Mary Kay Cosmetics : Sales force

Incentive (A&B)
Presented By : Group 02
Nyein Wai
Puja Singh
Beatrice Ngowi
Mary Kay Ash
 American businesswoman and founder of Mary Kay Cosmetics, Inc

 Ash went to work for Stanley Home Products

 Received numerous honors from business groups, including the

Horatio Alger Award. Ash was inducted into the Junior Achievement U.S.
Business Hall of Fame in 1996

 Founded the Mary Kay Ash Charitable Foundation to raise money to combat
domestic violence and cancers affecting women

 Recent acknowledgements were the "Equal Justice Award" from Legal

Services of North Texas in 2001, and "Most Outstanding Woman in Business in
the 20th Century" from Lifetime Television in 1999

 Author of several books, including "Mary Kay", an autobiography in 1994,

"Miracles Happen" and You Can Have It All in 1995. Her first book called
"Mary Kay on People Management" was published in 1984

 Died on November 22, 2001 2

 Mary Kay Cosmetics Inc.
 Mary Kay is a direct marketing cosmetics company founded by Mary Kay Ash in 1963

 The company relies on an active sales force(direct selling) of independent beauty consultants who are free to
work

 Consultants desiring to earn a more full-time salary are encouraged to recruit, manage and support a sales
team of new consultants

 Encouraging consultants to form their own sales teams, and rewarding them for sharing in each other's
success, builds a stronger sales force than one formed via more traditional management approaches

 Mary Kay world Headquarters is located in a suburb of Dallas, Texas, U.S.

 Mary Kay has a strong presence in more than 35 markets throughout Europe, Asian Pacific, and the
Americans

 High-end products

 Provides its employees with open ended potential to achieve personal and financial success

 Exceeds more than 3.5 million Independent Beauty Consultants worldwide

 To achieve preeminence in the manufacturing , distribution and
marketing of personal care products by providing personalized
service , value, convenience and innovative solutions to
consumers needs through our independent sales force.

They believed in golden rule – “ Do unto others as you would have them do
unto you” and priorities of god comes first, family second and career third.
They refer to a model for the consultants –
S – Satisfaction with a task well done
T- Teamwork
O- Opportunity
R- Recognition
M- Money
Abstract

Describes the incentive system by which Mary Kay Cosmetics motivates the sales force of 200,000
independent agents who comprise the firm's only distribution channel. Illustrates the powerful effect
on sales-force behavior that results when creative types of employee recognition are combined with
financial incentives. Focuses on the challenges that managers face when they try to reduce program
costs by modifying the VIP automobile program that awards the use of pink Cadillacs and other cars
to successful sales agents. A detailed description of the parameters and formulas that drive the
recognition and reward programs is provided.

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1
What are the important highlights of the
organization structure of sales force
 Sales Force

 The Mary Kay Cosmetics sales force consists of a team of contractors called Independent Beauty Consultants

 Beauty consultants buy their inventory from the Mary Kay wholesale division and sell it directly to customers at
in-home parties and through personal websites

 Similar to brick-and-mortar stores, consultants keep the difference between what they sell their products for and
what they paid for them

 In addition to sales profits, consultants earn commissions by recruiting and supervising new consultants

 Once a consultant's team consists of five consultants, she is eligible for a promotion to sales director

 Subsequent promotions for building a successful team include senior sales director and national sales director.
These positions include bonuses and higher commissions

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Recruitment, Training and Support

 The Mary Kay management philosophy is built on experienced

consultants helping new hires

 To encourage this, established consultants are rewarded for bringing in

new consultants with a percentage of each sale the new hire makes

 In return for a continued percentage of the recruited consultant's sales, the

recruiter is expected to provide on-going training and support to her team

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 The fact that consultants are paid a percentage of the sales made by anyone they recruit to work for Mary Kay
causes some people to wonder if their business structure is a pyramid and therefore illegal

 In a classic pyramid organization, money is made only through the recruitment of new employees, with very little
goods or services actually being sold

 Although Mary Kay does pay consultants to recruit new members, consultants do actually sell cosmetics and the
compensation for recruiting members is paid by the corporation not the recruits

 Additionally, recruiting consultants are expected to earn their commissions by supervising and supporting their
team

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 2
Calculate the income/s of consultant, VIP team leader and Director assuming a
certain level of sales and based on
these find out which components of the financial incentives program appear to be
primary motivator of the sales force.

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3
Recommend a set of changes in the VIP car program that will improve
overall sales force effectiveness at Mary Kay.
Consider the motivational risks and cost effectiveness of your proposals as
well as how they could be implemented?

.
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 The current VIP program utilized by Mary Kay has the
potential of increasing overall company operating costs due to
the short-sale situations which arise when a VIP Consultant is
unable to maintain her numbers and therefore forfeits the use
of a company supplied vehicle.

 Attempts to design a more effective program would be more

specific if the case study provided details associated with the
cost of the vehicles along with the amortization scheduled
utilized by Mary Kay
 VIP Consultants currently earn the use of a Pontiac
Grand Am if they are able to maintain team production
of $3000 per month and personal production of $600 per
month
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 It is also required that the production team consists of
at least 12 recruits and further that 10 of these recruits
be in an active status “by the end of the four-month
qualification period”

 As indicated ,VIP consultants “feel no motivation to

increase their sales and recruiting efforts above the level
necessary to maintain the use of their cars is not tapping
their full potential because [the company is] not
rewarding them for achieving it

 It would appear that the VIP Consultant is treading

water or just maintaining the threshold necessary to
maintain use of the vehicle
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 Recommendation
 Consultants who are able to maintain the current requirements associated with
the VIP car program should be exempt from any new requirements

 The new guidelines should apply to those consultants who forfeit the use of
a Grand Am because they are unable to maintain the minimum requirements of
the program as well as consultants who hit the milestone after the new guidelines
have been implemented

 Consultants must maintain a team consisting of at least 10 consultants of which

must be in an active status. The reward level associated with a company provided
Grand Am will not be triggered until this status is maintained for at least six
months. This will motivate the consultant striving to achieve VIP status into
considering the quality of the consultants that she recruits.
Maintaining NPV
Production volume 
Cost savings 
Price
Time horizon 
Terminal value 
Step one: NPV of the initial
investment

Identify the number of

periods
Identify the discount rate

Step two: NPV of future cash flows
Payback period 16
To bring down the attrition rate

 Optimize recruiting and hiring

 Contract based hiring
 Collab's with online platforms to sell for agents(multichannel)and different
cosmetics brands
 Arrange paid workshops with more no. of clients and hiring
 Enhance training programs
 Enhance customer satisfaction focused monitoring
 Establish clear communication channels
 Enhance recognition and rewards programs
 Provide skill development programs
 Offer continuous opportunities for promotion
 Improve work conditions providing perks and other services
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Beauty Consultant Career Path Program
Announced in November 1989
Objectives:-
   1. To reduce the percentage of company sales spent on beauty 
consultant compensation
   2. To strengthen car qualifiers and their terms & improve their 
chances of maintaining the use of      
       their cars for 24 months.
   3. To provide additional opportunities for recognition and bonus 
income for those consultants, not     ready for, or not interested 
in, pursuing directorship.
   4. To prepare consultants for the challenges of directorship
   5. To redirect incentive compensation to most effective programs 
and beauty consultants
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Team Manager
• Abolished VIP position
• Team managers were eligible for VIP car
• Qualifications 
- 4 consecutive months of $3000 team wholesale,
- $ 600 of personal production per month
- active recruits increase from 10 to 12
• Three Tiers
- team manager (first 8 months)
- silver key team manager (months 9 through 17)
- gold key team manager (18 months or more)

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Recommendation
• Collab's with retailers , divide regionally wise as per the 
consultants and arrange workshops and assign targets.
• Beauty parlors collaboration
• Free gifts and cosmetics form Mary kay for constant performance 
apart from car program
• Paid vacations
• Salary plans (combination of basic and other incentives such as 
health care, leave)
• Arrange women summits to ask constants for motivational speech 
and discussions and conduct workshops as well
• Post videos of the best consultants on the website and picture on 
Mary kay’s magazine (consultant of the month for motivation)

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Thank You!
Any questions?

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