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How Risk Management Strategy Helps Direct Sales Business?

The risks of direct selling business, just as any other form of business, are many and varied. With the diversity in the workforce comes greater risks to deal with. This article will explore types of risks and how a risk management strategy helps direct sales business to enhance business growth.

>>Distributor and customer attrition

Distributors are the essential part of the direct sales business and as the market gets widened, business entrepreneurs need to find new strategies to encourage their distributors. If they fail to do so the distributors will feel disengaged which leads to an increase in distributor attrition rate along with the increase in customer attrition rates.

To avoid this, direct sales entrepreneurs should introduce different gamification methods for distributors with interactive rewards and loyalty programs. This way distributors' engagement can be increased, and also direct sales entrepreneurs should keep in mind that they do not miss the concerns of any distributors and always provide them with the needful. 

>>Security threats

Security threats are the most common threat any business can face. According to PwC Pulse survey “Managing business risks”, cybersecurity has ranked #1 with 40% of respondents citing it as a serious risk for concern. Direct sales companies should always analyze their business process to check whether they are not affected by an extreme risk.

To mitigate this, direct sales companies should need an incident response and recovery plan in the event of an attack. Also, it is always essential to establish a zero-trust framework.

>>Compensation Plan

It is considered to be an important part of the direct sales business. Having a suitable compensation plan for your business determines the success or failure of your business. So it is essential to have a compensation plan that benefits both the distributors and the company by following the rules and regulations.

Distributors should be compensated on the basis of sales they made and not for their purchases. Compelling distributors to make purchases to earn rewards is considered illegal. Also, business entrepreneurs should make sure that their compensation plan should not underline recruiting, since recruiting only is considered to be a pyramid scheme.

This article was published on 09.01.2023 by Noufal P Bava
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