Join, Stay, Leave: A Study of Direct-Selling Distributors

Abstract

This paper uses a unique dataset of over 13,000 individual direct-selling distributors from dozens of firms, at a wide variety of stages in their direct selling experiences, to investigate the motivations to join, stay, and leave a direct selling distributorship. We build on the literatures in sales force management and compensation, economics, organizational behavior, psychology and sociology to develop hypotheses both about each of these key decisions a distributor makes, as well as the interlinkages among the join, stay, and leave junctures in the distributor’s life cycle. Our analysis shows that many insights from these underlying academic research paradigms are robust to the direct selling situation, while others are not supported – suggesting that direct selling has many parallels, but is not a replica of, other non-direct-selling sales channels.

We find that individuals join as direct-selling distributors for a variety of reasons, many of which combine multiple aspects of direct selling that a cluster of distributors finds attractive. Only a small proportion of joiners sign up purely for personal consumption of the direct-selling firm’s products – but a great majority do join for this and other reasons as well. We further find that stated reasons for joining are frequently replaced by other motivations for staying as a direct selling distributor, consistent with the idea that distributors join without always knowing what direct selling will offer to them; they learn in the process of doing it. We also link certain traits as well as certain joiner and stayer types to the likelihood that a distributor will leave the firm; but interestingly, we do not find that a distributor’s reasons for joining have a relationship with his/her likelihood of leaving. Thus, the join → stay → leave life cycle path does show linkages from each stage to the next, but its failure to directly link join reasons to likelihood to leave is consistent with the learning that naturally occurs as distributors develop.

Keywords: MLM, Multi-Level Marketing, Direct-Selling, Distributors, Sales Compensation, Turnover

JEL Classification: D22, J24, J28, L81, M52