By Amy Bell
Direct Selling News, September 2012
The services side of the direct selling industry has plenty to smile about. Providing services from energy to travel and everything in between, these distinctive direct selling businesses are booming—even in the face of a sluggish economy.
In fact, the entire U.S. service sector is experiencing a surprising upsurge. Service companies, which employ roughly 90 percent of the American work force, enjoyed their 29th straight month of expansion in May 2012, according to the Institute for Supply Management survey. (The I.S.M. survey covers all service sectors outside of manufacturing, including financial services, health care, hotels, construction and retail.)
“I would say that the direction of today’s economy in general is toward a service economy,” says Glenn J. Williams, President of Primerica Financial Services. “We see that more and more, and the direct selling industry is just a reflection of that.”
How are service businesses gaining steam despite a struggling economy? “Regardless of what is going on in the economy or in the world around us, consumers aren’t willing to give up services such as wireless, television, gas and electricity. It just doesn’t happen,” explains Greg Provenzano, President and Co-Founder of ACN Inc., a direct selling telecommunications company that spans 23 countries across North America, Europe, Asia and the Pacific.
“I would say that the direction of today’s economy in general is toward a service economy.”
—Glenn J. Williams, President, Primerica Financial Services
The statistics certainly prove him right. Recent studies show that even in today’s tumultuous economic environment, service companies in an array of fields continue to develop, expand and grow. For example, the World Travel & Tourism Council (WTTC) forecasts that the travel and tourism industry will directly contribute $2 trillion in GDP and 100 million jobs to the global economy in 2012. Mike Azcue, Co-Founder and CEO of the travel company WorldVentures, says he is committed to providing a “one-of-a-kind experience” for those millions of travelers, combining the experience with convenience and value. Azcue says, “WorldVentures has become the world leader in the growing global market for curated group travel—thoughtfully pre-planned excursions.”
But travel isn’t the only service industry that’s burgeoning. The global legal services industry will mushroom to $647 billion by 2015, according to a 2012 report by Global Industry Analysts Inc. Also, worldwide telecommunications services revenue is projected to increase from $2.1 trillion in 2012 to a whopping $2.7 trillion in 2017, according to The Insight Research Corp. And driven by growth in energy-efficient buildings, the global energy service company market will more than double to $66 billion by 2017. The list goes on and on.
“The services side of the direct selling industry provides a ‘product’ that everyone still needs or uses, regardless of the economic situation.”
—Angela Chrysler, President and CEO, Team National
Of course, this explosion in the service sector is directly fueling service businesses in direct selling. “The services side of the direct selling industry provides a ‘product’ that everyone still needs or uses, regardless of the economic situation,” says Angela Chrysler, President and CEO of Team National, a direct selling company offering a wide variety of services, including benefits packages, financial services and telecommunications.
The down economy has actually fostered the growth of the service sector, according to Craig Jerabeck, CEO of 5LINX Enterprises Inc., a direct sales provider of security systems, telecommunications, energy, credit card processing and a range of other essential home and business services. “We offer essential products and services, such as telecommunications, Internet, energy and many more services home owners and businesses need every day, and we do it at or below market prices,” he says. “In an era of belt-tightening, consumers cannot afford to pay a premium for products that they can buy at discount retailers, which hurts the product-oriented companies.”
Kerry Breitbart, Co-Founder and CEO of North American Power, adds that consumers simply cannot live without certain services in this day and age. “The product side of the [direct selling industry] offers many wonderful and unique products, but more often than not, they’re not products people really need to have,” he explains. “And they’re certainly not a purchase that consumers would be making anyway. Nine times out of 10, in the services industry—and particularly in ours, where we’re selling electricity and natural gas—these are bills that the consumers have to pay anyway. So it’s a much easier sell if you’re offering savings, particularly in this economy.”
Chrysler points out, “Services are widely used so they have mass appeal.” She explains that consumers are less likely to cut many of these must-have services, even when they’re on a shoestring budget. “Consumers are more likely to decrease the use of other items or activities before services.”
Provenzano, reflecting that sentiment, says, “The products and services ACN offers aren’t about luxury or indulgence; they are absolutely essential—and most consumers simply won’t live without them.” Because ACN is offering indispensable services, Provenzano says they haven’t had to adjust their model based on the economy. “In fact,” he explains, “now more than ever, consumers simply aren’t settling for the incumbents’ same old rates and lack of personalized service anymore; they are going in search of a better alternative. And ACN is that alternative.”
Tony Petrill, Vice President of Sales with LegalShield, a direct selling company that provides professional legal counsel to its members, believes that today’s tough economy is actually contributing to his company’s growth. “The thing that’s interesting and unique about our service is when the economy is tough, two things continue to happen: one, people are faced with issues they were never faced with before, such as real estate challenges; and two, identity theft continues to rise,” he explains. Because LegalShield offers a range of legal services as well as an identity theft protection plan, an increasing number of consumers are turning to the company for professional counsel in these uncertain times.
Petrill says the average income per LegalShield sales associate has practically doubled in the past year—a sure sign that business is on the rise. “New sales associates with our company are 50 percent more successful this year than they were the same time last year,” he says.
Need a Job? At Your Service.
Thanks to the nation’s soaring unemployment rate, the services side of direct selling has also enjoyed a deluge of job-seeking entrepreneurs in recent years.
“The economy always affects people,” says Chrysler, “but in a positive way it can make people more open to direct selling in general because of the opportunity for part-time income.”
“I think people want to make more money, and if they can get behind a service that they can feel good about, it just makes sense.”
—Tony Petrill, Vice President of Sales, LegalShield
Petrill points out that in a bad economy, people either decrease their expenses or increase their income. “And I’ve always voted for increasing income,” he adds. “The reality is that the average household is looking for more income, and because there is no inventory, the servicing industry is attractive to many people. I think people want to make more money, and if they can get behind a service that they can feel good about, it just makes sense.”
Not only are millions of Americans currently out of work, but many disgruntled employees are struggling with shrinking salaries, fewer hours and rock-bottom morale. As a result, thousands of these downtrodden professionals are searching for alternative employment options. “Direct selling typically sees a spike when the economy is struggling because people are looking for a plan B,” says Provenzano. However, he adds that job seeking entrepreneurs won’t settle for just any new business opportunity. “What good is a business opportunity in a down economy if you are trying to sell people products they don’t need or can’t afford?” he asks.
Jerabeck agrees, noting that widespread corporate downsizing and downward wage pressure has driven thousands of discontented professionals to the direct selling industry. “This has led to significant growth in our representative base, and we continue to expand the service offerings to bring more customers into the 5LINX tent.”
To top it off, the majority of job seekers can’t afford to pay a hefty fee to start up a direct selling business. “I think people are open to opportunities to earn money on a part-time basis outside of their normal working environment, and in our case [at North American Power], a no-investment, no-risk opportunity has particular appeal,” Breitbart says. “I’m a fan of direct selling, but fee-based entry is not necessary in a services model. I think our success is, in part, based on the fact that we don’t ask anybody to write a check.”
Tightening the Belt
Though it appears it’s all smooth sailing for the services side of direct selling, these companies are certainly not immune to economic slumps. Much like the product side of the industry, the service sector has faced its fair share of challenges in recent years.
“The economy impacts all types of businesses, and clearly it’s been a difficult environment for us,” Williams admits. He says Primerica mostly serves the middle market—consumers with a household income of $30,000 to $100,000 a year. This is precisely what separates Primerica from the majority of financial service companies, who generally target more affluent households. “When the middle market is strained financially and disposable income is limited, people begin to prioritize, and even important priorities, such as financial services, life insurance and their savings for the future, are impacted when dollars become scarce,” he explains. Williams says many of these strapped consumers continue to do business with them, but they buy less. “So they still buy life insurance, but they buy a smaller policy because money is scarce. They continue to invest for the future, but the average amount they have available to invest is less. So the transaction sizes have gotten smaller.”
Breitbart says that, from its inception, North American Power has done business in the shadow of an unhealthy economy. “We’ve only been in business for a few years, and we’ve been in business in the same kind of rock-bottom economy from Day One,” he says. Despite the challenges, the company continues to blossom. “I think it’s because we offer a product that the consumer has to buy anyway at a cost savings,” he says. Combine that with the fact that North American Power reps don’t have to pay a fee, and it’s a recipe for success. “I believe our no-fee model has had a positive impact on our business and the growth of it.”
Troubled times can also motivate individuals to look for a way to escape. WorldVentures provides a combination of great experiences with financial opportunity that can fulfill the dual need of extra income through the opportunity, and a way to escape the pressures of life—all at a bargain. Azcue says, “Our DreamTrips club memberships delight consumers with life-changing experiences at guaranteed below-market prices.”
“The services side of direct selling has witnessed incredible growth over the past few years, yet the surface has barely been scratched.”
—Greg Provenzano, President and Co-Founder, ACN Inc.
Selling Intangible Products
Unlike product companies, service-focused direct sellers are marketing a “concept” that consumers cannot touch, taste or smell. Obviously it can be a daunting task to get potential customers pumped up about an intangible product—not to mention that some of the more complex services are difficult to explain in layman’s terms.
“This is always the biggest challenge!” Chrysler says. “We explain the concept in general terms and use stories to share some specifics and generate excitement. We have a PowerPoint presentation, a video and a printed brochure for our independent reps to use.”
However, Breitbart insists that North American Power’s product isn’t really all that intangible. “Customers touch and feel that power bill they pay every month, whether they want to or not,” he points out. “And they certainly have a real profound experience when the lights go out. I really don’t think it’s that intangible because it’s a bill they have to pay. There’s no option to buy our product—it’s just whether they buy from us or they buy from the utility at a higher price.”
Provenzano echoes that reasoning. “To some, ACN’s products and services may not appear tangible but we believe they are,” he says. “Think about how many times a day you use your cellphone, send a text message, check your Facebook status or pick up your television remote. It really doesn’t get more tangible than that. Consumers are using our products and services every day without even thinking about it. Using a wireless phone is as effortless as breathing for most people. With that said, our products and services truly market themselves.”
Plus, because service direct sellers never have to deal with inventory, selling an intangible product is often a blessing in disguise. “You don’t have to have 30 attorneys in your garage to market LegalShield,” Petrill says with a laugh.
“There are tremendous advantages to not having a tangible product,” Williams adds. “We’re not dealing with inventory that goes unsold or becomes dated or stale in our warehouses. We have complete elasticity in meeting the needs and demands as they grow and shrink in our marketplace. The advantage of being a service provider is that we can flex to the demand of our marketplace.”
Breitbart points out, “I think the service industry is a solid business. There’s no product inventory and there’s no waiting for it to come in on time, so it’s easier from the company standpoint and easier from the rep standpoint.”
A Blindingly Bright Future
As service-focused direct selling businesses look into the future, they may need to slip on their shades. “The future is bright for service-based direct sellers, and with the deregulation of gas and electricity sweeping the nation, I mean that quite literally,” Provenzano says.
Breitbart says service businesses are an increasingly important part of the direct selling industry. “I don’t know this for a fact, but many people out there say that this industry has created more millionaires than any other industry,” he says. “I think the stature of it is continually rising. I can’t speak to every other company’s policies and procedures, but I know with ours, people truly own their own business. So it’s an opportunity to really own a business, not just get a part-time job—and I don’t think the appeal of that is going away anytime soon.”
There is no question that the services side of direct selling will continue to expand, but Williams stresses that only the businesses providing a truly valuable service will flourish. “The businesses that offer legitimate, long-term value will do well,” he says. “You can have a great sales process, but if there’s no value or credibility, clients are going to eliminate that service a month or two later. Unless you have a service that truly meets a long-term need—not just a need that you can get a customer excited about at the point of sale—then the future of that is going to be very bright.”
Plus there is plenty of room to grow. “The services side of direct selling has witnessed incredible growth over the past few years, yet the surface has barely been scratched,” Provenzano says. “There are still millions of consumers who simply don’t know they have an alternative when it comes to who provides their essential services. And there is no better, more effective way to reach those customers than through the proven, person-to-person direct sales model.”
Basic Training? Not So Much.
When we asked a few service direct selling businesses how they prep their reps for the sales world, we discovered these companies’ training and marketing programs are anything but basic. Here’s what they had to say about it:
“ACN has an incredibly robust training and support system,” says Greg Provenzano, President and Co-Founder. “I could fill pages talking about this alone.” During regularly scheduled live webinars, regional events and quarterly international events, ACN provides its independent business owners (IBOs) with all the tools they need to be successful. “But when the rubber meets the road, our business is really all about talking to people—whether recruiting other IBOs or acquiring customers,” adds Provenzano. He points out that virtually every person in the nation is already using the services ACN provides, and their friends and family are using them too. “Our business opportunity is as simple as that—offering the people you know, and the people they know, and so on, an alternative to the services they are already using anyway.”
Primerica Financial Services
Primerica is unique in that it works in a regulated industry. The company’s representatives therefore have the option to become life insurance licensed—and if they qualify, they also have the opportunity to become securities licensed at no additional cost. “So, when you think about training, it’s not simply making sure people get certain sales skills and product knowledge; there are regulatory requirements in place for licensing, for continuing education and for certain levels of proficiency, which I think adds some credibility and legitimacy to our business,” explains Glenn J. Williams, President. “One of the things I think we’re good at is accommodating that on a large scale. We can train people, we can license people, and we make sure they have access to the appropriate continuing education. That’s part of the service we provide—and that expertise makes us attractive to those who want to build a business at Primerica.”
North American Power
“Because we’re free, in essence there’s no difference from a customer and a rep,” explains Kerry Breitbart, Co-Founder and CEO. Every new North American Power customer receives their own website, and they have the opportunity at any point to become a rep. If they choose to become a rep, North American Power offers web-based training and in-person live training around the country. Breitbart believes the company’s no-fee model has served them well when it comes to recruiting new reps. “Having been in business for 32 years, it never occurred to me in any industry other than this one to charge the salesforce to work for me,” he says. “I like to think we’re kind of a vanguard company.”
Team National offers its independent representatives a wide variety of training opportunities, including person-to-person training, online training, education through their own TV network and a variety of live events. “Relationship building is an important part of our training,” says President and CEO Angela Chrysler, explaining that their reps generally target friends, family and businesses. “We teach them to work a warm market and to make a cold contact a warm contact.”
LegalShield offers a basic training class, an online training course, an employee benefits training class and a small-business training class. “We’re really excited about our Dallas Learning and Leadership Conference this fall, which is a shift to more training than ever,” says Tony Petrill, Vice President of Sales. Additionally, in 17 states LegalShield associates are required to become licensed. In 2011, LegalShield (formerly known as Pre-Paid Legal Services) was acquired by private equity firm MidOcean Partners. Since then, the company has completely revamped its marketing and sales materials for associates. “We’re equipping our associates with more and more tools.” Perhaps the most exciting new tool is the company’s recently launched national television advertising campaign. “After just one week of airing, we received reports from associates that people were coming up to them and saying, ‘Hey, I knew you were with LegalShield, but I just saw the TV ad during the Olympics. Tell me more about it,’ ” Petrill says. “It’s a whole new ballgame with national advertising.”