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.

5
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

7
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

8
 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

9
 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.

10
11
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?

.
12
 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

 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 13
 The following recommendations are made in the absence
of this critical information

 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 8must 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.
 The following recommendations are made in the absence
of this critical information

A consultant is considered to be in active status during the month of and

two months after she places wholesale orders totaling $225 or more. This
represents an increase of 12.5% over the existing definition. This
guideline should be applied to all consultants regardless of tenure as a
way of generating an additional revenue stream to offset some of the
costs associated with the VIP car program.
•
All consultants at the team leader level will receive a longevity bonus of
an additional 1.5% of the wholesale sales of any of the recruits on her
team who are able to maintain an active status for more than 3
quarters. This will provide team leaders with an additional financial
incentive for facilitating the selling and recruiting abilities of her team
members
Maintaining NPV
Production volume
Cost savings
Step one: NPV of the initial investment
Price
Time horizon
Identify the number of periods
Terminal value
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

17
 Improve work conditions providing perks and other services
Car Program

November 1989 –”Beauty consultant career path program” was announced

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

18
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)

19
Thank You!
Any questions?

20