating sustained energy, optimism about future launches, sharing product innovation ideas, or building long-term relationships with their customers, they are essential partners and the engine that makes a direct selling company thrive. No matter what aspect of the company you’re looking at, the participants in direct selling are the true value creators.
SSN: What trends do you foresee shaping the future of direct selling in the next five to 10 years?
TW: Specialization of brands is a key trend in my view, along with personalization, which focuses on creating added value for truly personalized and specially targeted products. Personalization continues to gain traction, whether through DNA testing or custom formulations tailored not just to specific consumer types or demographics but to an individual’s unique profile. I believe these are helpful trends and complement the unique value and personalized, human-to-human approach of direct selling. Ultimately, it is about building trusted relationships and a culture designed to attract, retain, and sustain customers.
Another important trend is open-source innovation and bringing in ideas from different industries—cross-platform research and competitive analysis for further customer acquisition and development of refined models of attraction.
Internally, along with the digital marketing and tools needed to grow, furthering the capabilities and sophistication of data management is becoming increasingly important. Absolutely nailing your metrics on how your business attracts and retains people, customers, and sales participants is increasingly critical to assess opportunities for growth and expansion. Having internal analysts and support from external resources that enable data-driven decisions rather than relying solely on input from sales, marketing, and field teams can help round out your data suites as well as taking the right actions based upon that information.
Overall, I think the trends towards more hybrid models, finding the right mix of products, brand focus, and compensation to drive customer acquisition and retention will create greater opportunity into the future. Many companies are well-positioned to bring elements of an affiliate-based front-end model into their companies. Others, organized around different behaviors, will be focused on increasing specialization or offering more premium products to support their core competencies around their culture and their plans. Every company can benefit first from an internal assessment and then an environmental view of how to compete in today’s dynamic marketplace and platform based environments. If I have any advice generally, simply identify and focus on what you do best. It’s about self-confidence and your own identity—understand exactly what type of culture you want to sustain, what will help you achieve your objectives for creating an opportunity to share your products, and as a brand stay true to yourself, your teams, and your partners.
Tyler Whitehead was interviewed by David Bland on behalf of Social Selling News.