The recession has hit the direct selling business in about the way we expected. According to our latest Growth & Outlook survey, the number of people engaged in direct selling grew to a record 16.1 million in 2009. The same thing happened during previous downturns, when many people turned to direct selling to replace lost income.

Sales last year fell slightly, to $28.6 billion. That’s somewhat disappointing, but even our resilient industry felt the pressure of the economic headwinds of the last two years. Consistent with the experience of previous recessions, though, direct selling still outperformed retail, which saw a decline of more than 7%, compared to about 4% for direct selling.

I’ve been traveling quite a bit lately (part of the reason why it’s been so long since my last post!). Everywhere I go, people share stories about how direct selling has helped them and their families. Some turned to it for the first time when a family member lost a job. Others had dabbled, but ramped up their businesses to provide themselves a little extra financial security. All were thankful for the opportunity.

A colleague recently told me that he attended a seminar here in Washington with two prominent administration officials. Their message: The economy may not be growing as fast as we’d like, but we’ve definitely turned the corner.

Maybe. I certainly hope so. What do you think?

Phone rep: “Oh, I’m sorry to hear that you want to cancel your service. You have been a valued customer since 2000. Is there anything we can do to convince you to stay with our service?”

ME: “I’m not unhappy with the service and as I explained I’m not leaving your company – I just don’t need two lines anymore.”

Phone rep: “Well perhaps we could offer you a better rate plan. Would you like me to look into that?”

ME: “No, thanks, I still have all the same services I had before, but now I get them through one account so I have no need, at any price, for the second line.”

Phone rep: “OK, I can certainly take care of closing your account for you if there’s nothing we can do to keep your business. PAUSE. OK, ma’am, your account has been closed, but just so you know, you have 59 days should you decide you’d like to reinstate services from our company as we do value you as a customer and are disappointed that you no longer need our service. Is there anything else I can help you with today?”

ME: “No.”

Phone rep: “OK, thank you and please refer us to your family and friends.”

I had to wonder where the training broke down there. She was treating a perfectly happy customer as though I was unhappy, and in fact made me feel like I wasn’t getting good customer service because she clearly wasn’t listening to a word I was saying. To top it all off, at the end of the conversation, she asked me to refer my friends and family to her. So which is it – am I an unhappy customer they want back or am I satisfied customer that they want to encourage to go out and talk about their services to people who trust me? Sounds like they need to update their phone script.

Anyway, the point I’m trying to make here is customer service cannot be a cookie cutter. I’m sure the minute the word “cancel” came out of my mouth the computer chugged away and spit out a script for this woman to read. It didn’t matter what my answers were – she was trained to read that script and by-golly that’s what she was going to do. Do I feel valued? Nope, not at all.

I would have much preferred the rep to actually listen to what I was saying and offer assistance based on what I said. Asking how I liked my new phone or if there were any additional services I would be interested in would have been more appropriate. But, no, not in the script.

Think about the last time you experienced great service……still thinking?……not surprising. Good customer service is lost on most people today. A poor economy usually means customer service improves, but I haven’t noticed it. I rarely even get a “thank you” after the completion of a sale.

Perhaps I’m particularly cognizant of this as I spend a lot of time talking about the individualized service offered through direct selling. Think about it – you’re shopping with someone who knows you or at least knows something about you. You can call them at any time with questions and they’ll follow up with you after the sale to make sure you’re happy with your purchase. It’s their job to make sure you are happy and most take that role very seriously. Some people may not like being treated like a valued customer – and may even mistake it for being pestered – but the alternative is anonymous and sterile and doesn’t make me feel good in an economy that could use a little sunshine.

So the next time you’re out shopping, take note of how you are treated as a customer and then consider how you would like to be treated. Try the same thing if you are a direct seller yourself – treat your customers in the same way you’d like to be treated, listen carefully when they talk to you, pick up on the details that will make them feel important and then do your best to make them the most satisfied customer you have. Do this and you’ll feel confident saying “Please refer me to your family and friends!”

The full analysis is a bit more complicated, but it is instructive to look at the last documented recession, which lasted from November 2001 to November 2002. In 2001, direct selling companies reported an additional 1.2 million sellers over the prior year, with anecdotal reports indicating that many of those recruits came on board in the last quarter of the year, post 9/11. (The average increase between 1990 and 2006 was about 656,000 sellers per year.) Sales showed a similarly positive performance as 2002 sales were up $2 billion from the prior year, far outpacing the average increase between 1990 and 2006 of $1.2 billion.

Certainly the data from one recessionary period does not constitute a trend, but coupled with the steady growth pattern of direct selling over the past two decades, the numbers suggest that when the national economy sours, direct selling can be expected to demonstrate its recession-resistant tendencies. During more stable times, direct selling will track more closely with the economy, a fact that has become particularly evident since 9/11.

But back to the unemployment rate. A side-by-side comparison of direct sellers vs. the unemployment rate reveals that high unemployment doesn’t result in a mushrooming of direct sellers as a counter-cyclical argument would suggest. Instead, over the past decade the number of direct sellers has increased as unemployment has decreased, except for the 2001-2002 recessionary period following 9/11 when the number of sellers increased markedly during rising unemployment. This further supports the theory that a true recession causes a strengthening of direct selling numbers, whereas other economic situations result in a closer tie between performance of the direct selling sector and the economy.

So what about our current situation? Sales and salesforce numbers for 2007 showed the first declines in more than two decades. At the same time some companies are reporting solid sales and recruiting numbers while others are noting decreased sales. In addition, economists are still undecided if we are truly in a recessionary period. Can we predict that the worst is behind us, or is direct selling tied so closely to economic performance that we can expect the roller coaster ride to continue unless a documented recession occurs? Only time will tell.